5 Investing Mistakes To Avoid
I think we can all agree that investing is not seen by many as a simple concept and there is not one single secret recipe for success! There are so many factors that go into investing, and quite honestly, it can be scary as a beginner — but don’t worry, I’m here to help!
At Women, Wealth & Worth, we are committed to helping women at all stages of their investment journey, especially those just getting started. While everyone’s financial situation and investing journey can be different, I wanted to share five of the most common mistakes beginner investors make.
1. Investing Without Knowledge
Far too often, people have little to no knowledge about investment options beyond traditional financial instruments. If that’s the case, you definitely need a Financial/Wealth Coach!
Unfortunately, without professional guidance or investing in educating yourself, there is a lot of room for ill-informed advice to be shared between friends and peers who think they know best. This can be harmful to your financial health simply because your friends may not understand your entire financial picture which may impede your ability to achieve financial freedom. Trust me!
2. Poor Choice of Investments
Inexperienced investors tend to judge the quality of an investment based solely on star ratings or historical returns. These are not the only things to consider. Sometimes, even current performance is not enough to guarantee the success of an investment in the future!
Much like the first mistake, having minimal knowledge of how and why you should invest in index funds, exchange traded funds (ETFs), stocks, crypto currencies, etc., can lead to losses. Before you choose a stock, mutual fund or ETF, find out more about the company, fund manager, performance history, business model, top management, etc. You should consider consulting with a Financial Coach or a financial advisor for additional insight and education about what is best for you given your financial situation.
3. Investing Based on Emotions
As with most things in life, letting emotions get the better of you while investing may lead to losses. When I refer to emotions, I’m not talking about happiness or sadness — I’m talking about brand attachment, fear, or even greed. For example, selling stocks in March 2020 due to fear of the global pandemic might have seemed like a logical option at the time, however, stocks since have gained over 79% from the March lows. Therefore, when investing in the stock market you want to leave emotions out of the decision making and take a long-term view, knowing that the market will bounce back over time. For more information about this please contact Women, Wealth & Worth.
4. Not Diversifying
Diversification ensures your portfolio has many different investments. Remember you never want all your eggs in one basket! Different asset classes carry different risks and banking on one asset class with all your savings can work against you.
Those that do not believe they have the time, knowledge or desire to do the research required of diversification may elect to diversify by using index funds or ETFs. Through these vehicles, you can delegate the research and selection process.
Basically, diversification provides protection to your portfolio, because some assets will perform well while others do poorly. And you worked hard for your money so know that not diversifying can cost you, big time!
5. Trying to Get Rich Quick
Unless you win the lottery, you probably won't become a millionaire overnight. Investors who fall into the trap of chasing quick returns, investing based on trends, or banking on the promise of overnight success are in for a rude awakening. Investing takes patience!
It’s really important to keep in mind that investing creates wealth over the long term. Typically, long-term investing means seven years or more, but there’s no firm definition. Did you know if you’re starting from scratch with zero savings, and invest $2,200 a month today, you could become a millionaire by 2040!
By avoiding these five mistakes and getting clear on:
why you are investing;
when you need the funds you’re investing; and
how much you are willing to put into investing
You will have a better sense of appropriate investments to choose and how much risk you should take on.
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Overall, the biggest mistake when it comes to investing is not arming yourself with knowledge which we see as the feeder of confidence to start investing. Whether you are seeking advice from a Financial Coach, like me, or want to take advantage of our FREE investing masterclasses, at Women, Wealth & Worth we want to support you getting started.
Are you ready to start your investing journey? I’ve got your back! There’s never been a better time to sign up for our signature LIVE empowered learning experience: “Start Your Investing Journey Now!” on November 3rd at 6PM ET. Together, we will create a customized Investing Roadmap and spring you into ACTION. Decide to INVEST in YOU and finally secure your financial future with confidence.