Investing and trading have become very commonly known and widely used concepts for earning money, appreciating capital and starting to get returns on investments, however, they might not be the simplest of means to toy with. Buying share as in a business which do you not understand, expecting too much from the stock, using money you cannot afford to risk, being impatient, learning about stocks to invest in from wrong places, following the crowd, taking advices from someone random etc.,all are common issues and errors that might run an investor into grave troubles sooner or later.
Every individual wants to make more money and during this haste of often trying to earn higher returns many people pertain to make mistakes. Well making mistakes is human but while investing your money in this modern age, you cannot afford making mistakes that cost too high or can’t be undone.
Here are 11 mistakes that every investor must definitely stay away from:
1. Blindly looking at making more money
When you think of investing or want to invest, you should never simply look up how to invest online in a haste and then just invest all the money that you own. It is not advisable because when investing is subject to market risk, you never know when the market would be volatile or growing. Investing your hard earned money entirely into any one specific product or scheme is risky because it leaves you with no financial backup for your future needs, and might make you unstable and high-and-dry.
2. Buying instruments of which you have less or no knowledge
If you try to invest into instruments yourself or even with the help of financial advisors/broker and know nothing about the same, then you could easily be making a mistake. Imagine if you are aware of how the stock market runs even if you are appointing a financial broker you will understand the terms. When you are deploying your money, you should at least understand the terms and conditions as well as the procedure and fee structures.
3. Over-expectations with investments
It is never acceptable to keep over expectations from anything, especially with people and stocks. When you invest into stocks, you need to be patient and neutral because you could never make right decisions when you are too occupied with hopes and hence it is best to keep away from it.
4. Spending money that isn’t yours
There are some people who see stock market as a place to gamble and if you are one of those then it definitely calls for alarm. If you are investing then it should be genuinely and not merely to make more money. Borrowing money from various sources to double it is not smart move. Ever if the market clashes, you would be able to repay your debts, and this will do nothing except increasing your payables.
5. Being impatient
As an investor you should be aware of the market volatility and fluctuations, and track the market on a regular basis. When the market is not so good, an impatient investor will abruptly sell his shares, which always may not turn out to be positive. For example, if you are an investor who has bought equity shares to earn higher returns and the market volatility inclines, it could make you impatient. So you sell your shares thinking to avoid loss, but the market may grow better than ever and that wouldn’t go down well with you either. You can avoid this mistake by tracking the market at regular intervals.
6. Learning from wrong places or people
Investing your hard earned money is a big step for you and you should not leverage it on any random advice at all. This is your investment and it is your sole responsibility to gather information from only those who are certainly eligible like the stock brokers, sub-brokers, financial advisors,wealth management companiesand more, because learning from wrong people is ultimately going to cost you.
7. Doing what the crowd is doing
Investing where the crowd is investing is unfair with your money and simply doing research on how to invest online won’t cut it. People invest according to their financial goals and plans and based on how much risk appetite they have. So investing in the same funds as others is completely unacceptable, unless you have similar financial background and backup.
8. Forgetting to read documents
If you are new to the investment world and you don’t know all the terms and conditions, you should read all the documents carefully. The documents consists all the terms and conditions which are imposed by the asset and wealth management firms.The most common and known jargon is “Products are subject to market risk. Read all the scheme related documents carefully”. It is a moral responsibility of the side of investors that they read all the documents carefully before signing anywhere.
Even when you are learning all about how to invest online, the T&Cs and other important documents are always available online for reference.
9. Be honest with yourself
When you are pouring your money into investing, you have to be honest with yourself. You cannot just invest and expect your stocks to reach the sky. If the market crashes and you face loss, then just face the loss. What you don’t do is buy more and more to cover up that loss and then look to make more money from that. As an investor you cannot expect your stocks to always stay in the green and bring you profit.
10. Thinking short-term
When you invest your funds in various financial instruments with a short term motive, you cannot expect to earn higher returnsat all times. When you invest with long term motive or have long-term goals like retirement or education or tour, financial advisors often suggest to have stocks in your basket. This will cover your portfolio from losing more value and try and keep it afloat even during volatile times.
11. Buying winners of last year
Investors assume that the stocks which were hitting the sky previously will do the same this year too and try to often tap in to that to earn higher returns. There are many market factors such as volatility, interest rates etc. which might not let the same stock be at the top again.