Top 3 Biggest Investing Mistakes to AvoidBy Angelica Malin
Investment has never been more accessible.
In the past, you’d probably have to trawl through newspapers to see the latest on the stock market or depart with most of your cash to get the lowdown on the best ventures.
To put it bluntly, it was all a bit of a chore.
Today, getting started with investment has never been easier.
You can get hear about the latest stock market rises and falls as it happens and research the best retirement investments with the tap of your finger – all you need is a smartphone and access to the internet.
Of course, whilst this access to resources has made getting involved with the process simpler than before, it does not necessarily mean that investment is a more effortless venture to succeed in.
To make some genuinely significant returns, you’re going to need more than a subscription to a weekly newsletter; the most effective investors will ensure that they engage in thorough research and consider numerous factors and strategies before making any significant decisions.
The most popular and well-known forms of investment are through the stock market and property.
Of course, history has already proven these two to be some of the most effective methods of securing lucrative passive income.
However, as with every investment, these opportunities come with a certain deal of risk and – due to lack of research, experience, and even patience – there are many common mistakes that would-be investors make that can be easily avoided.
There are many things that trip you up when starting your investment journey.
So, to help you get on the right track, here are some of the biggest mistakes to avoid when investing.
1) Short-Term Returns and Quick Results
Now that it is no longer solely restricted to high-flying Wall Street Suits, there appears to be a slightly clouded perception that investment is a game in which massive returns can be made within a matter of seconds.
Of course, as with the lottery, it’s not impossible for beginner investors to strike gold immediately and sail straight towards their own secluded island.
Unfortunately, the odds of this are not really in your favour.
Building a successful, stable and flourishing portfolio that produces regular long-term income – and can survive market volatility – takes a considerable amount of time, financial planning and, most importantly, patience.
This particularly applies when looking at ventures like property investment, where planning to focus solely on short-term returns is probably the biggest mistake you can make before even starting.
However, for those with lower risk tolerance (and a great deal of patience), the property market is one of the most stable and lucrative forms of gaining solid returns: the greatest of such only achieved in the long term.
While rental income, primarily from tenanted properties, can leave investors with immediate passive income through monthly returns, the most handsome and impressive are made through capital growth over time.
Also known as capital appreciation, this is when a sustained period of growth increases the value of your property and means you can sell it for more than its original buying price.
Clearly an excellent long-term strategy, there are major returns to be made – again, only if you put the work in!
2) Failure to Diversify
When building your portfolio, in order to ensure strength and security, a key factor will be diversification – essentially making sure that you don’t place all your bets on one investment or even one market.
By spreading out money over a number of different investments, such as stocks and shares and even distinct types of properties, you can protect yourself against significant losses in the circumstances that the market or investment takes an unexpected turn.
However, again those purely focussed on short-term returns, many investors don’t take the precaution to spread risk across sectors, which is probably of the most significant errors you can make as an investor.
Building a comprehensive and widespread portfolio will allow you to better survive uncontrollable market fluctuations. This takes time (and patience), and you may benefit from seeking the advice of an experienced financial adviser to further ensure that your back is covered.
Using property investment as an example, an excellent way to diversify your portfolio would be to invest in more than one rental property. Also known as buy-to-let property investment, this strategy presents one of the most reliable, high-earning opportunities out there and carries with it a number of benefits that will protect investors from fluctuating markets.
3) Ignoring Current Trends
Whether you’re looking at stocks, properties or even a promising, trendy startup company, keeping up with the economy, political landscape, and the latest market news is vital to make the most confident and informed investment decisions.
Ignoring these external factors would be like crossing an old bridge with your eyes firmly closed.
If you’re not in the know, it could seriously hinder your chances of making a sizeable return on your investment.
Many beginner investors – in their rush to earn immediate returns – are often relaxed in their research gathering, something which usually results in disastrous investments down the line/
A massive factor to consider is inflation.
While saving your money is typically regarded as the safest option in comparison to investing, this is not always exactly the case.
For example, say that the interest rate on your savings is below the current rate of inflation. In these circumstances, its value will begin to decline over time. Investments like property are a proven and well-established means of avoiding this, as you would putting your money towards a physical asset that only grows in value over time.
It’s important to remember that there is no singular path to success when it comes to investment.
Your needs will vary, and whatever strategy you come across will have its advantages and disadvantages.
So, in order to ensure success, you must comprehensively research, evaluate, and thoroughly analyse every method, piece of data, and expert opinion that you come across.
Make sure that you’re as fully informed as possible. After all, whether it’s the latest news or your budget, the strength of your knowledge can make the difference between devastating success and spectacular failure.