5 Common Investing Mistakes and How to Avoid Them
Fri, 11/09/2012 - 4:26pm | by Guest Contributor
At one point or another, we all have considered making some sort of investment. Correction: At some point in our lives, all of us_ do_ make investments, whether it's of our time, our efforts or our resources. The thing is, when it comes to making a wise one, we must get all of the information that we can beforehand about how much time, effort, resources, money or capital that we should put into a particular thing in order to gain the kind of return that we seek.
On the financial front, there are many errors that people make when it comes to investing; again, mostly because they don't have the right kind of information prior to making the decision to do so. If you're considering making an investment, here's a list of five investing mistakes that are commonly made, along with ways to avoid them.
People invest without a clear plan. Does anything ever go well, especially when it comes to a financial commitment, without there being a plan? You may see people spontaneously play the stock market in the movies, but in real life, following that model could turn out to be a real nightmare. If you're serious about investing, consult with a couple of financial advisors to discuss with them both your short and long-term goals along with how much, not only you're willing to risk, but can afford to.
People don't do enough research on companies. Would you buy a car that has only been tested out by 20 people? How about taking a new medication? It sounds a bit absurd, right? Yet, this is what people do on a daily basis when it comes to businesses that have either recently come onto the economic scene or always seem to have ideas that they either fail to fully implement or they don't fully follow-through on. The best way to predict the future is to look at the past. This definitely is wise wisdom when it comes to investing into a company. In other words, until they have a steady track record, don't invest in them.
People follow "the hot tip". The new latest and greatest investment tip is one that is probably like last year's fashion to the knowledgeable trader. Translation: Just because a lot of people are talking about something, that's not the best reason to put your money into it. Relying on hearsay means that you're trusting in gossip and rarely does that ever go well for anyone. If there's a "hot item" that you're curious about, do as much research on it as you possibly can before committing to it.
People buy when people buy, sell when people sell. We've all heard a mentor in our lives ask us, "So if Sally was going to jump off of a bridge, does that mean that you would do it?" when it comes to something that we're allowing peer pressure to cause us to consider. Believe it or not, many people do this when it comes to stocks too. If a particular one is currently sky rocketing, people will load up on shares. At the same time, if it seems to be taking a dip, lots of people will rush to sell. The wise thing to do is to make sure you purchase at a steady pace, regardless of what is going on around you. Steadiness speaks to balance and when you apply that formula, there's a great chance that the result will be that you'll be both buying when stocks are high and selling with the stocks are low anyway.
People don't take advice from people who've "Been there done that". If you don't know about Tim Sykes, he's someone who invests in Penny Stocks and has done extremely well for himself because of it. Matter of fact, on the home page of his website (TimothySykes.com), he speaks of turning roughly $12,500 into almost $3,000,000. He has a blog on his site that he updates pretty regularly that's filled with tips to help you make money by using some of the investment tools that he did. One word of caution is that it does not good to "skim" this kind of information. Make the time to read it thoroughly, but if you do, you can only benefit. Knowledge isn't just power, but oftentimes profitable too.