Most investment gurus will agree that investments are really tricky ventures.
Managing your portfolio is a time and emotion-consuming affair that, just like other projects and ideas ran by people, is prone to failure due to certain mistakes.
Avoiding these mistakes as you go about your investments could save you a lot of headaches while making them could lead to the eventual loss of all the money you’ve collected over the years through painstaking hard work and discipline.
Here is a list of the most critical ones to be avoided at all costs:
Holding a loser hoping that it breaks even
Many people hold on to investments that are spiraling, hoping that the spiral will stop and instead climb.
The worst thing about this mistake is that it is rarely ever about the investment, but more about your initial decision to buy it because it was a great investment.
An essential skill in the field of investment is learning to cut your losses, learn your lesson and move on to the next opportunity.
The greatest enemy of investors is making rash, uninformed decisions.
Many great investments lag for years before they make a turn for the better, and stun investors with a spectacular performance.
To maximize your returns on an investment, you need t hold on to it until it completes a full cycle, for the manager’s strategy to play out.
This cycle is more like a recession period; it takes a while for people to realize that it’s actually over.
Expecting what works for someone else to work for you
A trusted friend or family member’s great investment idea that works wonders for them might not work for you.
There are other important factors to have in mind. For instance, will this year’s performance be as good as last year’s?
Past returns often have very little to do with future returns. The best way to handle other people’s advice is to take it with a pinch of salt and keep your expectation within reality.
Not having clear investment goals
Most people invest to secure their retirement. If this is not the case for you, you need to figure out why you are making a particular investment.
Making clear-cut goals helps to avoid wastage of time, energy and resources. Moreover, you need to determine how much risk you are willing to handle.
Trading too often and too fast
Many investors enjoy the thrill of playing around with their portfolio, reacting to real-time news and moving their investments around.
This mistake accrues you lots of transaction fees, brokerage fees, and taxes that quickly swallow up your gains.
Read also: The Risks and Perks of Premarket Trading
Making emotional decisions
This often goes without saying. Making purely emotional decisions in investments often leads to disasters.
Involving decisions in making these decisions can make you vulnerable to several biases that cloud your judgment.
The best way to avoid these and many other investment errors
You should also consider getting an investment manager or financial analyst to delegate your critical decision making.