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Mistakes to Avoid for Budding Investors
Common Mistakes to Avoid for Budding Investors
Investing sounds like a dream come true. What’s not to like about sitting back and watching your money grow? You start with a sum of money, and over time it turns into more money.
No, it’s not a trick. Investing is indeed an essential step to growing your wealth and becoming financially sound. And the earlier you learn how to do it, the better.
But before you dive right in, make sure you avoid these mistakes that newbie investors often make.
Putting all your eggs into one basket
Diversify, diversify, diversify. You’ve probably heard that being said before, and for good reason!
No matter how great the returns you get from one particular type of investment, do not put all your money into it! Investing always comes with an element of risk. The higher the risk you take on, the higher your potential returns. However, higher risk could mean losing more than you earn, so be sure not to take on more risk than you can handle.
In order to protect yourself from suffering losses, you should always diversify by investing in a wide range of investment products, and also take care to diversify within an asset class.
For instance, when investing in stocks, never put all your money into one single stock. Instead, you should be investing in a range of stocks across different industries.
One way to diversify your stock investments without needing a lot of cash is through a Blue Chip Investment Plan. For as little as S$100 a month, you will be able to select from 18 different shares, which helps to spread out the risk.
Trying to make a quick buck
Investing is a marathon, not a sprint. Many newbie investors make the mistake of getting preoccupied with the possibility of short-term gains. That’s why so many Singaporeans have fallen prey to gold buyback scams in hopes of getting rich quick.
As you’re still decades away from retirement, you should be investing with the goal of earning gains over the long term. Your youth is an advantage, as you’ve got lots of time to let your investments accrue in value.
Investing for the long term is actually less stressful than speculating and trying to make short-term gains. For instance, investing small amounts in an exchange-traded fund, unit trust or blue chip investment plan is very easy and can even be automated on a monthly basis. You won’t have to worry about the short-term market fluctuations, because you’re in it for the long haul!
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