You may think you’re smart enough for investing. However, these are mistakes that even professionals commit. Are you guilty of these?
Check them out below.
Investing in Something Unfamiliar
The most successful ProfitiX Broker investors in the world always warn against the mistake of investing in businesses that you don’t really understand.
In simple words, you shouldn’t be investing in companies whose business models you don’t understand.
The best way to avoid this mistake is to create a diversified portfolio of exchange traded funds (ETFs) or mutual funds.
If you can’t say no to invest in individual stocks, make it a point to thoroughly understand each company that issues the stocks you want to invest in.
Being attached too much in One Company
There are many instances when we find a company and invest in it and at one point we just realize we’re too invested in it.
To some extent, we can say that we somehow have fallen in love with a company. However, remember that you bought the stock to make money.
If any of the fundamental factors, which compelled you to buy that stock in the first place, changes, then you have to consider selling that stock.
Not having Enough Patience
A lot of times, the slowly-but-surely approach has proven to be more powerful, beating other types of styles in the longer span of time.
It’s no different in the world of investing. A slow, steady, and disciplined approach will take you a lot further over the longer haul than aiming for any quick plays.
Remember that when you expect your ProfitiX Trading Platform portfolio to do stuff that it wasn’t designed for is usually a call for disaster.
This means that you need to set realistic expectations when it comes to the length, time, and growth that each stock will face.
High Degree of Investment Turnover
Turnover refers to jumping in and out of positions and it is one of the most dreadful return killers.
If you’re not an institutional investor, who has the benefit of low commission rates, the transaction expenses can chip away from your money.
There will also be short-term tax rates and the opportunity cost of missing out on the long-term gains of good investments.
Timing the Market
Timing the market also eats away from your returns. That’s because successfully timing the unpredictable market is extremely difficult to do.
As a matter of fact, even institutional investors fail to do it successfully.
One study showed that an average of 94 percent of the variation of returns over time was explained by the investment policy decision.
In simple words, this suggests that normally most of a portfolio’s return can be explained by the asset allocation decisions that you make. It’s not about the timing or the security itself.
Letting Your Emotions Get the Best of You
Your emotions are arguably the most effective killer of investment returns. As a matter of fact, the markets have this belief: fear and greed rule the market.
You must not let fear or greed take over your mind and affect your decision-making skills. At all times, try to focus on the bigger picture.
Stock market returns may swing wildly over a shorter timeframe. However, during longer time horizons, historical returns for large-cap stocks can average up to 10 percent.