11 Common Investment Mistakes
How do you make your money work for you? One way is by investing your money. Investments are a way to make your money grow through the stock market, investment companies, mutual funds, and retirement accounts. But, while you are looking to invest your hard-earned money in something, don't forget to familiarize yourself with the mistakes that are more commonly made by new investors:
1. Not taking advantage of your 401(k) plan. Most employers offer a retirement plan for their employees. It can either be used from the first day of employment or there may be a short waiting period (usually 3 to 12 months). Whatever the circumstances, contribute to the plan as soon as you are able. Another advantage of investing in your company's 401(k) is that many companies will match all or a portion of the amount you contribute.
2. Not having a plan. Whether it is a 401(k) plan, an IRA, or another investment vehicle, go into it with a plan for contributing and how to invest the funds. If you just put your money into it and do nothing else, you have a glorified savings account. Let your age, family responsibilities, and the market determine how you will invest the funds so that you get the highest return possible.
3. Investing too heavily on the risky side. This is the risk most people associate with investing. Obviously, investing in investments that are too risky could lead to the loss of a person's hard earned money.
4. Investing too heavily on the conservative side. This is one that most people don't think about. Fear of the market and/or lack of knowledge of investments could cause a person to invest too conservatively. Conservative investing could lead to insufficient returns. Insufficient returns could mean that a person doesn't accumulate enough money to reach their goals (i.e. retirement)
5. Putting all your eggs in one basket. There needs to be a good mix of stocks, bonds, and other investment vehicles so maximize your money. Different investment vehicles perform differently depending on economic conditions. Simply investing in one thing limits your money's potential.
6. Falling for get rich quick schemes. For a while everyone was into those "hot tip" stocks that promised a quick profitable return. Playing with fire like that for too long will result in you getting burned and your money going up in flames.
7. Not knowing when to get out is a potential problem. For a lucky few, getting to ride the wave of a great stock to high profit is a rush and an opportunity. The trick is to know when to get out and put your money into something more stable for long-term growth.
8. Too much information can immobilize us. We don't invest because we are on overload and don't want to make a mistake. The only mistake here is not giving it a try. Use an investment advisor to limit financial mistakes.
9. Trying to invest with other debt. Before you are free to invest, the money must be freed up to do so. Pay off credit card debt first so that you have the cash to devote to investments. This also ensures a gain. Think about this. If you have a credit card which is charging you 18.99% or higher, you save 18.99% by paying off the balance. Few investments can produce that type of return.
10. Paying too much in commission fees. When you know what you want to do, ask how much it will cost, before you invest. Shop and compare prices and services just as you would for other products you buy.
11. Not using a professional. If a person is not feeling well, they go to a professional, i.e. a doctor. It should be the same when dealing with your financial health. Find a professional that can offer recommendations based on your particular circumstances.
This article is not intended for use as a source of legal, business, accounting or financial advice. As discussed in # 11, please seek the services of a competent professional.
How to Invest
Investment is a tricky question. We more often than not search for new investment ideas. Ideas to invest are not easy to come in. There are very well established investment solutions and new options to invest. There are traditional ways of investing and modern way of investing. There are investments with low risk and investment with high risk.
How to invest or rather how to choose a particular investment rather depends up on the character of the person who invest. If you are a person who is young and energetic, a person who keeps his eyes and ear wide open you can really afford to take certain amount of risk. Traditionally people selected two methods of investing. Gold and real estate. People choose real estate for many reasons. Land brings in prestige and profit. Land very rarely depreciates. The appreciation in value and income makes it first choice of investment for many. But it lacks the liquidity factor. That prompted people to turn towards gold. Gold has a high liquidity value and the price of gold always appreciates. But the amount of appreciation is very negligible and the risk associated with the storage of gold made people turn towards more modern investing methods.
In modern investment methods people choose stock market. In stock market you can trade in long term and short term trading. Long term trading based on the track records would bring in more safety factor and profit while short term and day trading is associated with lot of risk. Then there is forex trading which is a lot of fun. The rate of returns you get from forex trading is unmatched by any of the other investment methods. Commodity trading in futures offers a great investment option too. It is also a very good business and investment option because you can be pretty sure about the way commodities are moving than the stocks.
Various investment opportunities are associated with several advantages and dis advantages. You have to be pretty sure about the option before investing. Half baked Ideas do not bring good results. Be a good investor with the backing of knowledge.