Mistakes many investors make



Investing in anything will always carry a risk, how much of a risk will vary depending on what it is. Usually higher risk investments will offer the chance of bigger returns so can attract a lot of interest, but unless you really have experience in investing and can afford to lose the money if things don’t go well we would advise you to tread carefully.

Here are some of the most common mistakes investors make:

 

Letting market conditions dictate investment decisions

Based on the market conditions, good investment strategies that have a long term outlook may underperform for a period of time. However, if your investment strategy is based on solid characteristics it is important to ride the waves and see it through. Never make a decision just based on what’s happening now.

Not having a plan

In order to achieve good returns on your investment you need time, so if patience isn’t your thing forget it! Investing requires a plan that revolves around your financial goals and gives you the motivation to save money rather than spending it on unnecessary or mundane things.

Putting all your eggs in one basket

Investors that have diversified investment portfolios usually achieve better returns. How you allocate your investment funds will have a major impact on whether you meet your financial goals. If you don’t include any risk in your portfolio you may not earn a big enough return from your investments. Good diversification would be a portfolio that is made up of different asset classes such as stocks, bonds, shares, property and cash (saving accounts).

Joining the herd

It can be easy to become a sheep and follow the herds of people when they are all telling you how much money they’ve made from a particular investment. Whilst we’re not saying ignore it and it’s always worth taking a look, try not to get caught up in the excitement and ensure you do your homework and due diligence.

Investing when in debt

Robbing Peter to pay Paul has never worked and never will. There are many people who see an investment opportunity as a way of getting a quick increased return on their money and end up in a worse financial situation. Investing requires time and available funds and should never be seen as a way of clearing debt.

The value of investments and the income they produce can fall as well as rise. You may get back less than you invested.