There is no fool-proof formula or any well kept secret for success in investing. For those actively involved in the Stock Market, investment comes with highs and lows and is a difficult beast to tame. This market is so complex that many experienced brokers and amateurs will find themselves perplexed at the thought of understanding the latest reports on the stock charts or the most recent earnings.
The reason most investors miss out from making it to the big league is because they have failed to understand the fundamentals of investing and how to approach it. There are many tips to improve your investment portfolio but only a well-planned and balanced financial strategy can help you get some good ROI on a short or medium term time span.
Taking that into consideration, there are 7 common investing mistakes and ways to avoid them listed below.
1. Paying too many fees – Many investors pay brokerage fees that are more than what they should be paying for their investment. This can be attributed to greedy brokers who never seem to get enough money. Lack of awareness is the main culprit here. It is a good idea to research and find out what investment plan is best for you. Make sure to get the most value out of your investment plan.
2. Not diversifying – Warren Buffet rightly said, “Don’t put all the eggs into one basket”, when it came to investing. One of the oldest tips in the book is to diversify your investments. Many investors don’t follow this advice and end up facing huge losses which in turn causes debt or bankruptcy. So make sure to invest in companies from different sectors that are unlikely to be impacted when there is a crash.
3. Don’t mimic Wall Street – Let’s face it, Wall Street is not for the faint hearted. Known undoubtedly as the Mecca of investing, many of the most profitable brokerages are located in New York City. But that doesn’t mean everything that Wall Street does is right for each individual investor. Many investors take little risk to gain little profit, which does not suit the profile of an average investor. Also many firms and brokerages engage in high volume transactions or day trading activities. This usually leads to huge profits when executed in a correct and timely fashion. Again, this may not suit the average investor. So before taking decisions or risks, weigh out your options before diving in.
4. Not re-balancing a portfolio – Make sure that your investment portfolio is perfectly rebalanced, in the sense that the ratio of value from different stocks have not dropped significantly. This ensures that the lion’s share of the profits does not just stay with the winners. A rebalanced portfolio will prove to be more profitable in the long run when one sector outperforms the other.
5. Don’t get emotional – Never get too emotionally attached to a particular stock. That should not influence your decision when considering your investment needs.
6. Buying into the herd mentality – Don’t be like sheep following sheep. Sometimes you may head to the edge of a cliff. It is easy to stick with a general trend, but in the end it may prove to be too costly. The dot-com bubble is one such example for those who chose to follow the herd.
7. Not having a plan – Planning is the key to a successful investment or investments. Have a concrete plan in mind based on the way the stock performs. It is not possible to predict the market’s outcome but it is important to foresee changes in the future. Formulate a plan with careful consideration and some diligence.
In addition to this, savings plays a significant role in lowering your business costs, reducing your overhead and simplifying your budget. You can cut down on your daily expenses by simply being a little tech-savvy. For example, you can use expense tracking apps like Expensify or Concur, use cash back offers while shopping or visit voucher sites like http://www.voucherbin.co.uk for discount coupons.