5 Investment Mistakes You’ll Want to Avoid
Investing can be an exciting whirlwind or a dry bore, depending on your point of view. Regardless, it’s an important part of global and personal finance. Trends on Wall Street affect both international economics and individual retirement plans. It is therefore important to be a careful investor. While some are overconfident or lackadaisical about their investments, if you’re aware of these pitfalls, you won’t be.
Ignoring Short-Term Goals
Retirement is the big focus of investment for the majority of Americans. This is of course critical, but you can invest for short-term goals as well. Make a prioritized list of your savings goals and think about how your investments can help you achieve them. Not sure how to proceed? Consider talking to your financial advisor about how to adjust your investments to meet all your objectives.
Making Panicked Decisions
It is natural for the market to go up and down, sometimes dramatically. You should not immediately move to sell a share just because the value has gone down. Sometimes it is beneficial to wait it out. Much like in climatology, overall trends are more important than day-to-day storms. If you dump all your shares on a whim, you may disrupt your overall game plan.
Playing the Market
Most people are not experts on the stock market. Even experienced investors risk losing a lot of money by buying and selling too often. In fact, the more you do it, the more you may stand to lose. Trading on the stock market is essentially gambling and can be dangerously addictive. Safe, boring index funds are a better choice for most people.
Setting and Forgetting
If you are one of those people whose eyes start getting heavy at the first mention of finances, you may be tempted to just set up your index fund and leave it untouched until retirement. Don’t do this. Keep checking in on your investments, even if that’s all you’re doing. At some point, you will need to readjust, whether you have new goals or are facing major life changes.
Too Much Diversification
You need to diversify, but you can do too much. Our trusty index funds come to the rescue again here because they are already made up of many companies. They are also designed to be low-risk. So you do not need to personally purchase many cheap stocks yourself. If you do so, you may end up spending more on fees than you make on your investments.