6 Investing Mistakes to Avoid

Investing is something that everyone should be doing to help them build wealth and ensure they are building an effective portfolio for the future. However, making mistakes when investing can be highly damaging financially, and not knowing what you are doing, getting bad advice or failing to make solid decisions can drastically reduce your nest egg.

These are some of the investing mistakes you should be avoiding.

Not Understanding the Investment

Going in all heavy and putting your eggs in one basket, so to speak, without understanding what you are investing in, the risk, returns and consequences can be a recipe for disaster. Make sure you fully understand everything you are investing in, especially individual stocks or if you want to invest in different countries. If you want to invest in africa, South America, or the Indian markets, for example, then understand what you are getting into and don’t make any commitments if you are unsure of anything. If you are unsure or don’t understand things then it is always best to speak to experts like Daniel Lerner and David Lerner Associates so they can help you make the right decisions and help you protect your investments and finances.

Ignoring Inflation

If you are risk averse and don’t want to lose your money in a bad investment, simply opting for a savings fund, then this could also be a big mistake too. If the interest rate is below the rate of inflation, your savings won’t be worth as much as you might think they would be. This can be riskier than investing and something you regret down the line.

Not Keeping a Rainy Day Fund

Yes, investing your money is good and something you should be doing. However, you shouldn’t invest every penny of your savings pot and leave nothing behind. Everyone should have a rainy day fund equal to around 6 months’ worth of expenses. If anything happens to your primary source of income, you have something to fall back on, and you won’t need to sell any investments to get money to live off.

High Turnover

Jumping in and out of investments can be a costly endeavour; while there are some exceptions to this rule; however, short-term taxes and transaction costs can add up if you are jumping in and out of positions for a quick buck. While the immediate gains might make this enticing, you will eat into any profits you make.

Failing to Diversify

Every investor needs to be able to diversify their investments. This will generate more returns and avoid losing all your money in a bad investment. Ideally, you will want to invest between 5 and 10% in one investment alone.

Investing with Emotions

Letting your emotions rule your decisions is a big no-no. Investing requires you to make decisions with a clear head, and letting greed or fear play a part will only lead to you making mistakes and potentially losing everything.

Let your head make the decisions and avoid panicking and selling, for example, if stock is falling because you want to cut your losses. Typically, investing favours the patient; long-term investors typically get the best returns, so you need to be logical and play the waiting game.

Investing isn’t easy; it is worth getting financial advice before parting with your money so you know exactly what you are getting into and what you can expect to happen. These are some of the top mistakes you should avoid when investing your money.

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