If you’re a newbie in the investment market and hoping to be better with your investment in 2019, then you should brush up on some useful investing suggestions. Well, the most crucial investment suggestion is avoiding the mistake. If you truly want to get gain from your portfolio, then you shouldn’t commit even a single mistake when investing your money.
However, you may think that you have done your homework already. So, you can’t commit any mistake. But you shouldn’t be overconfident. You should take any kind of precaution before stepping into the investment market.
The concern of this article is to highlight all the common investment mistakes that must be avoided by new investors to avoid falling into failure.
1. Don’t plan for investment when you are out of sufficient income
Proper investment can never happen if there is not enough money that can be specifically set aside for investment purpose. If your monthly income is not enough to cover your living expenses, you shouldn’t try your luck in the investment market. You should try to increase your income first.
2. Don’t make an investment without a clear strategy
Stepping into the investment market is not easy. You need to plan every step so that you can make the ultimate benefit. If you are a new investor, then you need to make a list of your short term and long term future goals first. You need to evaluate the risk and also check how much risk you are able to tolerate while trading in each kind of financial instrument. Investing without a strategy can invite financial loss in your portfolio.
3. Don’t plan for investment with less knowledge about diversification
Most investors often make the mistake of investing in a particular area of a specific company. You can lose your money in the investment. With price volatility, your investment may not be the perfect one. Thus, you should learn how to minimize the risk of losing money in the investment. You should know how to diversify away from a group of investments to avoid losing money.
If you’re a stock market investor, you must try your best to diversify your portfolio by investing in various stocks of various companies. This reduces your risk as all the stock values will never fall together unless there is a stock market crash. You can also invest in stocks, bonds, and various other securities.
4. Don’t make investments without doing enough research
Investing in a particular company that is more prone to loss can invite financial loss in your investment.
Remember, investing in stock means you are becoming a partial owner of the company. You may incur the loss with the depreciated value of the company’s stocks.
Thus, you should do complete research on the company, its whereabouts, its future goals, and past performances. By doing so, you can avoid loss.
5. Don’t go for investment without paying off your debts
If you are one of the million Americans who have huge debt, then you shouldn’t invest money before paying off your debt. Remember, making only the minimum payments to your debt is not enough. You are losing money on interest over time. And if you start investing money without repaying your debt, the loss ( Very common in any investment) can destroy your financial life. You may not be in the situation to rebuild your new financial life. So, if you have multiple debts, then repay them first. There are many debt assistance programs you can consider to get rid of your debts. Once you are debt-free, you can either save or invest your money to build wealth.
6. Don’t make an investment before building an emergency fund
You should be prepared for the unforeseen risks (Job loss, illness, accident, and natural calamity) that can arise at any point in your life. You should have enough money in hand to fight back with any surprising expenses. Thus you should build an emergency fund before setting other financial goals. Making an investment with the last penny of your income is not advisable especially when you have no emergency fund. You should save at least 1 year of savings in an emergency fund before making an investment. Since investments are not risk-free, you can lose your money any time. If you have enough money, you can survive during a bad financial phase.
7. Don’t make real estate investment without arranging the down payment
Investing in the real estate market can make your money multiply. One of the primary concerns that you must have is, from where will you arrange the finances to make the investment. You may need to pay only the down payment which usually is 20% of the total value of the property that you are buying. You can take out a mortgage loan from lenders for rest of the amount. Thus, you should save enough money for making the down payment for your house. After that, you should be concerned about improving your credit score so that you can qualify for a mortgage loan.
Lastly, investing is a risky job but if done carefully, it can help you become rich in no time. But you should consider an expert’s advice before investing your money.
A whole year has passed, so investing strategy can change in the new year. So, you should know what not to do when it comes to investing your hard-earned money in the coming days.