Common Mistakes Made By First-Time Investors
Investment is a good way to plan for your future, and the earlier you start, the more you will get out of it. Saying that, there are some common mistakes made by first-time investors that can be costly. Here are five of them.
Investing In The First Place
Before you start any investment plan, make sure you pay off debts first. The return you get on the vast majority of investments – whether stocks, cash or bonds – will be dwarfed by the interest you pay on your debts. That means that you will end up losing money in the end. Furthermore, you should never use money that you cannot afford to lose. Market fluctuations mean that you could end up with serious financial woes if you are playing with those finances that you need.
Short Term & No Plan
A good plan is a cornerstone to all investment success. And all good plans have an eye on the long-term future, rather than the short-term. Although you can get lucky on occasion, taking punts and investing in companies that you think will bring you a nice slice of profit in a year or less will only end in tears. A stable investment portfolio will look at a five year minimum before an exit.
All Eggs In One Basket
Never put all your eggs in one basket, and diversify your investment portfolio. This works in two different ways. Firstly, have the right mix of stocks, bonds and cash investments. Because those markets do not rise and fall at the same time, you will be spreading your risk. Secondly, don’t go in large on one particular industry. If there are sudden industry changes or that specific market tanks due to a new product, you could be left with a portfolio in tatters.
The Difference Between Low & High
The basics of investment are to buy low and sell high. But how you see both those positions is pure speculation. Ten years ago you might have thought that selling your Google shares at a dollar a pop. After all, how big can a simple search engine get? But the guy who bought them off you could have thought that was an incredible price to buy into the future. So, who was right?
Diving Into Forex
Using the foreign exchange market (FOREX) to invest is fraught with danger. You have to know what is going on in the world to make it work for you, and many first-time investors can end up having serious problems. If you are planning on investigating FOREX, make sure you use an international currency exchange broker. Unless you are an expert on the minute global market fluctuations that can see a currency tank one day and shoot up the next, you will need help.
Thanks for reading. We hope we have given you a heads up on what to look out for if you are planning to invest. Now you know what to look out for, here are some tips to follow that can help you make the right decisions.