Posted on: November 23, 2015
One wrong move and you can kiss your money goodbye. When it comes to investing, strategy is key. And those of us that allow our bad habits to guide our financial decisions can quickly find ourselves in less than desirable situations more often than not. The problem is, most of us don’t even realize our bad habits are affecting our wealth, until they do. And when we do realize it, it’s too late. So, before you unknowingly sabotage your investments with your poor investing habits, read on:
Letting your emotions influence your decisions
If your ‘gut’ is your main advisor, it’s time to reassess your guidance. Choosing investments based on how you’re feeling at the moment is not only a dangerous habit, but one that rarely yields profits for your account. Sometimes, our fears (or excitement) can cause us to take desperate measures, when in reality we should be waiting patiently and making tactical decisions. Other times, an overly optimistic attitude can cause us to get into investments with clear, red flags. It’s important to make investment decisions that are aligned with your financial goals and time horizon, not because you have a good feeling about a particular investment opportunity. So, before you buy 400 shares of that hot startup that went public, stop and ask yourself if you’re being driven by sentiment rather than logic.
Investing money you can’t afford to lose
While it’s smart to invest early, it’s not always smart to invest money you can’t afford to live without. Many people make the mistake of investing their entire savings into one investment they believe will multiply their money. The problem is, a lot of times, these investments carry a high level of risk, which could leave you with nothing in a split second. Once you’ve planned and done some due diligence regarding your finances, look for low-risk investments that protect your principal investment while still earning you yields that make a positive stride towards your financial goals. Always remember that no investment is truly guaranteed. There is always some level of risk involved. Do your homework and don’t invest your life’s savings without truly analyzing what it could cost you.
Not diversifying your portfolio
What’s the problem with putting all of your eggs in one basket? If you lose those eggs, you’re left with nothing. If something happens to that nest, you also have nothing. Don’t make the mistake of putting all of your capital into one investment type. Many of us have this idea of going “all in” because the yields are promising and the investment seems so lucrative, when in reality there is no security, or assurance your funds will be 100% safe from market fluctuations and loss. And quite frankly unless you’re Warren Buffett, who has decades of investing experience, you should consider diversifying your assets to minimize overall risk to your portfolio. In other words, if you lose money with one particular investment, you still have others which will give you some financial cushion, rather than leave you dry. If you’re not sure how you can diversify your investments, consider hiring a financial planner to give you a better understanding of what can work for your financial goals.
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