Investing is attractive in terms of money making and the opportunity to secure a prosperous financial future. But at the same time, this is a rather complicated and risky process, when you can lose your money. Not everything is as bad as it may seem. Common sense and this guide that we have prepared, will help you to avoid investing mistakes .
Learn the basics about common investing mistakes
Before you start investing, you should understand the basic concepts of investment and its types. Different types of securities require different approaches to them. Long-term bonds, stocks, government bonds and other types of financial instruments should be divided in order to be able to successfully manage them.
- Determine whether you have free money
To invest you need to have money. It does not have to be large sums, but you don’t have to spend all your money on investments. You must have money that does not participate in your monthly budget. It is desirable that you have savings that can cover your expenses for several months or expenses arising in the event of any emergency situations. We are all prone to accidents, illnesses and injuries, and everyone can lose a job or another major source of income. If you have free money and savings, then it is probably worth start investing.
- Start as early as possible
Start investing with not a large amount. Do not wait too long for a large amount to accumulate. The sooner you start, the sooner you will reach those goals for which you want to invest. At the same time, too small investments may not bring you the desired result or none at all. Time is the only resource that each of us has, but which cannot be compensated. As soon as you have enough money, start investing.
- Research before investing
One of the common investing mistakes is investing with a lack of information. Before investing your money in any securities, it is worth conducting an independent research, do not take the word of others, everyone may be mistaken or have some kind of intent. Read financial information, study charts, keep up to date with news and events that may affect your investments. Drop the emotions and let the mind be your ally, because emotions can often mislead us. When it comes to your invested money, take only facts, not speculation.
- Determine your risk tolerance
Any investment is risky. Depending on the type of investment you have chosen, the level of risk can vary greatly, but it will be anyway. No one will ever give you guarantees that you will not incur losses, so determine how much money you are willing to risk monthly to invest.
- Have an investment plan
To get what you want, you must have a goal and a plan for achieving it. After collecting information about the object of your investment, set a goal and make an adequate plan with a real deadline to achieve. Determine how much money you are willing to spend on investments every month or quarter, given your resilience to financial risks.
- Stick to the plan
Be always on guard; do not miss important information about any market changes in order to have time to take the necessary measures. If any stocks or other securities began to fall, adjust your investment portfolio to achieve your goals. Periodically look at the compiled plan in order to understand what needs to be changed under circumstances.
Do not keep all eggs in one basket
Big common investing mistakes is to keep all your money in any one kind of securities or sticking to one type of investment. Some people choose the most profitable investment tools, others prefer more reliable ones, but both options are wrong if each is the only one. Spread your money between different securities, industries and companies to reduce the risk of loss.
- Accuracy First
When it comes to money and numbers, there is no place for rough indicators or typos. One minor mistake can play a key role and make a big difference. Check and recheck all the letters and numbers you enter or call. Focus entirely on this when you are sending or receiving information.
- Buy cheap and sell high
The difference between buying and selling is your profit. Look for stock options that have good prospects. Making a purchase of securities when they are at their peak is one of the common investing mistakes. After the peak, there is always a decline, so this acquisition is likely to predictably result in a loss to you. Also always consider the purpose of your investment to choose the right option.
- Be a stockholder, not a player
There are different types of securities that work at variety of time intervals. Most often, high-yield stocks can help you earn in the short term, but they are also the most risky. If you are thinking about the future, then pay more attention to long-term prospects and reliable securities. You should not chase every move up or down.
- Decide when to sell
In time to sell, what will soon begin to fall is an important aspect that will help you avoid common investing mistakes associated with the sale of already falling stocks. This is a direct way, if not loss, then precisely to loss of profit. Professionals in the field of investment solve this problem by setting a specific price of the security when you need to get rid of it. In addition to the residual difference between buying and selling, do not forget to take into account the tax, which will further reduce your profit from the investment.
- Keep abreast of events
Always be aware of what is happening with your investments. Whatever type of investment it is, never forget to check the state of affairs. There are quite a few websites that allow you to track indices, charts and other important information about the state of the market and various securities.
Market and limit orders
Stock prices are subject to frequent fluctuations, so when buying stocks through your broker, tell him the price you agree to pay. The market order indicates the price at which the share is sold at the time of its receipt. After a few tens of minutes, this price may differ from the one, that was at that moment when you made the decision to purchase this stocks. Common investing mistake is not to specify your price per share. A limit order sets a certain price, but it may not be executed due to price fluctuations more than you expected.
As you can see, investments are not simple enough, but there is nothing that could not be understood. Be consistent and you will succeed in investing.