: Common Mistakes to
Avoid
Investing can be a powerful tool to help you
achieve your financial goals, but it is important
to make sound decisions because you can
lose money as well as earn it. Some investment practices may seem smart, but they can
actually result in a loss rather than a gain.
Trading too Frequently
Even though new and promising investments
may present themselves all the time, buying
and selling too frequently is not usually a good
strategy. Most good investments go up and
down in value in the short term, but gain value over a long period of time. If you sell too
quickly, you may miss out on the long-term
benefits. You might also end up losing money
if you sell too quickly because the price drops
to less than what you paid to buy the investment.
Holding Stocks too Long
Monitoring your portfolio regularly will benefit it by selling investments that are not performing well which would keep your portfolio strong. Holding stocks that consistently
provide disappointing returns can drag down
your entire portfolio. That is why it is good to
keep an eye on your investments and take the
time to evaluate your portfolio on a regular
basis.
Researching before Buying a Stock
Before you make any investment, you should
learn as much as you can about the company,
property, or fund. You can find out about investments by reading financial newspapers
and visiting websites to follow what is happening in the market. You should also learn
what you can about the company’s financials,
goods, services, and business practices.
Hot Tips and Rumors
Buying and selling investments based on tips
and rumors is extremely dangerous. With any
rumor there are several risks:
• The information could be wrong
• The rumor could be purposefully mislead-
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ing to get people to invest
• The rumor may encourage investments
that are illegal
Before you act upon any information, make
sure you can back it up with your own research. Use a reputable source such as a wellknown financial publication. Ask yourself
what the person providing the information
stands to gain, and whether you know and
trust the source.
You should be especially wary of tips you
receive through unsolicited emails or phone
calls or some non official websites.
Allocating too much of your Portfolio to one
Stock or Industry
Even though a single stock or industry might
seem like an excellent investment, putting
all your money in one place is never a good
idea. There is always a chance that something
could go wrong with any company or sector,
no matter how strong it seems. If you have
sold your other investments to buy those that
turn out to be bad choices, you could end up
losing everything.
It is also very risky to take money out of your
emergency fund or use money you need for
your home to purchase stocks.
