Financial investment and investment on the markets is a great way to build long term wealth. However, it is not as simple as the You Tube videos or successful investors would have you believe. There are some common mistakes that this article advises you not to make.
Fall in love with a company
The age-old adage is that you should only invest based on the facts of the matter and the available financial data. Use your head and not heart to make investment decisions, ensuring that you have done the required research on the intended investments before you put any money into them. Following investment trends or investing in a company simply because you like them and their products and believe in them is not the way to go and in fact will likely lose you money. The more people investing in a share or stock in the same period will only result in these shares increasing in price based on the demand. Buy only based on your research and due diligence or advice that you have received.
Put all your eggs in one basket
Diversify, diversify, diversify, this should be your motto. The analogy of having all the eggs in one basket is clear and obvious that should you drop the basket you risk losing all the eggs. You should never have all your money in one type of investment or for that matter in one specific company. One of the best ways to ensure that you have a diversified portfolio is to make use of reputable personalized financial planners who will be able to advise and work with you to ensure that you have spread the risk. From art to oil and everything in between, it’s all investable and as such you should know what’s hot and what’s not before you spend any money.
Constantly watch the market/your investments
Financial investment is about the long term and as such constantly checking to see what movement there has been, goes against the overall aim. If its short-term gains you’re looking for then expect more risk and also look at the more volatile currency markets or cryptocurrencies. The more you constantly watch the investments that you have made the more likely you will be to sell at the wrong time. It can be incredibly stressful to watch a share that you have spent money on, drop in the short term. Even a small daily drop has seen investors rush to sell and in doing so, lose the potential that the shares had to recover and make them a profit in the long term.
Financial investment can take various forms and have numerous reasons, the main aim is to generate financial wealth. The three common mistakes made by investors and financial managers alike as noted in this article have seen the opposite occur and as such if you are to avoid losing your money, don’t make these mistakes. Do your background research, have a clear plan and look for as much advice as you can afford.