Everyone is prone to make mistakes. Making mistakes is a part of our life. Small mistakes may not hamper you much; however, when you make big mistakes, it may cost you dearly.
Therefore, if you want to become a successful investor, you must avoid making big mistakes.
Investing Mistake: Waiting to Invest
How do you measure mistakes as small mistakes or big mistakes? For an investor, the biggest mistake can be dillydallying investment or not investing at all.
An investor has to make his/her money work, even if he/she can spare just $100 in a month to invest. One of the biggest mistakes in investing is waiting to get into the market.
Compound interest is extremely powerful, but it relies on time. The longer you stay invested, the more money you can make. Starting to invest early in your life will give you a leg up and allow you to make more money.
Investing Mistake: Not Being in a Strong Financial Position
Another big investing mistake for an investor can be investing before he/she is in a strong financial position to make an investment.
If you want to invest, you should get started only when you in a position to invest. Before you can invest, you need to stabilize your financial situation.
For example, pay your high interest loans, clear your debt, and have bank balance that can support you for at least three months. Get ready to invest only when you have surplus money and you are not living paycheck-to-paycheck.
Investing Mistake: Investing for the Short Term
One of the common investing mistakes is people are largely attracted towards “get rich quick” schemes. Most of the “get rich quickly” programs are scam. Even if it is legitimate, such kinds of programs are very risky and you are very likely to lose money.
If getting rich was so easy, everyone would be doing it. Think about long term investment, the kind of investment that will give you returns slowly.
Long term investment is less risky than the short term investment. You should consider short term investment, only when you want return in short interval.
Before, you invest on short term investment programs; you need to check the program thoroughly. Do research and invest only when you believe your investment is safe.
One of the safest short term investments can be fixed deposit bank account. You can get a high return on fixed deposit accounts.
Check out how M1 Finance can get you started investing.
Investing Mistake: Investing Too Much in Alternatives
One of the common investment mistake is many people believe that their collectibles will give them good returns. You collect rare coins. It may or may not make you money. You collect jewelry, are you sure the money you invested in your jewelry will give you maximum returns?
When you invest, think about hard cash. Unless you know a lot about alternative investments, it may not be as safe as you think. Sure, it is possible to make money in art, collectibles, Bitcoin, and fine wine. However, it is much harder to get started and to ensure you make a profit.
Instead of focusing on alternative investments, start with the basics. Stocks, bonds, ETFs, and real estate are great places to start.
Investing Mistake: Trying to Time the Market
Timing the market is usually very difficult and does not pay off. If you have a chunk of money, you may be tempted to wait for the market to drop. On the surface, that is a good idea since you would buy stocks at a discount.
The problem is that no one knows when the market will actually drop. It could be next week or it could be two years from now. If it drops in two years and you are not invested, you lost out on two years of gains.
It is better to add small amounts of money to your investments at regular intervals. This will even out your timing so that you don’t buy everyone at one point in time. The longer you stay invested the market, the better you will be long-term.
Investing Mistake: Selling When the Market Drops
Many people panic and sell their investments when they start to see the overall market drop. This is a terrible idea because it ensures that you will lose money if you sell for less than you bought it for.
In investing, you only lose or make money when you sell. If you hold your investments, even during a market downturn, they will likely bounce back and continue to make money.
History has shown that the market trends upwards over the long term, even if there are periods of drops. As long as you can wait out a market drop, you will see them bounce back and continue to grow.
