The big investment mistakes one is prone to making
Not everyone is a financial guru, the common man is bound to make some mistake while investing. While these mistakes may seem innocent and harmless but they often turn out have disastrous outcomes. And that creates quite a huge amount of stress and anxiety for the one who is investing. Here, we suggest you some ways that will help you prevent a disaster of such kind and also ways you can fix them:
Be rational when it comes to predictions
Human beings tend to be emotional and this often affects in our investment strategies. Investors often react to the highs and lows of the market in ways that are irrational. Selling stocks when the market is down is one of the common mistake undertaken by the investors. They get frustrated, lose their cool and sell their stocks when the market is down. Successful investing lies in controlling your response in dire situations and taking a rational stance in it.
Studies have shown that in the USA, 62% of citizens have less than a $1000 savings in their accounts. (Source: GObankingrates.com). These figures tell us that they do not possess the sufficient amount of cash reserves to cover an emergency period. The only way out to this problem is automation of a savings account that keeps a percentage of your paycheck blocked for emergency purposes in future.
Improper retirement planning
Not only insufficient savings, but there exists a growing tendency which shows the presence of improper retirement planning among the masses. Insurance, disability coverage, college education for kids, tax complications; all these form a huge cause of stress if you do not have prior planning to handle them. And so it is important to start budgeting and planning accordingly that keeps in mind this important aspect of retirement planning.
More often than not people want that extra security when it comes to financial planning and tends to lose out on in the process. Your saving rate may increase your account balance but make sure you are at par with the inflation rate too. Or else you won’t be able to do much with your savings. Yes, stock markets do involve risks but the positive thing to remember is the markets always go up 🙂
Showing too much aggression
By aggression we mean greed. While playing too safe might cause you losing out on your money. Showing too much of aggression while investing also does no good. People usually get too greedy when the market starts doing well. But the thing to remember is the market goes in cycles. If there is high there will be subsequent low too. Hence too much aggression and greed might cause heavy losses.
Running after emerging trends of the market
One of the common mistakes is falling for the hype that is created by the forever emerging market trends. While falling prey to the short-term trends people often lose out on big long term money. The thing to keep in mind is that market is unpredictable in the short run, the wise thing to do is to keep eyes on the long term goal.
Investing all in one venture
diversification helps in reduction of risk management, allocating funds in different financial instruments and categories. It is useful as it helps achieve long-term goals with minimum risks. Diversifying further to invest in stocks as well as bonds reduce further risks during market swings.
Insufficient knowledge about hidden costs
Many investors are unaware of additional taxes, management fees, trading fees and proceed without any knowledge of these hidden costs. These costs are usually withdrawn from the account without you even knowing about them. So, it comes as a shock to people who are unaware of them. Therefore, it is always advisable to read and gather proper knowledge about the subject matter before investing.
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