Most people will make a few investing mistakes, however there are some big mistakes that you absolutely must avoid if you want to be successful. For instance, the biggest investing mistake that you could ever make is to not invest at all, or to put off investing until later.
Make your money work for you, even if all you can spare is £20 a week. Something is better than nothing.
1. Invest At The Right Time
While not investing at all, or putting off investing until later are big mistakes, investing before you are in the financial position to do so is another big mistake. Get your current financial situation in order first and then start investing.
Get your credit cleaned up, pay off high-interest loans and credit cards and put at least three months of living expenses in savings. Once this is done, you are ready to start letting your money work for you.
2. Take Your Time
Don’t even think about get-rich-quick schemes. That is the riskiest type of investing that there is and you will most likely lose your money. If it was easy, everyone would be doing it.
Instead, invest for the long term and have the patience to weather the storms and to allow your money to grow.
You should only invest for the short term when you know you will need the money in a short amount of time. When this happens, you should stick with safe investments, such as certificates of deposit.
3. Not Understanding The Investment
One of the world’s most successful investors, Warren Buffett, cautions against investing in companies whose business models you don’t understand. The best way to avoid this is to build a diversified portfolio, but if you do invest in individual stocks, make sure you thoroughly understand each company those stocks represent before you invest.
4. Diversifying Is Key
Don’t put all of your eggs into one basket. Scatter it around various types of investments for the best returns. Also, don’t move your money around too much. Let it ride. Pick your investments carefully, invest your money and allow it to grow. Don’t panic if your stock drops a few pounds either. If the stock is stable stock, it will go back up.
5. Letting Your Emotions Rule
Perhaps the No.1 killer of investment return is emotion. The axiom that fear and greed rule the market is true. Investors should not let fear or greed control their decisions. Instead, they should focus on the bigger picture.
Over a long time horizon, a portfolio’s returns should not deviate much from those averages. In fact, patient investors may benefit from the irrational decisions of other investors.
6. Don’t Count On Collectables
A common mistake that a lot of people make is thinking that their investments in collectibles will make them a lot of money.
If this were true, everyone would do it. So don’t count on your pottery collection or your book collection to pay for your retirement years. Count on investments that you’ve researched and made with cold hard cash instead.