Investment is a sure way to achieve wealth accumulation. However, if you pursue any investment strategy, you’re bound to make investment mistakes. Whether you are a total rookie or a seasoned investor, there is a possibility that you may end up screwing up your investment plans.
To maximize your returns, it is crucial that you take a keen interest on how you spend every single penny. Equipping yourself with the right information beforehand on common investment mistakes could help you evade or deal with them.
I have scoured the web and pared down common investment mistakes. Without much further ado, here are the five common investment mistakes.
Lack of an Investment plan
You have probably heard that failing to plan is planning to fail. Well like in any other life aspect, investing without a plan a bad idea from the outset. The more planning you do, the more you increase your chances of success. If you want to get good returns on investment, you must have a clear idea of what you wish to achieve. A plan is a prerequisite before venturing into bonds, stocks or any other investments.
But that is not enough. You should strive to make your plan more specific. What is your overall objective or goal? Do you want to build your net worth?
The next thing is to determine the risk you can stand. For instance, if your retirement is due in the next five years, then it is prudent to go for more conservative strategies. These investment strategies may not suit young people in their 30s.
You should also think about the assets which can assist you to reach your goal, assets that you would like to invest in. To ensure you have a good balance of investment you should look at diversity that exists in each group of assets whether bonds, stocks or any other asset.
A written plan will go a long way to help you stick to your plan. In addition, it will give you some accountability and a way to keep track of your progress.
Making Decisions Based on Emotions
When making any decision especially financial decision, it is advisable to detach emotions. Dipping your toes in any investment based on gut feelings might leave you destitute. You should, therefore, shun decisions solely based on emotions without thorough research. In essence, you should determine if your instinct is on the right track by running the numbers and looking at the bigger picture.
Similarly, when deciding whether to sell an investment or not, you should avoid letting your emotions dictate your choice. You should be sagacious enough to avoid holding onto dud investments in hopes that it will turn out well in the future. Failing to admit that you have picked a loser will take your money down the drain.