“It’s recommended to learn from your mistakes, but it’s even better to learn from the mistakes that others do,” Buffett tells us. That may be so. Is not starting to invest one of the biggest investing mistakes? How do you look back at your investment mistakes and make peace with them by learning fast? Or look closely at what other investors have done wrong.
We’re not going to examine Warren Buffett’s biggest investment mistakes today. Instead, we bring to your attention a few of the most common mistakes that can escape your sight when ‘’handling money.’’
Expectations that are way too high or reporting to the expectations of… others
Long-term investments involve creating a well-diversified portfolio designed to give you the appropriate levels of risk and return in a variety of market scenarios. But even after getting the right portfolio, no one can predict or control how it will behave, both in terms of volatility and return. Pay attention to your expectations and goals and not to other investors.
Lack of clear objectives in investments
There is a saying: If you don’t know exactly where you’re going, you’ll definitely end up somewhere else. Everything, from the investment plan to the strategies, to the design of the portfolio, is recommended to be configured with life goals in mind. Too many investors focus on the latest way to invest or on maximizing short-term ROI. This is even though they should design an investment portfolio that has a high probability of achieving their goals, in the long run.
“Failure” in (exaggerated) investment diversification
The only way to create a portfolio that has the potential to provide balanced/adequate levels of risk and return in various market scenarios is through proper diversification. Often, investors believe they can maximize their investment by taking a large exposure to a single instrument or investment sector. With a constantly moving market, the results can be negative.
Just as a lack of diversification can have a negative impact, too much diversification and too much exposure can also affect investment performance. Seek expert advice to find the balance.
Watch out for changes in investment strategy
If you’re the type of investor with a long-term focus, speculating on the performance of short-term investments (which can lure you in with quick results) can be a recipe for disaster.
Why? Because it can make you doubt your strategy and make unwanted changes to your portfolio, which can also involve frequent trades, additional costs, etc.
Consult a coach before changing your strategy! This way you can avoid mistakes in the investment plan.
Too many and too frequent transactions
When investing, patience is a virtue. It often takes time to realize the ultimate benefits of an investment and asset allocation strategy.
Continuously changing investment tactics and portfolio composition can not only reduce returns but can also lead to unanticipated and uncompensated risks. I can reconfigure the path of your portfolio.
Lack of review!
If you have invested in a diversified portfolio, there is a chance that some things will go up and some things will go down, and things will look different in 6 months. Don’t forget to review your portfolio every 6 months/a year and re-track your investments.
Emotions in investments
Investment can also raise problems through the emotional decisions behind them. Do you want to share your financial information, success, or problems with your partner? How would you like your assets managed if something would happen to you? How do you react in periods when the return does not satisfy you? Do you make impulsive decisions when exposed to another type of dissatisfaction? Emotions are a “decision factor” controllable with the help of a financial coach.
Forget inflation/costs
Always pay attention to the return on your investments after fees and inflation fluctuations. Even when the economy is not in a massive inflationary period, some costs will change anyway! Develop discipline and attention in this respect!
You’d be surprised how many people don’t know their extra costs when evaluating portfolio performance!
Pay attention to the return on your investments and the hidden costs that can come from very frequent transactions. Studies say that over 30% of first-time investors fail to consider all costs when evaluating returns.
Excessive attention to the media!
Using the news as your sole source of investment analysis can be a common early-stage investor mistake. Be careful though!
By the time the information became public, it was already included in market pricing.
The key is to focus on valuable information. Successful, experienced investors gather information from several independent sources or turn to a coach. It re/guides them through the avalanche of information.
Not to start or delay investments
Maybe it will surprise you, but the biggest “mistake” in investing is not to start investing even though you could do it. From lack of basic investment knowledge to worry about when to start, all lead to procrastination, which is not beneficial for your money and well-being. There are also periods of investment inactivity as a result of previous losses and discouragement. Discipline, planning, and a good coach can get you out of a deadlock.
Ask for advice when starting your investing path, or whenever you lose your balance along the way.