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Investment Mistakes Every Beginner Needs To Avoid

StrategyDriven Practices for Professionals Article |Investment Mistakes|Investment Mistakes Every Beginner Needs To AvoidEven in the face of the current global pandemic and financial insecurity, the world of investment seems to maintain steady growth, with new investors taking up opportunities to grow their money. Recent studies showed that 15% of stock market investors in the US alone started in 2020. While this is encouraging, investments always come with significant risks. The last thing you want is to jump onto an opportunity with your eyes closed. So, are you thinking about investing for the first time? Here are some mistakes you might want to avoid.

1. Not doing enough research

As mentioned earlier, investments can be risky. While you may not be in control of the market forces, you can minimize the effect of any possible risk by doing your homework before investing. Thankfully, no matter what you want to invest in, you’ll probably find more than enough information online. For example, suppose you’re interested in stock trading. In that case, you will find valuable information from a platform like FX Globe reviews, like feedback left by traders past and present, to help you develop the trading skills you need.

2. Investing before you’re ready

The last thing you want to do is attempt any investment option if you don’t have a solid financial foundation. Most investments take time to yield returns, and you could find yourself in financial discomfort if your returns take too long. The safest thing to do is create a budget considering your monthly expenses, income, etc. It is also best to make an emergency fund covering at least three to six months of your living expenses like rent and utilities.

3. Focusing on short-term goals

The idea that some investment options like trading in stocks can rake in quick bucks makes them very attractive to many first-time investors. While that isn’t a problem, limiting all your investment goals to the near future alone might be a bad idea. Doing this makes it difficult to think about the long-term effects of the investment decisions, which could be pretty damaging to your financial future. Many first-time investors end up making some uninformed and rash decisions to grab steep profits in the shortest possible time.

4. Putting all your eggs in one basket

Diversification is one of the primary keys to responsible investing. Taking the time to diversify your investment portfolio will help minimize your risk in the sense that if one of your investments underperforms, you won’t end up losing everything. On the other hand, if you put all your eggs in one basket, one poor performance could mean losing your entire portfolio and your financial future as a result.

5. Becoming impatient

You don’t want impatience to drive the decisions you make when it comes to investments. As mentioned earlier, most investment options usually take time to produce results, even though it is always possible to strike gold within a short period, depending on your investment choice. However, it is a bad idea to make hasty decisions out of impotence when your returns are not looking encouraging.

Four Things to Consider with Your Investment Manager

StrategyDriven Practices for Professionals Article |Investment Manager|Four Things to Consider with Your Investment ManagerEveryone is different in terms of how hands-on they want to be with their money management. Some are content to turn over their funds to a reliable investment manager (read more about investment management here). In contrast, others want to be more involved in the day-to-day decisions regarding their money. But wherever you are on that spectrum, here are four topics you should talk over with your investment manager.

Your Timeframe

It’s pretty evident that your preference for long vs shorter-term investments will depend on your age. However, even if you are relatively young, you may have needs that you are planning for, such as higher education or starting your own business. Or maybe you are in such a good place that you can plan on retiring early! Whatever your situation, a discussion about when you need to realize the returns on your investments needs to be on the agenda when you meet with an investment manager or financial advisor.

Risk Tolerance

The amount of risk you are willing to accept is a hugely personal decision, though it should be, in part, dictated by some life circumstances. If you are older and looking to retire soon, you will probably want your investments to be at lower risk. You don’t want to lose everything just as you are hitting your golden years. But if you are younger and just starting your retirement savings investments, you might have a higher tolerance for volatile but potentially high yield investments. Or you may just be cautious by nature or a daredevil. Either way or any way in between, it is an important conversation to have.

Diversification

How much diversity you want to see in your portfolio is closely related to your level of risk tolerance. Putting all your eggs in a high yield basket, so to speak, can have a big pay-off but also makes you highly vulnerable. Having your assets spread out in many different places mitigates that risk, but it might be frustrating if you have a limited investment in a fund, or market, or company that takes off. You and your investment manager should discuss the possibilities, including strategies for mixing lower and higher-risk investments and making different kinds of investments.

Your Values

You may not care where your money is, so long as it is busy making you more money. But many people see investing as a form of supporting the practices of a business or industry in a very literal way. In the 1980s, many investors divested from their portfolios in South Africa to withdraw support from the Apartheid government. Since then, there have been various divestment movements, and there are funds available to invest in that support certain societal goods, like green energy. The saying is that you should put your money where your mouth is. Think about the values that are most important to you and how those values are reflected in society. When you meet with your investment manager, go over what is important to you to develop an investment strategy that honors your ethics.