These Are the Five Most Common Mistakes Beginner Investors Unwittingly Make & What You Can Do to Avoid Them
It’s a positive thing that more and more people today are seeing the benefits of investing and are starting the habit themselves. However, these new investors are also prone to make mistakes because they aren’t that familiar about the inner workings of the stock market and other investing avenues.
Five of those common errors are the following.
Wasting Time on Overthinking
While doing your do diligence and researching before you put money into the market is a good thing, wasting time on thinking isn’t. As RobustWealth chief investment officer Rob Cavallaro observed that some investors fail to see the advantage of investing over time.
Comparing the activity to a Chinese proverb, Cavallaro implied that while the best time to invest was years ago, the second-best time is right now. What more, the process of building wealth takes consistency and the patience to wait for decades to reap benefits.
Instead of focusing one’s attention on researching a single company and then buying their stock, Thomas Henske from Lenox Advisors recommends novice investors to learn about useful concepts like diversification and sectors as they will be more useful. Knowing these principles can provide more valuable insight into the world of investing and the market than simply finding the best stocks.
Comparing Apples to Oranges
Another mistake people make, according to Henske, is comparing different investment options like they were the same. The financial advisor said that one should keep comparisons to similar instruments if they ever do so. Still, he says that there might still be important differences even between these, so be warned.
Timing the Market
New investors tend to tense up when they notice that the stock market has taken a rocky turn. Thus, they may resort to checking on their investment portfolio too often than necessary or make the mistake of selling when prices are low and buying when they’re up.
As Facet Wealth co-founder Brent Weiss warns, timing the market is a ‘fool’s errand’. For him, what matters is time in the market, not timing. While the stock market is volatile and prone to temporary highs and lows, it goes toward the positive direction as historical trends show.
As investors focus on market trends and numbers, one can easily forget that oneself is also their most valuable investment. Thus, Cavallaro suggests people to learn new skills that would help them earn better or manage their wealth more intelligently. He also warns about how fast today’s economy changes and that one should be able to reinvent themselves to keep up.
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