Certain investors do not have the appetite to invest in direct stock. This could be for a number of reasons. Some of these reasons could be the risk associated with stock investments, share market volatility or even something like the fear of having all your eggs in one basket. In this case certain investors prefer investing in what is known as “exchange traded funds”.
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Every savvy investor want a good solid investment portfolio. However, when you come to think of it only some of us ever make it to having a well balanced and successful investment portfolio. Have you ever wondered why this is? The answer is simple. It can all be attributed to common mistakes made by everyday and professional investors. Listed below are some of the more common mistakes made by individuals when investing.
Investing Portfolio: Mistakes To Avoid
- Debt Accumulation: This may sound a little strange but consumers at times feel that credit card debt need not be paid back. This could be a real issue. Accumulating credit card debt quickly eats into your ability to invest as your too busy paying back the credit cards and other revolving lines of credit that you have been racking up. Make sure that you aren’t trying to create investments by increasing your credit card debt.
- Missing The Bus: This is exactly what it sounds like. Investors often are of the opinion that they might just hold on a little longer before starting off their investment portfolio and in so doing the quite literally miss the bus. Opportunities in the investment market are meant to be taken advantage of. While it is never good to be rash and hasty with investments, being over patient could be the difference between buying shares at $1.00 and buying the same stock at $25.00.
- Being Conservative: If you invest all of your funds in cash or fixed interest investments, out of the fear hat your investment portfolio may be lost, 9 out of ten times you can be assured of medium to poor return. The market rewards investors who have the appetite to take on a bit of risk. No one is asking you to go and put your money down as if you were Las Vegas. It may be beneficial to take certain calculated investment risks, as the risk-reward returns are far greater. Historically, for instance, international stocks have always outperformed domestic equity.
- Diversification: This is possibly the most common mistake made by investors. Placing all you eggs in the one basket could be hazardous for investment portfolio. The simple reason being, your entire portfolio depends on the rise or fall of one particular sector. However, if your investments were spread across a few different sectors like property, small companies, domestic equity, commodities, international equity and fixed interest, you would be much better protected against market and other investment related risks.
- Investing With Emotions: Investments are not your grandmother’s pearls. When investing you must be devoid of emotions. Do not hold on to a stock if it is not performing or has not been paying dividends. The fact that you like a stock or got some stock as an inheritance and owing to that it has emotional value, should never be a material factor as investments are meant to produce returns and if they do not they are supposed to be swapped for other investments.
In addition to the above mentioned mistakes, consumers can also of ten make mistakes by holding on to a stock or investment for too long and can also some times over pay for a stock. These mistakes are what keep portfolio form performing well and being able to take advantage of opportunities in the market.
References:
- 8 Common Investing Mistakes – The Motley Fool