Have you decided it’s time to get smart and start investing your money in stocks? For those who are ready, investing is key to building long-term wealth. It’s hard to find another investing vehicle that has produced greater long-term returns than the stock market.
Maybe you have invested in the past only to make mistakes. Perhaps you were disappointed with the results. But as they say in the investing world, “past performance is no guarantee of future results.” In other words, just because you’ve had one bad experience in your mind, doesn’t mean that you can’t succeed going forward with a different perspective.
On the other hand, you may be relatively new to the world of investing and feeling a bit overwhelmed. There is so much terminology to learn. And, how do you sort through all the investing options?
The good news is that you can do it. Millions of people have. The focus here will be on avoiding six common investment mistakes. If you can learn to steer clear of these issues, you’ll be much more likely to have positive results and meet your investment goals. Let’s take a look at how you can invest your money wisely.
Lack of Diversification
Perhaps the most common investing mistake that beginners make is not diversifying their investments. Any professional will tell you that the secret to investment success is to diversify. Put simply, this means to spread your money around. In other words, don’t put all your eggs in one basket.
Putting all your eggs in one basket would look like investing all your money into one asset. You increase your risk if all your money goes into XYZ investment. If that one investment does poorly, you risk losing all your money.
However, when you diversify, you spread your money into different stocks. You might even spread your money into different types of investments like mutual funds, bonds, real estate, or collectibles. That way, if one should do poorly, at least you don’t have all your money tied up in one company.
So try starting with at least a few different types of stocks. Then, when you feel more comfortable and are financially ready, you can expand further.
Take Advantage of Digital Calculator Tools
Unless you’re a math wizard, figuring out all the calculations in terms of investments is next to impossible. But you will want to know things like compound interest, returns on dividend stocks, and the final value of certificates of deposit. Knowing these things helps you determine whether or not your investment is a good one.
Doing math yourself is challenging. But you can get help by using digital calculator tools. Digital calculator tools make financial planning easier and will have you feeling like a professional. Simply key in the important numbers and let the calculator do all the work for you.
Failure to Research the Company/Business
All too often people end up investing in a company or business that they know nothing about in an industry. They read something online or saw something on TV and have no real information about the company. You simply cannot go into investing blindly. You have to do the research before putting your money to work.
Remember, this is your money you are essentially wagering so don’t you want to make a sound investment? Ideally, you want to learn as much as you can about that industry, such as news and trends, so you can get a feel of where the market currently is and where it’s going. Once you better understand that industry, you can break it down further and look at the individual businesses in that space.
Related Content: The Ultimate Beginner’s Guide to Investing Money the Right Way
Not Sticking Around Long Enough
You’ve often heard it said “Patience is a virtue.” In the world of investing, that could not be a truer statement. Rarely does one have an overnight success story.
Making a lot of money quickly is extremely rare. So don’t expect it. The stock market shouldn’t be seen as a get-rich-quick solution.
Instead, you need to play the long game and hold out until the time is right to sell. If you act too fast, you may be shorting yourself on potential profits. The long game may be 20 to 30 years. But you are more likely to win if you invest for the long-term than if you are constantly jumping in and out of your investments.
Improperly Handling Your Emotions
Money creates emotion. Without it, we feel vulnerable. With some of it we feel settled. With a lot of it, we feel secure.
But ultimately, emotions should not enter into the discussion when it comes to investing. You cannot let emotions drive your investing decisions. That will work out poorly for you in the long run.
Instead, learn to check your emotions at the door and use your mind to make wise investing choices. The stronger your mental capacity to handle the ups and downs of the market, the better off you will be.
Letting Fear Stop You from Investing
The final mistake people make is an emotional one. They let fear control them and steer them away from investing altogether. Anything new is going to seem scary and intimidating. However, that doesn’t mean you shouldn’t try. If you don’t dip your toes in the water, you’ll never have a chance to improve your investment skills and potentially watch those investments increase in value.
A good tip for beginners is to start with a small amount, only what you’re comfortable losing. Keep your expectations at a minimum. And as you learn, you’ll get wiser about picking your investments and how to best grow your portfolio.
By being aware of these common mistakes, you’ll be able to avoid many of the pitfalls that beginners in the world of investment fall into.
Leave a Comment or Answer a Question Below: What other mistakes should investors consider? What has your experience been like with investing? What would you tell someone who is scared to invest based on all they hear from the media?
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