Whether you’re new to investing or it’s something you’ve been doing for years, it’s likely you’ll come across these common problems.
You Have No Patience
Once you make an investment, you want to see the return, and you want to see it now. If you have access to check on your investment, you may find yourself obsessively checking it to see how it’s doing. Lack of patience is one of the hardest things to overcome for new investors.
You need to understand that investing is a long-term process. To get the most out of your money, you need to let it sit. Read up on investment strategies from 28-year Forbes columnist, Ken Fisher. Teach yourself more about the stock market.
You Believe the Hype
There’s a lot of hype out there when it comes to the stock market. What should you buy? What should you stay away from? Do you pull all of your money out of the market right now? Many investors get caught up in the hype that they hear on TV and start getting nervous about the American economy and stock market.
If you’re nervous about local markets, make sure to branch out. This will give you a more stable, broad base. Globalize your portfolio to ensure that you have ample options, especially when it comes to inflation.
You Invest Without Understanding
Your investment broker knows what they’re doing, right? If you think this means that you don’t have to know what’s going on, you’ve got some rethinking to do. You need to not only know where your money is going, but you need to understand your investments.
Make sure you understand the business models of the companies you invest in. If you don’t understand the company, you’re not going to know if you actually believe it will profit. Educate yourself on the stock market as well as your personal portfolio.
You Ignore Fees
You don’t take the time to shop around for different fee structures. Instead, you go with the investment firm you talked to first, or you decide on the strategy that first came to mind. While you may be lucky and get to work with a great company, you may be hurting yourself with fees.
Not all companies charge the same fees. 2.5 percent and 1.5 percent may feel like it’s negligible right now. However, in the long run, you could easily be spending much more money than you need to. Shop around and make sure you’re not paying too much. You’ll regret it years down the road if you don’t take the time now.
You Always Choose the Highest Yield
It’s tempting to invest in companies with the highest yield. They’re the ones that are going to give you the most money, right? Well, not always. In fact, many companies that have insanely large yields end up going under or having problems paying investors. Remember the saying “if it sounds too good to be true, it probably is”? Nowhere is this truer than in investing.
Instead of only going with the highest yield investments, make sure that you’re investing in moderately yielding options. Many companies offer 3 to 5 percent, and this is where you should be aiming. Too much higher than this, and you should think twice. This is not to say that all high-yield investments are bad. However, it’s important to be careful about how many of them you invest in at once.
You Fall in Love With Companies
When you invest in a company, you may quickly find yourself falling in love with it. You’ll defend the company in any argument. It seems like they can do no wrong in your eyes. This may be immediately, or it could be after they’ve paid you a dividend. Either way, this is a bad trap to fall into.
Make sure that you pull yourself out of this, by your toes if you have to. Remember that you invested money with the company. This is a business transaction, and you need to keep it that way. What this means is that if the company does something that will make their stocks fall, pull out. Don’t stay just because you love them.
Investing brings along with it a lot of emotions. On top of that, there are a lot of rookie mistakes to be made. Do your research and you’ll get through your first few investments without too many problems.
About the author: Susan Pizarro is a freelance writer based out of Florida with a degree in Marketing. She loves writing about personal finance, health, and frugal living tips; and she enjoys travelling the world and trying different foods