Don’t do this: 8 common mistakes of many investors

When you have some extra money, you may want to make it work for you. Our expressive experience shows that having free funds causes as many troubles as being short of them. For instance, how will you allocate your capital if you have many options? How should you act not to lose? You may call it “eternal” questions, with lots of personal insertions. Well, we’ll talk about faults that are common both for “old birds” and rookies. They can really do harm…

1. Heavily in debt

Incurring a credit is a normal practice, which works fairly good. Just never forget about a cost of debt. If you manage to earn more somewhere, cover that loan ASAP before you decide to start investing. Any debt – even a “cheap” one – always pulls down. Honestly, it’s incorrect to compare today’s rate of credit with tomorrow’s rate of return. You’d better wait till your debt turns into zero before you start thinking about being an investor.

2. An awry focus on fund costs

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While looking for a future partnering company, people certainly check how much it wants for servicing. It’s right but don’t run to extremes. In case your target is investments in everlasting gold, prefer gold ETFs to physical gold to save on costly transactions and sufficient safety charges.

Besides, the amount a fund wants you to pay is just one parameter among many others that matter. Ask how big your expected return will be and how company’s capital is diversified. The amount of costs is important, but a complex and profound insight with all pros and cons is a must.

3. Investing in fads

Often new gizmos tend to sound more promising than their well-known “relatives”. And more profitable as people say good words about them. Don’t rush: investing is a long and delicate process. You’ll probably fail trying to earn money from investing in a hot tip. We think so much about nuances of being investors for some reason, don’t we?

4. Lack of faith in what you do

You must believe in success of a pursued investment strategy as you’ve picked it. No market is stable all the time: slumps and gaps show up when the market completes its circles. A balanced approach with a long-term focus should win in the end even if several months of losses will come first.

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Don’t react on market fluctuation with cardinal changes. Be patient.

5. Investing with unreal returns

Think twice before you let your money work for an opportunity that sounds suspicious or too good. A fast or medium-term hyip offering an excessively high monthly return is likely to make you believe in unreal things.

6. Unreasonable expenses for advisers

Investors – mainly newly arrived ones – at first may find it difficult to learn how their industry operates, and advisers are right here. They can surely tell you everything you need to know, but it’s better to acquire skills and knowledge via practice. Even highly reputable wealth consultants may recommend you “needed” companies/funds. The cost you’ll pay for their services can be that same benefit you get from investing in a low-cost ETF.

7. Investing on margin

It has something in common with the one we’ve discussed in the 1st point. However, nothing is that easy. Indeed, there is such a notion as margin investing but only professional investors can manage it. Speculations on margin are generally risky and ungrateful. One bad move can wipe out a big portion of capital (which is not yours). The conclusion: invest as much as you can lose without significant hardships.

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8. Uncontrolled investments

Money management prefers a cold heart and a healthy mind, with all emotions kept under control. Fear or greed are bad helpers. No strategy or at least plan is an equally bad contributor to successful investing. Now and then we come across tempting offers. Still it’s unreasonable to waste hard-earned money for the sake of doubted income.

In my view, this article is a good reason to think whether we do everything correctly or not. Fix your approach if it is needed and let’s make money!

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