When you’re new to investing, it can be difficult to figure out what approach suits you. So, before you get caught up in the little details, you need to know what you should be avoiding on your investment journey.
This guide will show you some of the most common mistakes that new investors make. With our help, you will be able to avoid these and begin your investing journey on a high note.
Not Having Savings
Before you begin to invest, it’s important to have a cash cushion set aside. This is a form of savings that can protect you if your investments don’t go to plan, or you have a sudden need for money. It usually covers around six months of expenses if an emergency arises and you need money immediately.
Whilst there is often debate about whether you should save your money or invest it, you can’t go wrong with a combination! It is always safer to have some form of savings set aside before you begin investing to use as a safety net.
If you put all of your money into investing, you might not be able to cover any unexpected bills. Even though you can eventually get a return from your investments, you should remember that it isn’t guaranteed. Investing always comes with a risk, so having some savings set aside can help to manage it.
Failing to Diversify
Diversification is a key aspect of smart investing. When you begin to invest, it can be easy to find one company you like, and put all your money into it. But this can be dangerous. When you are reliant on one company succeeding, you’re leaving very little room for mistakes.
Instead, spread your money across multiple different platforms and companies. This will give you more opportunities for success. If one of your investments is unsuccessful, you won’t lose everything, as you still have shares in other companies.
This is vital for creating a balanced investment. When you are beginning, it’s easy to think you should start small by investing in just one company. In reality, investing a little bit in multiple places will go much further.
Having Unclear Goals
You can’t start investing if you don’t know what you want to achieve from it. Think about why you want to invest your money, and what your aims are. You’re more likely to lose out if you aren’t working towards a specific goal. So, before you even begin investing, find your goal, and stick to it.
There are lots of different reasons people invest, so find the goal that is right for you. This could be:
- Creating a retirement fund
- Starting a business
- Having children
- Creating financial stability
- Other life events
Whatever your goal is, make sure you have one. It will make the investment process easier when you know exactly what you are trying to gain from it.
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Investing takes time. Probably more time than you would expect. If you’re only willing to wait two or three years to see an increase in return, you’re going to end up disappointed.
When you choose to invest, you are making a long-term commitment. It takes time for an investment to bring success, so be prepared to wait at least ten years before expecting an increase. If your investments fall, they need a lot of time to build themselves back up.
The longer you wait, the more chance you have of getting a big return!
Following the Crowd
It can be easy to follow the investment choices of your friends, or what seems popular, but this isn’t always the best idea. Investments can be overhyped, and if you haven’t researched them properly, they can come crashing down without warning.
Instead, choose to invest in things that you feel confident in. You don’t need to rely on others for your investment journey. Find companies and platforms that you believe in or feel a connection to, and focus on them.
Whilst it’s great to have friends who know a lot about investing, try not to put your focus on them. Remember that everyone’s investment goals are different, which means what you invest in will be different too.
Investing can be a great way to secure your financial wealth in the future. When you are new to it, investing can seem like a daunting topic. So, take your time, research before you invest, and do what is right for you! Create your own investment journey by avoiding these common mistakes.
If you want to learn more about investing and financial security, contact the team at Count today!