Common mistakes made by beginners in the investment world (12 mistakes)
Common mistakes committed by beginners in the world of investment, investment is one of the most used ways to increase income or to save in the long or short term, and in order to be able to reach an investment level that suits your goals and financial ability, you must gain experience that gives you the technical skill to manage these investments, in addition to avoiding Making investment mistakes that can cost you a lot. It is natural for some mistakes to occur in the investment world as it is in everyday life; Because despite our previous experience and information, no specific person or program can always do it perfectly. This is due to the fact that investment often has some ambiguities, in addition to that it may be affected by an emotional impulse after long years of hard work.
Common mistakes in the investment world
1. The lack of a planning idea
A common mistake that investors make is to start forming an investment portfolio without planning it in advance. Such as starting with a specific investment that one of your friends has nominated, without studying the topic and then planning it. Because you are the one who will bear the result of your investment decision, even if this nomination was made by mistake.
Investment planning gives you the opportunity to get to know your required goals in addition to financial capabilities, and then you can determine the appropriate investment options for you, how to invest in them, the necessary period, and other things that you must prepare for in advance instead of taking a random decision.
2. Not to diversify the investment portfolio
Some people think that it is better to focus on a single investment so that you do not get distracted or spend more effort in pursuing multiple investment tools. But this method is very risky, especially with fluctuating market performance, as diversification in the investment portfolio is the best way to reduce the percentage of risk that your portfolio is exposed to. Also, do not forget that the process of diversifying the portfolio is not an easy matter and it requires focus and comparison of options available to it in terms of return and risk.
3. Looking at profits without risk
There are people who look at the profit numbers realized in a particular investment without considering the degree of risk associated with that investment, which may be relatively high with the high expected rate of profits.
Investors differ in their investment methods, some of them want to face high risks by nature and invest large sums in investments with high expected returns and vice versa if they are willing to take risks.
4. Neglecting the investment period
The importance of knowing the appropriate investment period for you in determining the elements of your investment portfolio, for example if you are looking for savings investments for retirement, this indicates long-term investments, so it is not correct to invest in stocks that need to be monitored daily to determine when you can buy or sell in order to reap profits. It is best to invest in long-term assets such as real estate or investment funds with long periods of investment, and vice versa if the desired investment period is short.
5. Not following the news
Follow-up news is one of the most important skills that any investor needs, regardless of his experience. By following economic news, you can know the impact of these new financial news or decisions on the market in general and on your investments in particular, which helps you in making the decision to increase or reduce investments or change your strategy.
6. Failure to follow up on performance
The importance of monitoring the performance of your investment portfolio is highlighted in identifying the strengths and weaknesses of the portfolio, which gives you the ability to avoid more losses and change your strategy to achieve more profits.
7. Making emotional decisions:
Investing is a science and an art. In general, it should contain both, to avoid emotional decisions tinged with bias, which often lead to disastrous consequences. As for sound decisions related to investment, they must be based on careful research and study, and subject to reasonable judgment.
8. Sticking to a losing investment until the value of its expenses and revenues is equal:
Better to cut the losses and move on, and avoid sticking to wrong decisions. However, some investors find it difficult to admit the mistake and correct it from the beginning, such as if someone buys an investment, and then loses its value later. Then he decides to keep it until the market revives again, to equalize the value of his expenses and revenues, and then sell it. But he will not do that if the investment income rises again, seeking more profits if he keeps it and does not sell it, which will reinforce his belief that the purchase decision from the start was correct.
9. Lack of patience:
Any investment requires a great deal of patience, along with not making any hasty decisions about matters that are not entirely clear. Also, the results of the investment do not appear at its inception. There are many cases in which it may witness a decline for several years, before recovering again and achieving high profits.
10 overestimating returns from previous years:
When choosing an investment, do not place your hopes on previous years’ profits only. For example: If you intend to buy a mutual fund, it is important to evaluate the performance of its management during periods of recession in the market, and if its loss is less than others, this is evidence of its having a strong risk management system.
11. Adherence to recommendations:
If a friend advises you for a specific investment, it does not mean that it is necessarily good; There are many things that must be considered when evaluating investment opportunities, such as the returns of previous years. However, it should be noted that it does not always affect the returns of the following years. Investment funds that reach their peak of success in one year may not remain so in the following year.
12. Fear of investing again after falling into a big loss:
When investors suffer a heavy loss, they become afraid, so they sell their losing investments, and wait until they feel that the situation is safe to return to the market. But stocks usually have risen significantly during this time. Although they prefer investing at a time of low prices, they tend to be cautious after going through a big loss, in addition to the fact that most of them hesitate to return to the market after a major setback, and this is also a mistake. To avoid this, it is best for you to establish clear rules for determining when the right time to buy or sell. Then you will see that your investment opportunities start to improve.
In the end, we showed you 12 common mistakes that beginners make in the world of investing. We hope you have benefited from this article.
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