It would be so great if investing is easy as we imagined it in our minds, your life savings which mostly represent your future or your livelihood and legacy for your children. As an investor, making mistake is far easier than effective investment. There’s no doubt that most investors fail in many ways, We at access view Africa accounting and business management firm have had encounter this investors who are victims.
In this article we would like to share 6 commonly investment mistakes that you should know and avoid today as an investor.
This mistakes have been repeated over, and this pitfalls has significant lasting negative impact which can derail your future and the possibilities of retiring comfortably.
The beautiful thing is that you can actually avoid this investment pitfalls if you are aware of them, as an accounting and business management company, we are going to shed more light on this topic as you read on.
Here are the top mistakes that cause investors to lose money unnecessarily.
Using a Cookie-Cutter Approach:
Most investors, along with many of the people who advice are satisfied with a one-size-fits-all investment plan. The “model portfolio” is useless to most investors. Your individual needs as an investor must govern any plans you make for investment. For instance, how much of your investment can you risk losing? What is your investment timetable…are you retired, a young professional, or middle-aged? The allocation of your portfolio’s assets among various types of investments, including Treasuries, blue-chip stocks, equity mutual funds, and other, should match your needs perfectly.
Taking Unnecessary Risks
As an investor, you do not have to risk your capital to make a decent return on your money. There are many investments that offer a return that beats inflation and more-without unduly jeopardizing your hard-earned money. For instance, Treasuries, the safest possible investment, offer a decent return with virtually no risk. Blue-chip preferred stocks, common stocks, and mutual funds offer high returns with a fairly low level of risk.
Allowing Fees and Commissions to Eat Up Profits
Many investors allow brokers’ commissions and other return-eating costs to cut into their returns. Professionals need to be compensated for their time; however, you should make certain that the fees you are paying are appropriate for the services performed. Don’t allow unnecessary charges which eats into your money.
Not Starting Early Enough
Many investors are not cognizant of the power of interest compounding, by starting out early enough with your investment plan, you can invest less, and still come out with double or even quadruple the amount you would have had if you started later. Another way to look at it is that by investing as much as possible earlier on, you’ll be able to meet your goals and have more current cash on hand to spend.
Ignoring the Cost of Taxes
Every time you or your mutual fund sells stocks, there is a capital gains tax to pay. Unless you are in a tax-deferred retirement account, taxes will eat into your profits, therefore, you should invest in funds that have low turnover (i.e., funds in which shares are bought and sold less frequently). Your portfolio, overall, should have a turnover of 10 percent or less per year.
Letting Emotion Govern Your Investing
Never give in to pressure from a broker to invest in a “hot” security or to sell a fund and get into another one. The key to a successful portfolio lies in planning, discipline, and reason. Emotion and impulse have no role to play in investment. Similarly, do not be too quick to unload a stock or fund just because it slips a few points. Try to stay in a security or fund for the long haul. On the other hand, when it’s time to unload a loser, then let go of it.
Finally, do not fall prey to the myth of “market timing.” This is the belief that by getting into or out of a security at exactly the right moment, we can retire rich. Market timing does not work. Instead, use the investment strategies that do work: a balanced allocation of your portfolio’s assets among securities that suit your individual needs, the use of dividend reinvestment programs and other cost-saving strategies, and a well-disciplined, long-haul approach to saving and investment.
