5 Common Investing Mistakes You Should ALWAYS Avoid

Uncategorized May 28, 2020

In investing, making mistakes is a lot easier than expected. With how complex it is, investors often fail in a lot of ways. However, these pitfalls may be the most common ones. Falling into these traps can negatively impact your investments and possibly risk your future and comfortable retirement. Fortunately, it’s easier to avoid if you’re aware of them.

G-Stock Studio/Shutterstock | It’s easy to make mistakes in investing, but you can avoid them if you’re knowledgeable enough.

Focusing On the Short Term

Successful investing that is driven by goals entails long-term commitment. However, investors might get derailed from these long-term plans when they focus too much on short-term goals and get swayed with short-term inputs like fears or shifts in the market. Investors get into a form of short-termism when they get into and out of stock positions pretty quickly. Often, they do this multiple times in one day.

Some tend to sell their stock positions when they think that they have lost value. Others also sell their stocks during a market recovery and then repurchase them when the stock prices are low. These short-term tactics might force you to miss significant gains that could be more impactful than the short-term successes you get.

Chasing the Trends

Some investors tend to flock to an investment or sector that has recently performed well, hoping that the growth will continue. Investors might think that putting their money into a top-performing asset class is a safe route, but they might just be doing so out of fear of missing out. Remember that good past performance doesn’t guarantee the same in the future.

G-Stock Studio/Shutterstock | Following stock market trends may not guarantee a secure investment.

Checking Your Portfolio Balance Too Frequently

If you find yourself checking the market movement too often, then you might be risking your focus on the long-term goals. It can be reassuring to see your portfolio balance is steadily growing. However, seeing your portfolio lose value due to negative volatility might just wrack your nerves.

It may even tempt you to make decisions based on temporary market swings. To avoid this pitfall, create criteria for how you evaluate investments, including more than just the price movement.

Putting Your Money in Illiquid Assets

Liquid assets can be easily purchased and sold without having to move the price. Stocks and some bonds tend to be under this category. However, not all investments and assets are considered liquid. Illiquid assets like vintage cars, artwork, and real estate properties are riskier investments because they are harder to sell. If you invest heavily in illiquid assets, you’re likely tying up your money. You might not be able to easily access the funds right when you need it.

Gorodenkoff/Shutterstock | You should diversify your stock portfolio to lessen the risks.

Placing Big Bets on a Single Stock Investment

Putting your eggs in one basket is a risk you might not want to take. Putting most of your investments in a single stock makes you dependent on it. So, if it does poorly in the market, your funds also go down with it. Although gains on that singe investment may earn you big checks, not diversifying your portfolio also exposes you to more risk.