Seen as you’ve made it to this blog, you probably know how a few smart investments can generate a massive amount of income, and set people up for life. However, not all investments are successful ones. There are various mistakes which newbie investors commonly make, and bring their plans to ruin. If you’re taking your first steps into investing, here are a few blunders you need to avoid…
Planning in the Short Term
If you’re investing to save for retirement 30 years down the line, then the fluctuations of the stock market this year or next year shouldn’t be your biggest concern. Even if you’ve recently entered retirement around the age of 70, you’re still likely to have 10 to 15 years ahead of you with which to maximize the potential of your investments. If you’re looking to leave some appreciating assets to your heirs, then your time frame will be even longer. Of course, if you’re investing for your kid’s college education and they’re currently in high school, then your time frame is going to be slightly shorter, and your plans should reflect this. Whatever you do, don’t plan in the short term when you should be thinking in a longer time frame!
Failing to Use the Right Tools
Unless you’re some kind of once-in-a-generation financial genius, you should be using all the investment tools at your disposal to get the most out of your assets. You’re going to be competing against countless other investors who are trying to play the same market, and if you’re not equipped to the same standards, you could miss out on some golden opportunities. Whatever kind of investments you happen to be making, do some research into the kinds of tools you can use to support yourself. Automatic trading robots can make you cash while you concentrate on other things, budgeting software can allow you to manage all your accounts from one place, and many financial journals have apps which will keep you updated with the movements of various markets. Financial tools represent a pretty sizable industry, and it’s not expected to shrink any time soon. Take some time to look at what’s out there, and adopt the tools that could make a difference.
Focussing Too Much on Performance
A lot of inexperienced investors will choose their strategies, asset classes, managers and so on based on their recently impressive performance. While I see the logic, the fear of missing out on some big returns has led to countless bad investing decisions in individuals who are taking their first steps into their market. If a particular asset class has been doing well for the past four years, the only thing this tells you is that it would have been a smart investment four years ago. Now, however, the factors that led to this great performance may be coming to an end. Smart investors are cashing out, and the foolish ones are paying in. Have a plan, stick to it faithfully, and rebalance every now and then, rather than blindly chasing performance.