Ten Investing Mistakes

November 30, 2009

How do you make your money work for you? One way is by investing your money. Investments are a way to make your money grow through the stock market, investment companies, mutual funds, and retirement accounts. But, while you are looking to invest your hard-earned money in something, don’t forget to familiarize yourself with the mistakes that are more commonly made by new investors:

1. Not taking advantage of your 401(k) plan. Most employers offer a retirement plan for their employees. It can either be used from the first day of employment or there is a one year waiting period. Whatever the circumstances, contribute to the plan as soon as you are able.

2. Not having a plan. Whether it is a 401(k) plan, an IRA, or another investment vehicle, go into it with a plan for contributing and how to invest the funds. If you just put your money into it and do nothing else, you have a glorified savings account. Let your age, family responsibilities, and the market determine how you will invest the funds so that you get the highest return possible.

3. Investing too heavily on the conservative side. As an investor in their twenties, there is enough time before retirement to place the majority of your money into higher yield stocks. If by some chance you do lose some money, there is enough time to recoup your losses.

4. Investing too heavily on the risky side. For older investors who are nearing retirement, it is time to move things around and reconsider where your money is invested. Now that retirement looms, this is no time to play around with risky investments.

5. Putting all your eggs in one basket. There needs to be a good mix of stocks, bonds, and other investment vehicles so maximize your money. Simply investing in one thing limits your money’s potential.

6. Falling for get rich quick schemes. For a while everyone was into those “hot tip” stocks that promised a quick profitable return. Playing with fire like that for too long will result in you getting burned and your money going up in flames.

7. Not knowing when to get out is a potential problem. For a lucky few, getting to ride the wave of a great stock to high profit is a rush and an opportunity. The trick is to know when to get out and put your money into something more stable for long-term growth.

8. Too much information can immobilize us. We don’t invest because we are on overload and don’t want to make a mistake. The only mistake here is not giving it a try. Use an investment advisor to limit financial mistakes.

9. Trying to invest with other debt. Before you are free to invest, the money must be freed up to do so. Pay off credit card debt first so that you have the cash to devote to investments.

10. How high are your commission fees? For the amount of stock trades that the typical person makes, the commission shouldn’t be expensive. If they are, find a more reasonable broker.

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