Investing Mistakes
Mistake no 1. Not Investing
Before investing you’ll want to do your research. This is a safe way to make sure that you understand what it is you’re getting into. But don’t let fear paralyze you. In the long run, being invested is better than not being invested. But you need to invest wisely.
Mistake no 2. Not Keeping an Emergency Fund
There’s a benefit to having your money invested, whether in retirement accounts, commodities, or bonds, but you shouldn’t be storing all of your money there. To be safe, you should have a liquid emergency fund established, held either in a high-interest savings or a checking account that you can quickly access. This is a safe way to have money on hand in case something unfortunate were to happen to your assets or if you needed to cover some sudden costs. Your emergency fund should cover 3 to 6 months survival before investing in anything.
Mistake no 3. Procrastination
There’s a benefit to researching the investment you’re considering, along with its trends over time, but you shouldn’t wait on it. If you’re expecting rebounds to take place around a specific time, whether for sales or purchases, you might be missing out, eventually preventing yourself from making an investment at all.
Mistake no 4. Not Taking Losses
One of the biggest mistakes new investors make is not taking losses. There is an old saying “Let your winners run and cut your losses early”. Psychologically, it is easier to take a profit than a loss. So investors tend to sell when they see a small gain and hang on to their losers hoping they will turn around. This is exactly the opposite of what you should be doing. If an investment doesn’t act like you think it should sell it quickly before a small loss turns into a big loss. On the other hand, if a company is going up stick with it (but not necessarily forever).
Mistake no 5. Not Matching Your Employers Contributions
If you work full-time for an employer, it’s likely that you have a 401(k) in which money is being stored. This individual retirement account is a sound way to put aside money with each paycheck to save for the future. In most cases, your employer will match your investments up to a certain amount, whether it is a percentage of your paycheck or an exact monetary amount. Match whatever they offer! It’s free money take all you can get.
Mistake no 6. Not Watching Out for Fees
When it comes to certain investments, there might be hidden fees you’re not considering. Whether those are fees faced when investing, on sales or trades, it’s something you should be aware of. Furthermore, you need to be aware of any taxes you might face at the end of the year. You don’t want to be hit with fees or taxes you didn’t expect, especially if money ever happens to be tight. Take some time to research these possible investments prior to putting down your first money.
Mistake no 7. Starting Big
Invest, start small and gradually increase. Dont start big. The only way to get good at investing is to do it. And just like everything else you WILL make mistakes when getting started so keep the mistakes small and you will gain experience. And over time you can increase your investments.
Mistake no 8. Not Investing Enough
The opposite of mistake 7 is not investing enough. You need to have a hefty nest egg for retirement but don’t put all your eggs in one basket and don’t take big risks with big money. Limit risk by using stop losses, and diversification. But keeping adding to your investments throughout your lifetime.
Mistake no 9. Not Using Tax Free Accounts
IRA’s, 401k’s and other tax free or tax-deferred accounts help you multiply your investments. Once again this is free money so be sure to use it.
Mistake no 10. Not Being Honest with Yourself.
Can you research companies, do you have the time and skills. If not invest in Index Funds, diversified mutual funds, etc.
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