Especially if you are relatively new to investing, it is easy to make mistakes – even the pros get it wrong sometimes. However, professionals like Chuck Whitman Infinitum there are some fundamental mistakes that new investors are especially prone to making which are less about occasionally choosing the wrong investment and more about strategic errors. Here are some importance pieces of advice to help you avoid these mistakes.
Don’t forget why you are investing
When you initially began to invest, you probably took the advice of business professionals or friends who told you that you need to make investment decisions with some goal in mind. Whether it is to save for retirement or to save for a vacation, don’t lose sight of why you are investing and be sure to vet all of your potential investments against that goal.
Don’t take on more risk than makes you comfortable
It is sometimes easy to get caught up in the undeniable excitement that can come with investing, especially if you are doing well. Occasionally you may be tempted to make an investment that comes with more risk than you usually assume – before doing so, however, ask yourself first whether you will be anxious about the investment on a regular basis, and second, whether you can live with the consequences of losing the money you invested. Weigh your answers to these questions against the risk you are considering taking on.
Don’t invest in what you don’t understand
Whether you are investing with the help of a broker or doing it on your own, resist any pressure to invest in something that you don’t understand. It may be the stock of a company in an industry that you have no real knowledge about, or a fund that specializes in foreign stocks in markets that you don’t follow. The fact is that if you don’t understand the dynamics that influence the companies or funds in which you have invested, you won’t have the ability to evaluate the performance of the investment nor recognize when it may be time to divest yourself.
Don’t confuse “inexpensive” with “good value”
We can sometimes get so caught up in the mantra “buy low – sell high” that we are too quick to buy things that are inexpensive without asking when or if we will eventually be able to sell at a higher price. It is better to be thinking about buying things are under-valued rather than inexpensive, meaning that you think the price is lower than it should be based on the fundamentals.
If you bear in mind these basic pieces of advice, you will be able to avoid some of the worst mistakes new investors can make.