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5 Common Investing Mistakes

It’s impossible to not make mistakes no matter how controlling you may want to be. There are still some curve-balls that the market may throw at you with you having no immediate defense ready. And it’s not wrong for you to acknowledge when you actually made mistakes.

Coins with graphs and charts
Towers of coins next to each other with an overlay of charts and graphs put over it.

A lot of mistakes has been and is still being made by investors – rookies and veterans both – but that doesn’t mean that you should not be prepared for such situations when they happen. Knowing the mistakes you have made is a good sign, it means you have time to evaluate your actions and think of what it might mean for your investments in the future.

Not sure if you had been making mistakes during your long, or short, time in the investing business? Continue to read as we list down the 5 common investing mistakes made and are still being made in the market, and how you could possibly avoid them.

invest in holographic screen illustration
A man touches the word Invest in a holographic screen, pointing at the word.

Mistake #1: No Plan, No Goals

Not everyone sees this as a typical mistake, seeing as most people see investing as a way to support themselves further after retirement alongside their Social Security. These kinds of goals are easy enough to pursue with the help of your company or the government.

But when people start investing for other reasons other than the one said above, it starts to get tricky. You need to have a goal set either in your mind or written out, but you have to determine why exactly you’re investing, how far your goal actually is and how much risk will you be able to bear as you make your way to that goal.

Also, you should set up appropriate benchmarks along the way so that you’ll be able to measure how much success you have been able to garner and when it’s time to allocate your resources to a different asset class.

A sound plan is vital in knowing which road you would actually like to take as well as what path will suit you best. Whether it’s a long-term or short-term investment plan, you should be able to assess yourself properly and know which one will work best for you.

Mistake #2: Basing Decisions on Someone Else’s Expectations

This mistake is something that people usually make to take the easy way out.

A mindset where you prioritize other people’s expectations regarding what stocks are “hot” right now and would be best to invest in might be the easier route for you take on, seeing as you wouldn’t need to make any decisions and you can put the blame on other people if your investment does end up failing.

Though their words might carry some truth, and whether they’re a close friend or a relative, it still doesn’t automatically mean that the stock will truly be the “next big thing.”

We’re not saying that you should not accept any tip thrown your way, but you should first analyze it and study well about it before making your final decision. And you should make the investment because you think it’s worth it and not because a person close to you said so.

Mistake #3: Buying High, Selling Low

Almost everyone that makes this mistake didn’t mean to make it and were only following instincts. Most people make decisions to buy stocks once it does really well after a day or a week, like if the stocks rose 10 percent in its last quarter. That’s buying high.

However, once an investment ends up dropping in a quick pace, such as seeing losses over the last month or quarter, people instinctively sell their stocks as they get scared and end up panicking. That’s selling low.

Doing these strategies over and over might not work well for you after a while and could end up failing you not once but all the time.

Ignoring the lows and highs as you buy a little bit each week or each month and then selling when you see fit, can be much better approach in investing.

Mistake #4: Confidence – Not Enough or Too Much

This mistake can be done two ways, no confidence on your own abilities or too much confidence in your investments.

Some believe that stock market success is reserved to only the sophisticated people and therefore think that they will never succeed in their own ventures. But this isn’t true. Not all “sophisticated” people make the cut, most professional money managers included.

With enough devotion to learning and research, you can equip yourself with enough knowledge so that you may control your own portfolio and investing decisions, gaining profits too. Other than having the potential to surpass even the so-called investment gurus, individual investors with solid investment strategies also have a fair chance of beating the market.

On the other hand, you should also know how to honestly judge the performance of your investments. Even if some of your investments are doing great, that doesn’t mean that the same is happening over all. You being successful is not seen solely on your best investments, not is your failure at your worst, what does matter though is that you know how everything is doing and you are able to balance them.

Just don’t forget that much of investing is sticking to common sense and rationality.

Mistake #5: Chasing Everything

A lot of investors that make this mistake base their selection on recent strong performance regarding asset classes, strategies, managers, and funds.

The feeling of “missing out on great returns” has probably been the cause of most bad investment decisions when compared to other single factors.

Investments that happened to have the best returns during the past year or the last three years have always been tempting to jump right into. But you need to remind yourself that positive past performance does not automatically mean that the future returns will be the same.

You should instead do the exact opposite of chasing performance, which is to stick with your investment plan and rebalance.

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