Everyone knows that there is no way to guarantee a return on any investment you make. However, you can maximize your success by following tried and true methods of investing while avoiding common mistakes that new and inexperienced investors make. Here, Craig Cecilio, founder of DiversyFund, looks at five of the most common mistakes that you should avoid.
Investing Without a Plan
It is common for investors, particularly new investors, to simply throw their money into an investment and hope that it grows. If you invest without a plan, you will have no way to gauge the success of your investment. You must have an idea of how much money you want to make and why you want to make it. You should also have an idea of how much money you’re willing to risk and how much you’re willing to lose. If you have a solid plan, you will be able to maximize your successes and prevent yourself from experiencing insurmountable losses.
Thinking in the Short Term
The idea of making a fortune in the stock market with a single great stock pick is one that is very romanticized in the media. It is also something that happens very rarely. If you want to be a successful investor, you must think about long-term plans. Don’t worry about fluctuations in a stock over the course of a few months or even a few years. Pay attention to whether or not the stock is trending upwards. Ask yourself if it will be where you want it to be in 15 or 20 years.
A properly diversified investment portfolio has certain percentages of your money allocated to a variety of different investments. As time elapses, these percentages will shift depending on how your investments perform. It can be tempting to move more of your money into investments that are doing well at the moment. However, if you built your portfolio based on a long-term plan, it is essential that you frequently rebalance by selling your high performing assets and reinvesting the money in a way that restores your original ratios. Rebalancing might not make you as much money in a short period, but you are likely to make much more money throughout several years.
Chasing High-Performing Investments
When a particular investment opportunity is performing exceptionally well, many investors start to pour their money into it. They feel that they missed out on a lot of money by not already having done so. However, this strategy will throw off your balance and frequently cause you to lose money. You must accept that you cannot predict the future and that you didn’t lose anything by not having that investment.
Ultimately, the most successful investors are the ones who have the will to create a strong plan and stick to it despite temptations to do otherwise. Proper investing might not be as glamorous or exciting as the media portrays it, but it will ensure your continued financial security.
About: DiversyFund was founded to help everyday investors build wealth like the 1%. The company opens up real estate investing to the average person by breaking down traditional barriers to entry such as high minimum investments and unnecessary broker fees. Through their online platform, they are helping investors diversify their asset portfolio beyond stocks and bonds.