Making the most of your investments can be difficult. Everyone understands that with the nature of investments, some risks are inherent. But, making these common, yet costly, mistakes means you’re putting your money at a much higher risk than it needs to be.
Here are three of the most common mistakes investors make.
Investing in something you don’t understand
Investing can be a complex process, with a wide number of avenues available to invest your money. One of the quickest and easiest ways to lose your stake is to invest it in a business, scheme, or sector that you don’t understand. If you’re going to put your money into a business, make sure you understand the business model as thoroughly as possible. Same if you’re investing in a product or a new invention. Without proper understanding, you’re not able to make an informed decision about the risk you’re facing.
Letting the heart rule the head
When an investment does well, it’s easy to become overly attached to the company behind it. But it’s imperative to remember the nature of your investment, otherwise, your judgement is clouded. If you begin to love the company, you may be tempted to keep hold of those shares long after you should have sold them, to the point that you could end up losing your entire investment. Similarly, using gut instinct about which sectors you’re going to invest in is never going to be anything more than a pure gamble. Use facts, figures, and data – don’t use your heart.
Having a lack of patience
Slow and steady wins the race. This is applicable to many things in life, but it particularly applies to investments. If you want to see steady and consistent return, then you have to be willing to put a little bit more time into allowing those investments to develop. If you have unrealistic expectations about the time in which you’re going to see a return, you’ll end up consistently selling your shares too soon; maybe even at a loss. Investments are not a ‘get rich quick’ scheme, and you should never invest money that you can’t comfortably afford to tie up for a while.