Everyone makes mistakes, in fact, mistakes are a part of any learning process. Whether you’re a first-time investor or a seasoned one, you are prone to making mistakes in investments. So, what sets a good investor apart from a poor investor? It’s the knowledge of common investing errors that one needs to avoid and should steer away from. Here we introduce you to the most common investment mistakes to consciously stay away from.
Not having an investment goal
It is imperative that you have your investment goals thought through. For most people it’s simple. They save and invest for their post-retirement years. But what if your goals are different? You need to figure out how much time you have to achieve your goal and the risk you’re willing to stomach to get to it.
Failing to diversify your investments
Any financial advisor worth their salt would tell you, never invest all your money in one or two instruments. It’s important to invest in a variety of assets - bonds, stocks, real estate, alternative investments options, etc depending on your risk appetite. This way, you won't lose all your money even if one instrument fares badly.
Trading too often
People who get comfortable with investments sometimes tend to ‘play around’ with their investment. Trading far too often will incur transaction charges every time that may eat into your profits and not leave you with much. It’s better to invest in a diverse set of assets and stick to it.
Not keep a track of your investments
Wise investments are one thing, but reviewing their performance and keeping a track of it is just as important. Only by reviewing them will you know which of your investments are doing well and which aren’t, and then adjust them to give good returns.
Not educating yourself
Nobody know what would work for you but you yourself. A good financial advisor can help you to a large extent but you still need to keep yourself in the know. Watch the market trends, read newspaper articles and subscribe to financial blogs that can help you learn. Even if a particular investment is exactly what you’ve been looking for all your adult life, it is your duty as an investor to do your due diligence and make an informed decision.
A little tip about finding yourself a good financial advisor. As a general rule of thumb it’s best to look for fee-based financial advisors only because they are less likely to push a particular investment on you because they don’t get a commision or incentive from it.
Don’t make emotional decisions
There may be times when a particular investment might not do well. Or some time in your life when you make a hasty decision out of a sudden change to your life. Keep your anger and emotions in check and make informed decisions. Never fall prey to sudden, ill-timed investment decisions, you will only stand to lose money.
You can’t control the economy or the changing prices, but what you can control are your investment decisions. It’s important to make wise investment decisions with a diversified portfolio. We hope that the list we put together here will help you steer away from these investment pitfalls and give you happier investment days!