Suppose you’re eager to start investing because you want to see your money grow, good for you. Investment is a great way to make passive income, setting you up for financial freedom. However, don’t make your exuberance be your downfall. Most newbies feel impatient to see growth, so they make costly mistakes. If you want steady gains with minimal losses, you need to be investment savvy. Though buying gold and blue-chip stocks are great, don’t do it because they’re merely trending. Instead, find out why these assets make great returns and their possible pitfalls. Be calm and beef up your strategies so you can win in this volatile market. Take a look at these common mistakes that newbies make so you can avoid them, along with the subsequent heartache and headache.
Investing Before Being Financially Ready
Most newbies become so excited that they invest before they’re financially ready. The first thing you need to do before you invest is to make sure you have paid off all your high-interest debts, meaning credit cards. If you’re paying 15% interest on your debt, any money you earn from stocks or bonds will even things out. It’s better to pay them off first before you begin investing. Above all, don’t forget to build a 6-month to a 1-year emergency fund. Otherwise, you will end up touching your investments in case your car breaks down, or you experience a health setback. For instance, you may end up letting go of your bonds or selling stocks at a loss during a bullish market. This means, whatever gains you can potentially make will amount to nothing.
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Being Impatient with Results
When it comes to investing, your investment horizon or time plays a huge role in how your investment fairs. Hence, you cannot set unrealistic expectations and be impatient with results. For example, buying stocks or mutual funds mean you need at least five park your money for five years because the market constantly goes uphill and downhill. A long-term investment horizon means you can minimize the risks with cost-averaging. Most of all, don’t make emotional decisions because you’re impatient for results. Doing so can be your greatest down fall.
Failure to Diversify Assets
Professional investors will always say to never put your eggs in one basket. What does this mean? Well, you must place your money in different investment classes. This way, when one takes a dip, the others remain safe. Unfortunately, most newbies get so excited that they invest in one blue-chip company, thinking it would do well all the time. Remember, the market is volatile, so even these highly-esteemed companies rise and fall. For best results, park your money in different assets like precious gold and silver metals, bonds, annuities, trading funds, real estate, REITS, and the like. Diversification is your key to success.
Putting Trust in the Wrong Sources
Sadly, most new investors fail because they follow trends and trust the wrong people. Remember, not everything you see or read from TV or influencers is right for you. Instead of following a hot tip recommendation, do your own research. If you’re thinking of investing in the stock market or corporate bonds, do fundamental analysis and risk-assessments of the company. When it comes to investments, you don’t just invest your cash. Instead, you need to invest in your education so you can make informed decisions. Most of that time, you will end up making a bad call if you don’t have the right information. So you can invest properly, you need to understand everything first. Otherwise, bad things can occur, and you won’t even realize where you went wrong.