As a beginner investor, knowing where to direct your money can be quite the challenge. The truth is there’s no right or wrong way to go about investing and it’s only natural that your decisions are motivated by your personal preferences.
However, making the wrong investment decisions can harm your chances of wealth creation, both in terms of money and time involved in the investment.
No one investor has mastered investing down to a tee, and it is very easy to make incredibly costly errors in the process. But some mistakes can be easily avoided with a bit of guidance. To save you from having unnecessary regrets in the future, click here to see a list of four mistakes you should avoid when investing your money.
Table of Contents
Making Decisions Guided by Emotions Instead of Logic
Making an investment and expecting immediate results is not good investment practice. You need to take a long-term view and constantly remind yourself of the approach you had when you made the plunge.
It’s understandable for you to feel jittery and want out of an investment when markets are volatile. But panic-selling can make you miss out on a worthy recovery. As such, try to keep in mind that previous performances should never be used as a guide to the future and that the market can change overnight.
Not Diversifying Your Portfolio
Another mistake many beginner investors usually make is forgoing diversification and putting all their eggs in one basket. Don’t forget that investing is a risk, and putting all your weight behind one risk, no matter how well calculated, is even riskier.
But a diversified portfolio with several investment assets will ensure that you can still survive when one investment takes a hit.
As you consider what to include within your portfolio, consider your interests, goals, financial status, and proximity to retirement.
Not Factoring in Inflation
Many rookie investors tend to ignore the impact of inflation on their investments. By limiting the purchasing power of money, inflation can leave you a bit short when you consider your financial objectives.
To avoid inflation from devaluing your returns, consider investing in asset classes that can beat inflation, such as equities.
Not Having an Emergency Fund
Another mistake people often make is not having a nest egg for emergencies or unavoidable expenses that might be caused by illness or job loss.
Any investor worth their salt, or coin, in this case, knows that you need to have an emergency fund in place to help you meet certain expenses. This way, you won’t have to pull into your investments just to make ends meet.
No one is perfect. Even the world’s most renowned investors admit they have gotten it wrong a couple of times. Take Warren Buffet, for example, who in 2008 spent about $245 million on the shares of two Irish banks because they seemed cheap to him, only for him to experience an 89% loss in the same year.
Visit stocksignals.us if you’d like to know more about how you can make sense, and cents, out of your money matters.
Alex is fascinated with “understanding” people. It’s actually what drives everything he does. He believes in a thoughtful exploration of how you shape your thoughts, experience of the world.