Starting out on the right foot is important for beginner investors. You need to take it seriously. Make sure you do your research. Here’s some advice on how to avoid common pitfalls:
Failing to diversify your portfolio:
It’s a cliché to say, “Don’t put all your eggs in the same basket”—but it’s still good advice. If you take losses on one investment, you’ll have others to fall back on.
Following the crowd:
You may be tempted to do whatever everyone else is. Of course, you should consider the advice of veteran investors, but you need to do your own research—and think for yourself. Not will be right about everything. An example of this is the “dot.com” bubble that burst in 1999-2000, leaving many investors holding the bag. And although nobody alive can remember it any more, the crash of 1929 ruined millions.
Failure to plan:
Failing to make a long-term investment plan can cost you money. Keep an eye on the news concerning the company you are investing in, as well as look out for better opportunities.
Paying high fees to middlemen:
Many investment opportunities require paying fees; but they eat into your capital. Do everything you can to minimize them. In particular, mutual funds that charge fees are to be avoided.
Getting caught up in investment fads:
Don’t run right into investment opportunities without thinking them through. The world is full of people selling “investments” who mainly want to separate you from your money. Analyze all investment opportunities, and make sure that everything checks out.
If you are not making a satisfactory return on your invested funds, it may be time to move on to other investment opportunities. However, you should be realistic about your expectations for return, in relation to the risk you’re taking.
Being too trusting:
You don’t want to start investing in securities without really the securities market. Turning to someone you trust for advice is a good idea– but remember, no-one has all of the answers.
Investing can be a very exciting, but also, very costly. New investors are unaware of some common mistakes. If you learn to avoid them, you can be more successful.