Common Investing Mistakes

Written by , March 23, 2010

No one is planning on working forever. Some sort of investment, whether it is a retirement fund, real estate or other vehicle, needs to be looked at to finance your life after you retire from the world of work. But, be careful. When investing, many novices fall into traps and lose their money. Here is some advice on how to avoid making investment mistakes.

Investing is not the hardest thing in the world, but it does take time and research. Unless you understand what you are investing in, you may want to hold off until you are better informed.

  • The first mistake that many new investors make is paying too much for management. Some investment managers and companies charge way too much in fees. By the time you are finished paying their fees you haven’t made as much as you thought that you would. Expensive is not necessarily the best, just like cheaper is not necessarily bad. You are looking at market performance after fees are taken into account.
  • Another pitfall is spending your last dime to invest in a stock, bond or mutual fund. Investing is about saving money. If you are able to invest and not leave yourself in the lurch with other commitments (like household bills), setting aside money to invest is a wise decision. But, too often someone will hear about a “sure thing” and use their car payment in hopes of a quick turnaround. If you can’t afford to invest, maybe you need to wait until you can.
  • Another common mistake is lack of knowledge about investing. If the language is all Greek to you, find an investment counselor who can explain it to you. Investing in products recommended by friends and family may not be good for you, especially if you don’t know when to stick with it or when to get out. You are more likely to trust the wrong advice when you don’t know what you are doing.
  • How many times do we let our hearts rule our heads? With investments this can spell your downfall. Making smart choices is about information, not just your gut. Brokers or friends who tell you to jump on a stock right away could be setting you up for a bad situation.
  • What difference does a day make? For one, making a hasty decision today with visions of dollar bills in your head could see that same stock fall tomorrow. And if perchance it goes up the following day – well, that is just one fluctuation in the life cycle of that stock. You can still get in and make some money if it is in fact good for your investment needs.
  • There are many pitfalls to investing: lack of knowledge, high fees, hasty decisions and poor planning. If you can avoid at least the ones mentioned in this article, you have a fighting chance of creating a successful portfolio.

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