Planning to invest money? While it can be intimidating to put your hard-earned money into an investment account, you’ll find that the returns are well worth the risk. The key to investing wisely, however, is knowing which common mistakes to avoid. In this article, we’ll discuss five of the most common mistakes that investors make and how you can avoid them in order to ensure your investing success.
1) Not paying attention
This is one of my biggest pet peeves. All too often, people spend more time watching the market than they do analyzing it. I can’t tell you how many times I’ve heard that someone bought a stock because it was going up. The problem with that logic? It assumes price is an indicator of value and that price action in itself produces profits. In fact, research has shown that over 80% of all stocks lose money over long periods of time!
2) Overlooking fees
Most people don’t think about investing fees until it’s too late. But they should be on your radar as soon as you start researching financial advisors, because they can have a huge impact on your investment results. Find out if there are any hidden fees before you make an appointment—and then negotiate if necessary.
3) Buying too late
Many investors assume that time is on their side when it comes to investing. That may have been true once, but if you’re holding off on purchasing a stock today because you feel like waiting until tomorrow is better, then you’re making a huge mistake. History has shown us that there are instances where even an hour can make all of the difference in terms of investment value.
4) Getting greedy
Don’t let your investments get out of hand. Instead, invest a set amount every month and never touch it unless you really need it. In other words, don’t throw money at stocks just because they are doing well—and don’t sell them just because they aren’t. Stick with a sound investment strategy and a healthy mix of stocks and bonds and mutual funds instead.
5) Not diversifying enough
If you only have a small amount of money that you can afford to invest in stocks, then you may be better off investing in a fund or ETF. Don’t put all your eggs in one basket. You’ll also want to diversify between different asset classes such as large-cap stocks, mid-cap stocks, international stocks and emerging market stocks. Each class carries its own risks and potential rewards and should not be grouped together simply because they are equities.
