Home Business Insights & Advice The most common investment mistakes to avoid

The most common investment mistakes to avoid

by Sarah Dunsby
17th Jul 18 12:27 pm

If you have some money in your savings account, then you may be thinking of investing it elsewhere. This is a very sensible idea as making the right kind of successful investment should bring a much better return than the meagre interest that your bank provides. Of course, the key point here is making a successful investment.

Too many people listen to poor advice or rush in when they don’t understand the market in which they are investing. This is a real recipe for disaster and could see your newly invested money dwindle quickly. The key is to choose the investment that you will take on wisely and avoid the common investment mistakes.

Types of investment

Before we look at the most common mistakes to avoid and how to do just that, it is worth outlining some of the more common investments around:

Financial markets – this is easily one of the most popular out there and, done right, can enable you to see great returns on your initial capital outlay. It is actually quite wide-ranging as it incorporates the stock market, the FX market, bonds, equities and futures among others. Needless to say, this certainly needs proper professional advice or a thorough personal knowledge of the relevant market before parting with any money.

Classic cars – one of the more unusual but fast-growing investment classes is classic cars. If you put your money into the right one, then the price that you will see at auction could net you a handsome return.

Fine wine – this has long been a favourite investment for many, but is a long-term one. You would usually need to hold the wine that you buy for a number of years before being able to sell for a decent profit. French wines still lead the way, though some of the more upmarket new-world examples can fetch a good sum.

Fine art and antiques – one of the most popular investments around is in fine art and antiques. As with classic cars and wine, if you pick the right example, then you could see a good profit on the money you paid for it originally.

The most common investment mistakes to avoid

If you are new to investing, then here are the mishaps that you should avoid to preserve your precious money:

Overpaying – when it comes to investing, it is key to get the right price. This is mainly true for investments such as cars or antiques where you are buying an item to sell on. Even the most precious item can lose you money if you pay too much for it initially! Make sure to get the best deal possible and always be aware of how much you are likely to get for it yourself when reselling.

Using an unregulated broker – when it comes to trading currencies on the forex market or shares on the stock market, using a regulated broker is essential. This not only gives you confidence that they are reputable but also protects you from any shady dealings that an unregulated broker may try. This is especially true in the FX market where using regulated forex brokers is crucial. Take the time to check out any broker you may be thinking of using to ensure that they are above board and fully regulated.

Investing money you need – the golden rule of investing in any market is to only use money that you can afford to lose. This is why it is best to invest money from your savings that you don’t need for anything critical, such as bills or the mortgage. This will not only protect you financially but also make investing less stressful.

Jumping into an investment – this is quite common as it is only human nature. You hear from a friend that a certain stock is about to rise or see on the internet that a certain currency pair is set to fall. Before you know it, you have jumped into the investment. Always avoid this, and do your own investigation to reach your own decision before parting with any money.

Not diversifying – when building up an investment portfolio, it can be a common mistake for all your individual investments to be of a certain kind. It may be all from one investment class or the same group of stock types, for example. Try to build your portfolio from different investment types as this will help spread the overall risk to you.

Investing can be a smart move

If you have some spare money that you want to enjoy and make work harder, then investing is a great option. Not only does it present the opportunity to make a better return when done right, but it is also far more exciting than simply putting your money into a bank account. Try to avoid the common investing mistakes above and you will be well on your way.

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