The first thing to look out for is overactive trading. Many people like the initial excitement of the stock market, particularly if a stock they just invested in as risen by a little. They immediately want to sell and lock in the profits and then move on to the next thing. This is a dangerous game to play where you will almost always lose. Even if you do manage to grind out a small profit on a stock or two, the commissions will eat away at your returns too quickly. Invest with a year time frame in mind.

The second biggest problem for beginners is investing in things that they do not understand. The stock market is full of choices to invest in (mutual funds, ETFs, single stocks, etc.), but you should only invest in the things that you are able to explain. That means for many of us investing in fast food companies or retail companies might be a good place to start. We spend enough time there to understand the business and want to take part in it.

These are just two examples of where novices often make mistakes. There are many more areas where you could soil your investment portfolio, but if you can avoid these two mistakes, then you will have greatly limited your losses and hopefully you will turn some nice gains.

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