20 of the Biggest Investment Mistakes
Investing can be a very risky game, but you can minimize your risk by making sure that you are not making any of the common investment mistakes.
Not starting early. Many people do not start investing while they're young because they feel that they have a lot of time ahead of them. This is a really silly mistake. Because of the power of compound interest, they are losing hundreds of thousands of dollars. Now, that's certainly not chump change.
Taking unsolicited investment tips. Occasionally, you'll get a spam email or a telemarketing call offering investment advice. Don't take it. They are trying to drive up the prices of certain stocks so that they can make a profit. Do your own research or listen to your financial advisor.
Not realizing that there are risks. Just because something is considered a "safer" investment, doesn't mean that there isn't a chance that you could lose your money.
Being late to buy. You want to buy a stock as its price is increasing. If you are too late, you will buy it just as it's starting to turn down.
Not reviewing your portfolio. While it's a good idea to automatically invest a portion of your paycheck each month, you should often review your portfolio to check for any mistakes and make sure that things are performing the way that you want them to.
Having no plan. Good investing requires a solid plan. You should know your risk levels and what your goals are and invest in ways that reflect that.
Not diversifying. You should strive to have a well-balanced portfolio. You don't want to put all of your eggs in one basket.
Changing their portfolio often. Many people find it exciting to buy and sell their stocks. It's addictive. All addictions come with a price though, and you are paying a lot of money for each of those transactions.
Succumbing to panic or excitement. You shouldn't always sell just because other people are selling or buy just because others are buying.
Not participating in your company's 401k program. Many companies offer to match your 401k investments. If you are not participating, then you are giving away free money.
Trying to take shortcuts. Proper investment should be for the long term. Taking shortcuts rarely pays off.
Holding losers and selling winners. Many make the mistake of holding onto a losing stock because they are waiting for it to go back to the level that they bought it for. Others may sell their stock too early, only to find that the price continued to increase well past what they sold it for.
Following recommendations in the media. By the time that an expert is talking about an investment on TV, it's already getting past its prime.
Investing in individual stocks without financial knowledge. If you don't know much about investing or how to determine whether a stock is a good buy, you should stick to mutual funds.
Falling for get-rich-quick schemes. There is no easy way to make money. Get-rich-quick schemes are rarely all they say they are.
Being over-invested in their company. Some people become over-invested in the company that they work for. You should strive to have a balanced portfolio.
Following your emotions. Your emotions can cause you to make mistakes. Investing should be something that's done with your brain.
Making early withdrawals from your 401k. 401ks are meant to be a retirement plan. There are hefty penalties for withdrawing your money early.
Not saving enough. Many people simply don't save enough money. You need to make sure that you are saving enough money now to reach your long-term goals.
If you can avoid these huge investing mistakes, then you will save yourself a ton of money and heartache.
