Five Common Mistakes
Provided by FinancialContent.com
By Chris Stallman
| E-mail
Investing
for the long-term can be extremely beneficial to the person who
takes advantage of it. But that doesn't mean that there aren't
any pitfalls. Here are five common investing mistakes that you should
avoid if you hope to fully benefit from a long-term investing approach.
Investments Are
Too Conservative/Risky
A big mistake people make is that they pick investments
which are too conservative or risky for their investment goals.
For example, a person who invests too conservatively with quite
a bit of time before retirement might find that they will need to
save more than they planned to because their investments aren't
appreciating enough. An investor who is nearing their financial
goals who decides to put their money in more volatile investments
will find that they are taking unnecessary risks with their portfolio.
If you
want to find out how much risk you should be taking with your investments,
take time to ask yourself three questions: "What am I investing
for?", "How much time do I have before I need the money?",
and "How much can I invest?" Then you might want to talk
it over with an investment professional. Or look at our model portfolios.
Losing Interest in Investing
I know it's
hard to imagine but there are actually some people who just aren't
interested in investing. While you don't have to have a passion
for investing to accumulate wealth in the long-term, it definitely
helps. What I've found is that a lot of people lose interest
in their investments after a couple years. When they first begin
investing, they might tell themselves "I am going to invest
$100 each month until I retire" but as time passes, they decide
that they would rather spend that extra money each month. This is
a big pitfall that you should avoid because that extra spending
money could literally cost you hundreds of thousands of dollars
in the long run.
Losing Sight of Your Financial
Goals
The 1990's
had an incredible bull market that spawned a new type of investing...daytrading.
This bull market led to great gains and has made quite a few people
extremely wealthy, and the media has hyped high-flying stocks to
get people's attention. The problem with this is that it has
caused many people to forget their financial goals. With all this
hype, people are investing in these hot stocks, even with college
or retirement just around the corner.
If you're nearing retirement or whatever it is
you're saving for, don't give in to the hype. Instead, keep
your mind on your goals, instead of ways to get rich quick.
Investing in What You Don't
Know
You may have
heard of the popular investing concept "invest in what you
know." Another way of saying this is "don't invest
in what you don't know". A lot of people invest in companies
that they know little or nothing about. This can hurt them because
a situation might arise that they didn't know about.
You can't expect to know everything about a certain
stock but it does help to invest in what you know the most. Rather
than investing in what you don't know, get out a piece of paper
and write down the names of some companies that you do know about
and then look up their stocks.
Not Educating Yourself
The previous
four mistakes that investors make are important ones but this is
probably the biggest mistake of all. Far too many people want to
invest but they don't know enough about it. Rather than taking
the time to learn what they can, they decide to try investing on
their own first.
It is extremely important to have a good understanding
of how investing works before you actually start, especially if
you plan on investing in stocks or any riskier investments. Getting
experience in investing is important but it's wise to have at
least a basic understanding before you decide to do so.
From time to time, investors do make mistakes but these
are five of the biggest mistakes that you should try to avoid. If
you can do that then you will be tipping the odds in your favor
when you are investing.
Previous
Article - Next Article
Like this article?
Bookmark
It
