Investing in the stock market can be one of the most effective ways to grow your wealth over time. But for many new investors, the excitement of getting started is often met with confusion, misinformation, or early losses that could have been avoided.
At ARM Securities, we work with a diverse group of investors, ranging from first-time retail investors to seasoned professionals. From this vantage point, we’ve identified a recurring pattern: many beginners make the same avoidable mistakes when entering the market.
This article explores the top five investment mistakes new investors often make, and how to avoid them by applying smart, practical strategies. Whether you’re just starting your stock investing journey or revisiting the basics, this guide offers valuable insights that will help you build a smarter, more resilient investment portfolio.
Why Stock Market Education Matters
Before diving into the common errors, it’s important to understand this: The Nigerian stock market like any market, is influenced by economic trends, government policies, global shifts, and investor sentiment. Navigating it successfully requires more than luck or speculation.
The good news is, you don’t need a finance degree to succeed. You just need the right information, a long-term mindset, and a platform you can trust, like ARM Securities to guide you.
1. Investing Without Understanding the Stock Market
One of the biggest mistakes new investors make is entering the market without understanding how it works. Many rely on social media tips or follow hype around a trending stock, without doing any research into what they’re buying.
Why it’s risky:
Stock prices fluctuate based on supply and demand, earnings reports, economic news, and investor confidence. Without knowing what drives these changes, investors are easily caught off guard when markets shift.
How to avoid it:
- Read daily market reports from trusted sources like ARM Securities.
- Learn basic terms like dividends, capital gains, and portfolio diversification.
- Attend webinars and investor education sessions. Stay informed before you invest. Knowledge is your most valuable asset.
2. Making Emotional Investment Decisions
Buying when prices are rising fast. Selling during a dip out of fear. These are emotional decisions that often lead to poor outcomes.
Why it’s risky:
Emotional investing leads to buying high and selling low, which is the exact opposite of what smart investors aim for. Markets are cyclical, and knee-jerk reactions often result in avoidable losses.
How to avoid it:
- Set clear investment goals before entering the market (e.g., retirement, wealth building, saving for a home).
- Create a strategy and stick to it regardless of short-term market noise.
- Use tools like ARM ONE, to keep your decisions data-driven, not emotion-led.
3. Lack of Diversification in Portfolio
Many new investors concentrate their funds in one stock they believe will perform well. While conviction is good, concentration without balance increases exposure to risk.
Why it’s risky:
If that one company or sector suffers a downturn, your entire portfolio is affected. Diversification helps reduce volatility and preserve capital.
How to avoid it:
Invest across sectors such as banking, telecoms, FMCG, and industrials.
Mix growth stocks with dividend-paying stocks for income and appreciation.
Use ARM ONE to identify a range of investment opportunities across the Nigerian Exchange.
Tip: Don’t put all your eggs in one basket. Spread your investments and reduce your risk
4. Ignoring Brokerage Fees and Settlement Processes
It’s common for new investors to focus solely on returns without considering the cost of trading, taxes, or transaction timelines.
Why it’s risky:
Fees can quietly eat into your profits, especially with frequent trades. Delays in settlement or lack of clarity on charges can lead to frustration and misinformation.
How to avoid it:
Choose a brokerage firm that is transparent about its fees and processes like ARM Securities.
Understand how long it takes to settle a trade on the Nigerian Exchange.
Track your performance net of fees, not just market gains.
5. Expecting Quick Returns
Many people enter the stock market with unrealistic expectations—expecting instant profits. While short-term gains are possible, stock investing is more effective as a long-term wealth-building tool.
Why it’s risky:
Chasing quick profits can lead to gambling-like behaviour, constantly buying and selling based on rumours or spikes.
How to avoid it:
Invest with a horizon of 3–5 years or more.
Reinvest dividends to compound returns.
Use ARM’s advisory services to help define your long-term financial goals and align your investments accordingly.
Finally, we understand that navigating the Nigerian stock market can feel overwhelming at first. That’s why we provide you with more than just a trading platform. With ARM Securities, you get:
A seamless online account opening and trading experience
Access to curated research and expert market insights
Transparent fees and real-time portfolio tracking
Support from experienced financial advisors
Tools to help you invest for the long-term
Ready to Start Investing With Confidence?
We’re here to support you. Whether you are starting with ₦10,000 or ₦10 million. Click here to open your stock trading account, or visit www.armsecurities.com.ng to learn more.
