Getting into investing for the first time can seem like an exciting adventure, but it can also be quite intimidating. Investing has a very steep learning curve and there are a lot of factors to understand before you make your first financial move. Many first-time investors get themselves into trouble due to their inexperience and make ill-informed investing choices that end up losing them money in the long run.
Here’s a look at some of the biggest mistakes that beginner investors make, so that you can avoid makiing them yourself:
Having Unrealistic Expectations
Many first time investors get excited when they hear of all the investment success stories out there and believe that they too can become instant millionaires. However, the reality of investments is not so thrilling and is much more about long term growth, patience and savvy choices than striking it rich. The lesson here is to not expect overnight success, especially if you are just starting out.
Failing to Diversify
We have all heard the saying, “don’t put all of your eggs in one basket?” This is true for a lot of things, but especially for investments. If all of your investments are similar in type and are all concentrated in one industry, it only takes that particular industry to suffer economic turmoil for your entire portfolio to turn into a rotten mess of yolk and shells.
If you have a diverse range of different investments, you will be able to weather any storm because the investments that are suffering will be supported by the ones that are doing well.
Watching Your Stocks Constantly
Many new investors will check their stocks every day, which is actually quite pointless and sometimes even torturous when the market fluctuates up and down. Remember that investing is a long term game and if you wait long enough you will get a return. Check in on your stocks at regular intervals, but don’t watch them every day or you will only cause yourself unnecessary stress.
Making Emotional Decisions
In order to be successful in your investments, it’s very important to make decisions based on logic rather than emotion. Many first time investors let their emotions lead them into making bad decisions, based on the news of the day or the most recent crisis.
Instead, the best thing to do is to make logical long-term plans rather than knee-jerk decisions. Be patient and take the time to educate yourself and diversify your portfolio. Be the one who remains calm and level-headed when everyone around you is panicking.
These are just a few important tips to keep in mind as a first time investor, so that you can avoid making the common beginner mistakes that can cost you big. Take your time, learn as much as you can, approach your investments with a cool head and play the long game – soon you will be an experienced investor with plenty of profit to show for it!
Samantha Smith has a keen interest for investments, she writes blogs for a lot of different companies and magazines such as EK consultants.