Investing in stocks or other investment options can be a risky business. Even so, many still consider it because of the high profits you can realise, both in the short term or long term. To ensure success, here are seven common mistakes in investing you need to avoid:
(1) Having no plan. No matter what kind of investment options you are venturing into, you cannot start investing without first doing your research. Spend a few months learning your way around, reading up on your markets and drawing up a plan on what kind of stocks and shares you are going to go for. You need a plan and you need to research it. That plan should address your goals and objectives, the risks involved, the appropriate bench marks, diversification and asset allocations. Through your plan, you can then adhere to a sound long term policy even when faced with unsettling market conditions.
(2) Don’t Focus on Short-term success. It is not a good idea to only consider short-term success when investing. You need to broaden your timeline. As we all know, the business or stock market can be extremely volatile. This means if you set your expectations following a short-term plan, you may encounter problems. Try to look at long-term success so you can take time to focus on the performance levels of the companies you are investing in.
(3) Don’t Pay Too much Attention to Financial Media. Sure, read up on how the markets work and keep abreast of company news in the financial papers, but always remember that there is nothing in the financial news media that can specifically help you to achieve your goals. Only a few newsletters can actually be of value to you and even so, it’s hard to identify them in advance. Don’t rely too much on these financial shows and newsletters, or worse, the whispers in online forums. Just focus on creating and sticking to your investment plan.
(4) Don’t Place Too Much Confidence in Fund Managers. According to most studies, managers usually underperform their benchmarks. Since there is no way to select managers who outperform in advance, and only a few people can profitably beat the market on a regular and long term basis, it is time to think twice about following these guys.
Alex is a freelance journalist and financial blogger. He loves to write about football and jazz but spends most of his days writing about mortgages, credit cards and payday loans.