If you have decided that the time has come for you to try your hand at investing, it is important to be prepared. We all make mistakes in life, but when it comes to money matters, you will want to minimise these as much as possible. With that being said, read on to discover some of the most common investment mistakes you need to avoid.
Thinking short term – This is one of the biggest mistakes that new investors make. They see investment as a get rich quick scheme, which it is most certainly not. You will not give your investments the time they need to grow if you only think about things on a short-term basis. A long-term plan is vital.
Buying last year’s winners – You need to be on the next big thing, rather than trying to capitalise on something that has already reached its peak. You should not expect last year’s top performing stocks or funds to be successful this year. In any given year, bond funds and stock funds can be impacted by numerous different factors. This includes the likes of political issues, consumer confidence, interest rates, and economic health. There is no guarantee that history is going to repeat itself. Nonetheless, this does not mean that you should overlook a fund manager with an excellent track record and past-season winner that has steady growth performance.
Failing to consider all types of investments – There are so many different types of investments to choose from. Did you know, for example, that the electric power sector accounts for 36% of annual US natural gas demand? However, this is a commodity that a lot of people would not consider investing in. It is important to consider all of your options, rather than simply going for something that is popular.
Trying to time the market – There are some investors that will stay completely invested in stock funds while there is a rise in the stock market, and then when stock values start to fall, they will jump rapidly to the money market or other cash equivalents. However, you need to know exactly when to get out of stocks if you are to make this approach work. You should consider your risk tolerance and your goals for the long-term, enabling you to stay invested.
Putting all of your eggs in one basket – Last but not least, this is most definitely one of the biggest mistakes that investors make today. Diversification is a necessity. If one of your investments does not go to plan, you will be able to fall back on the other investments you have made, which will minimise risk considerably.
If you can avoid the errors that have been discussed in this blog post, you can give yourself the greatest chance of success when beginning your investment journey. Make sure you conduct as much research as possible, go at your own pace, and consider all investment options that are available to you carefully.