Common Mistakes First-Time Investors Make
There Is Knowledge And Power In What To Avoid And What To Do As A First-Time Investor!
Statistics indicate first-time investors make up 15% of the USA population and; the costly mistakes these first-time investors make is 85%.
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A report by the Institutional Investor stated:
New investors make up a bulk of the younger generation between the ages of 25 and 35 years. Although it is excellent news to know that most first-time investors seek financial freedom, they must know the ins and outs of investment.
This is a compilation of a few mistakes first-time investors make as new entrants.
Hopefully, when you’re done reading this post, you will pick up some helpful pointers.
Common Mistakes First-Time Investors Make
1. Inadequate Understanding Of Risk
Risk is a significant component of investment, but unfortunately, not many first-time investors know this.
A poor understanding of risk puts a first-timer at a disadvantage when it comes to the rigorous nature of the financial market.
Some admit to having fair knowledge of financial risks in the investment world.
However, they fail to understand that risks present in various degrees, and it’s not always the case of avoiding them altogether as an investor.
On the contrary, some risks require braving the odds and making decisions that will minimize damage.
The question here is knowing which risks are worth taking as an investor and those that should be avoided entirely.
Unfortunately, the apparent lack of risk education results in first-time investors making wrongful financial moves that endanger their investment.
It would help if entrants enrolled in investment courses to gain knowledge about it.
2. Selling Out In Panic When The Market Takes A Dip
When the financial market takes a dip, it has a ripple effect on investment and stock.
But that is not the worse part.
In a bid to avoid crashing in the wake of a market dip, new investors sell out in panic.
They tend to do this as a mitigating move to avoid losing money.
However, according to finance experts, it is the worst reaction any investor can make.
According to them, even in the face of a market dip, it is wise not to get panicky.
Secondly, it will be helpful to carefully assess the market (not in haste) to enable you to make a sober decision.
Furthermore, experienced investors know that the investment market has its ups and downs.
Therefore, they set long-term plans which get activated in the event of a market dip.
However, because of the short-term attitudes of first-time investors, they fail to see opportunities for recovery that present during market dips.
This, therefore, results in panicky selling.
3. Failure To Shop Around For An Advisor
According to a 2018 survey, most first-time investors automatically go along with an investment advisor already used by family or friends.
The danger with this is not knowing if that advisor is the right one for you. First of all, everyone has peculiar investment needs.
Therefore, it is not recommended to go along with an advisor just because they came highly recommended.
What you should do is to search for one who understands your needs and peculiar expectations.
4. Investing In Trendy Things
The fact that something seems popular and is endorsed by a celebrity does not mean you should join the bandwagon.
Moreover, if your friends decide to invest in something, find out more about it and how you stand to gain before making any financial commitment. Trends are like fads – they come and go.
Being wary of ‘herd behavior’ can save you from losing money.
Last but not least, most first-time investors fail to plan towards a financial goal—all these factors and more your decision to invest.
Therefore, avoid these mistakes and be circumspect in your financial decisions, especially where your investment is concerned.