Earning money through investments is an appealing idea. Investing can really be a lucrative business and an effective way to become wealthy. However, investing is not as easy as it may seem. Namely, if you’re a beginner, you’re probably making some mistakes that could cost you all your potential profits. Many novice investors make these mistakes, and they leave them worse than they were when they started. On the other hand, if you play your cards right and get to know the subject a little better before you rush into anything, you’ll be able to prevent making mistakes which could destroy your investor career, as well as your financial stability.
1. Rushing into things
Gambling is not the same as investing. If you blindly pick where you’re going to invest, you’re more of a gambler than an investor. If you want to be successful in investing, you need to think things through. Carefully consider why you’re going to invest money into something, what you’re going to invest in and for how long you’re ready to stick with it.
You need to do some research about what you want to invest in. That will help you better understand what you’re getting into and you’ll be able to look at things more realistically and make decisions that will not harm you. You’re probably researching much more insignificant things. For instance, you’re probably researching travelling agencies to see which one offers the best deal. You’re probably comparing prices throughout stores – that’s research as well. So, don’t forget to do some research about more serious things, such as investing, as well.
2. Paying too much attention to financial media
Many people believe that watching financial news can help them achieve their goals, but that is far from being true. If you wanted to really find something that would be of value, you would have to search through piles of newsletters to maybe find one that is worth your time. Instead of wasting your energy trying to learn something from news and newsletters, you need to realize that nobody who got rich using their knowledge and information about the stock market will be willing to share that with you through the media. They don’t need to earn money by selling you that sort of information, as they’re already earning by investing. If they sold you their knowledge, they would be making you their competition.
3. Investing without a time horizon in mind
If you’re planning to earn money through investing for a specific cause (for instance – you want to buy a house or a car, or whatever of worth to you), you need to adjust the time frame for your investment. If you’re planning to buy a house, the amount of time it will take to earn that amount of money is not as long as the time it will take to accumulate money to finance your child’s college education. Not having a time horizon in mind when you’re investing can lead to wasting your money or becoming frustrated because your goals take a little longer to be achieved than you’d hoped.
4. Forgetting about the risks you’re getting into
When you invest your money into something, you need to realize that your return is not a completely stable and sure thing. There is a risk that you won’t get as much money as you though you would, or that you will lose what you invested and get no return whatsoever. Thinking everything through carefully certainly reduces the risk, but every experienced investor knows that the job comes with risks, and it’s up to you to figure out whether you’re prepared to get into risks or not. In any case, being aware of them is extremely important if you don’t want to be surprised at one point when the risk becomes too high and you lose everything you invested.
5. Putting all your money into one investment
If you put all your money into one thing, and what you invested in fails to deliver – obviously, you lose everything. In order to avoid that, you should make multiple investments, so that if you lose money on one – you won’t lose everything you had. This also helps protect you against severe price movements in any of the investments.
6. Paying more than you need on trading and brokerage fees
If you trade less often and hold on to your investments, you will save on trading and brokerage fees, which means that more money will be left in your pocket. Also, you should do a little research to find a broker who doesn’t charge too much, so you’d keep more of the return from your investment.
The bottom line is you should never trust that someone else in the financial business wants what’s best for you without getting anything in return. Don’t rush into anything and carefully consider any potential investment. If you avoid making the mentioned mistakes and stay careful, you could become a very successful investor.