How to Avoid Common Investment Mistakes

by Suba on May 25, 2012 · 4 comments

When you take the time to look, you will find that much has been said about saving and investing. However, only a few people tackle the topic of the investment mistakes that have been made throughout the years. These mistakes can be disastrous for your investments. By studying the mistakes made in the past, you can learn how to avert them and increase the likelihood of your investment success.

 The Importance of Planning

Like anything in life, investment requires planning. Having a clear goal in mind will give you something to aim for in the future. Setting targets, like how much money you want to earn and the time frame in which you need to get it done, is an essential task when embarking on the road to investment success.

In this stage, you can invest your money on investments that are suitable for you and that will earn a steady income. Also, include in your planning a benchmark so that you can measure how well you are doing. These plans should not be limited to preparations and gauging success, and it should include all the risks as well.

Setting Realistic Time Frames

Although earning a lot of money in a short amount of time is ideal, it is unrealistic at times. Investing requires patience, and in some cases, you will have to wait. Make sure to give yourself enough time, so that you will not be disappointed when things don’t has as quickly as expected. Time frames usually depend on your needs. For example, are you investing for retirement or are you investing for your child’s college? From your goal comes the time frame needed to achieve it, such as senior year of high school or when you turn 65.

Do Not Rely on Past Performances

Many people take one look at the top earners and think they have a 100% chance of being succesful if they invest in it. It will be very tempting to invest in top performers, but you should always invest with caution. No one can be sure how long the successful investments will stay on top.
Recheck your Goals Regularly

It is important to stay on track when you are investing your money, and it is best to be disciplined when it comes to investing. It is tempting to ride with the tides of the market, by purchasing top performers regularly. But by doing this, you are not assured long term gains. You can hit the jackpot at times, but you can lose just as easily. By sticking to your original plans and goals, you can reap your rewards in the future.

Wholly Trusting Market-timers

Trusting too much in the advisers who time the market can be quite tricky. Only a few people can actually time the market, and even the experts cannot guarantee fool-proof predictions. In fact, many individuals profit more from selling their market predictions than actually investing.

Too Much of a Good Thing…

Can be a bad thing, and too much or too little diversification is not advisable. It is obvious that you do not need to stick to one type of investment, even if it shells out regular gains at the moment. Remember that you have a lot of options available. Investing all your money in one type of investment class can spell disaster. No one knows how the market will play in the future, and if anything goes wrong with your investment, you could be left with nothing.

However, too much diversification can also be bad too. Investing in too many types of investments can be difficult to handle.

Investing is a wise way to handle money and to reap fabulous returns. Still, you must remember that amidst all the excitement that goes with investing is the reality that investment jackpots or homeruns are rare. The profit you want does not come without risk, and to battle such risks you have to handle every step wisely. Avoiding the repeated mistakes of other investors does not mean that you will gain millions from your investments, but it will certainly prevent some losses. If you can avoid these common mistakes, it will help you to make long term profits in the end.

Did you commit any of the mistakes mentioned? Are you still committing them? What investment advice do you have for others? Why don’t you check out, a Stock Primer for the Novice Investor

Suba

Suba is the editor of Broke Professionals.

More Posts - Website

{ 4 comments… read them below or add one }

1 Shaun @ Money Cactus May 27, 2012 at 9:03 am

Sound advice I’d say. My main piece of investment advice would be to invest for the long term and be patient. It’s not very thrilling, but it is very effective!

Reply

2 Paul @ The Frugal Toad May 27, 2012 at 8:36 pm

Dollar cost average, diversify among asset classes, and leave it alone!

Reply

3 Alexander Collins May 28, 2012 at 5:35 am

My advice would be – proper money management and analysis. Make a step beyond the borders and try to figure out what will be with these shares in a year or two, where is market moving, what is trend now and will it continue to be…

Reply

4 "Tom" May 28, 2012 at 7:13 am

Nice read no doubt. When it comes to investment, most of the people often tend to take wrong decision including me. Investing is an extremely crucial aspect of personal finance. So whatever steps to be taken, we should take thoughtfully. Personally I do prefer long term investments as it has certain extra benefits along with extra insurance.

Reply

Leave a Comment

Previous post:

Next post: