6 Common Challenges Faced By New Investors And How to Face Them

Posted by Ilayda Taze on Aug 30, 2021 10:10: AM
Ilayda Taze

Many people are scared of investing due to the volatile nature of businesses. They don't want to take the risk of losing their money.

However, you will face many challenges on your journey to becoming a successful investor.

This article will explain the common challenges that you can face as a new investor and their solutions.

The following are a few challenges that first-time investors struggle with and how you can overcome them.


1. Unknown risks in Investments


Not all investors know the risks involved in investing, particularly with new investors unaware of the hidden risks in various seemingly simple investment strategies. This can result in significant losses in their portfolios early on in the process.


It's essential to be as well-informed as possible.

Before considering margin, leverage, options, futures, and other investment choices, make sure you understand the risks involved.

You will be better positioned to fulfil your financial goals if you grasp the nature of risk and take action to control it.

2. Overload of information


While some investors will undoubtedly have little knowledge, others will have too much information, resulting in fear and poor decisions or putting their trust in the wrong individuals. 

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When you're overwhelmed with too much information, you may tend to withdraw from the decision-making process and lower your efforts.


It may not be enough to merely provide people with knowledge about financial possibilities to make sensible and solid judgments. Not only must investment information be comprehensive without being overwhelming, but it must also be simple to use and be used. This is a serious issue with possibly disastrous repercussions. 

With this, investors and their advisers should be aware of the dangers of information overload and make an effort to limit the amount and quality of the material they absorb daily. 

You don't need most of the information to make effective decisions, and a lot of it is terrible.

Brokers, banks, and other financial institutions must guarantee that the information investors are presented is easy to comprehend. The notion is that the average investor needs to be appropriately knowledgeable (but not excessively so) to make the best judgments possible.

3. Limited Capital to Invest


Another challenge that new investors face is having limited capital available to invest. This is only compounded when specific financial instruments are too expensive.

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This challenge can often be solved by looking into fractional shares.

Fractional shares are partial shares of a company's stock. Rather than holding one or more full shares, you own a fraction of one.

Back then, brokers only allowed total shares to be purchased, and investors ended with fractional shares only after a company split. 

However, this is changing as significant brokerage firms make it easier to buy fractional shares directly. This change allows you to specify how much money you want to invest in a company instead of how many shares you want to buy, and you can buy a tiny piece of a share if your financial investment isn't enough to buy a whole one.

When you purchase a fraction of a share, you're treated the same as if you had purchased the entire share. You make the same percentage gains and enjoy the same stock ownership privileges. However, you're also at risk of loss.

4. Too much diversification


Diversification is a strategy where investors buy various assets to reduce the chance of losing out on significant gains while also lowering losses.

Investors diversify their holdings among various companies, industries, countries, and asset classes rather than putting all their money in one company or a small number of assets.

However, if you've done too much diversification or done incorrectly, you might not lose much, but you won't gain much either. You might also end up taking on more risk than you anticipate, or you might pay excessive fees.


The best solution to avoid over-diversification is to keep your portfolio to a manageable level. 

For some, this means only keeping their top ten investments, as long as they're in different industries. 

Others avoid over-diversity by reducing their holdings in particular sectors (e.g., volatile materials producers or industrial stocks, or difficult-to-understand sectors like biotechnology stocks) for diversification.

5. Not Getting Help


Most people don't feel comfortable asking questions and prefer figuring things out by themselves.

However, it's risky to start investing without any outside help. 

Most of the reasons why people don't get help are:

  • Money, cost, or investment
  • Inability to tell the good from the bad
  • No trust or faith in the outcomes
  • Personal pride
  •  Not knowing where to begin to look
  • A relentless feeling of incompetency/inadequacy


The best investors are those who continuously ask questions and try to seek the right answers.

Some organisations and companies assist investors in making suitable investments. Ask help from these companies to minimise the risk of your investment. Or perhaps you have a friend or family member that has tried investing before, whom you can learn from. Ask for their advice. 

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With the proper knowledge and a sound support system, you can easily overcome these investment problems. Thus, you'll be able to earn a better return on your investment.

Don't be afraid to ask for help because the more you ask questions, the more you learn about what you want to try and venture into.

6. Timing is Crucial


Market timing involves the timely purchase and selling of financial assets based on projected price fluctuations. Depending on the investor's risk and return choices, they can use it for long-term and short-term time horizons.


Traders typically buy stocks when the markets are bullish and sell them when the markets turn bearish. It entails recognising when the price movement's trajectory may shift.

Rather than assessing the financial product's value, you must speculate on how the price will rise or fall in the future. The market timing strategy is an active allocation strategy that maximises the benefits of market price disparities.

Professional day traders, portfolio managers, and other financial professionals who can commit significant time to analyse economic forecasts and accurately predict market moves with such consistency have found success with market timing. 

Where Should I Invest?

Seek websites or platforms that can give you information about investing. Seek out experienced help because they will teach you everything you need to know about investments.

If you're looking for examples, then our website is the perfect place to start.

Regardless of whether you're new to your investment journey or a veteran, Trendscout is a platform that connects investors and founders. We specialise in creating purposeful, considered partnerships that drive profit and growth.

Our team of consultants who will work with you will understand your financial situation, goals, and personal values to discover the best startup for you.

We'll provide you with the tools and resources you need to make an informed decision, whether you want to diversify your portfolio, qualify for tax relief, or improve your returns for the future.

Located in the heart of London, we're right in the middle of it all. Our network of innovative startups and investors, combined with over 30 years of industry experience, allows us to identify up-and-coming opportunities before they reach the masses.

Our detailed assessment process strives to represent only the best startups with high-growth potential in finance and longevity. We take into consideration values that are similar to our own.


Investing can be a profit-making venture for many people looking to generate passive income. 

However, new investors should be aware of the common challenges they will face.

I hope this guide helped you, and if you have any concerns or questions about investing, you can ask us by scheduling an appointment with us today.

Rest assured that someone from our team will contact you to answer any queries you may have.