5 Common Investment Mistakes and How to Avoid Them

A fool and his money are soon parted. Investing can be an opportunity for riches. But it can also lead to squalor and bankruptcy. Before you take out some money to invest, take out some time to investigate the marketplace. 

You need to make the most informed investments possible. If you do, you will be wealthy in no time. Here are five common investment mistakes and how you can avoid them. 

1. Not Understanding the Investment 

There are a few things you should understand before you hand over your cash. Get a sense of what the business model is. Talk to the CEO and CFO about their five-year plan. Understand what they are selling, and who their target market is. Research the CEO’s history. Learn how they build and run a business. Ask them what common investment mistakes they made, and ask them how they fixed those mistakes. Run any contract you sign through a lawyer. Read the fine print. Do not enter into an oral contract with anybody. 

2. Failing to Diversify

Ask any very rich person for advice, and the first thing they’ll tell you is that you need to diversify. Invest in stocks, fixed income, and hard assets. Consider investing in real estate and online businesses. 

If one asset goes down, you will still have others to make money off of. Don’t fall in love with one company and pour your life savings into it. Spread your money around, so you never take a huge financial hit if one asset collapses.

3. Not Setting Goals for Investments 

You do not need to be ambitious. Most people invest so they can have a stable income in retirement. That goal is fine, and it works. But you should set some sort of goal. Maybe you want to make enough money so you can retire. Maybe you want to purchase a house or a car. Once you set a goal, make investments that will let you reach that goal month-by-month. Stick to your plan and goal. You will take fewer risks than those who don’t. 

4. Improper Timing

Don’t wait around. If an investment is a good bet, invest.  But don’t rush into an investment. Do your research and talk to your financial advisor. Don’t let the market influence your judgment. Stocks rising does not mean that they will always rise. Invest when things seem right to you, not when things seem right to everyone else. Don’t let the hype get to your head. The media likes to hype successful people and businesses, but they always leave something out. Do your own thinking and research. 

5. Not Knowing Your Portfolio

You should maintain a diversified portfolio. You should hire a financial advisor who can keep an eye on that portfolio. But you need to keep an eye on the portfolio as well. Understand how each of your investments is doing, and adjust them accordingly. Don’t get too tied up in one asset or another. Talk to your financial advisor on a regular basis. Do not let them make decisions on your behalf. Remain in control, and be willing to take charge of your money. 

Find More Common Investment Mistakes

Millions of people make investments every year. It is little wonder that there are many common investment mistakes. But you can rise above the rest and avoid them. Understand what you’re investing in, and diversify your investments. Set goals for yourself to reach, and time your investments to hit those goals. Check your portfolio on a regular basis to see how your assets are doing. Keep doing research because finance is always evolving. Follow our coverage for more information on investments and options for stocks.