When we learn and start something new, it’s often part of the process to make some mistakes. This is a truism in the complex world of investing.
Unfortunately, unlike most learning processes, some mistakes in investing can be very costly. However, you’ll be happy to know that most of these slip-ups are quite common and avoidable.
Read on to see how you can avoid the beginning investing mistakes:
Waiting until the market is ‘safe’
There are plenty of individuals who are eager to start investing, but hesitant to dip their toes into rough investing waters. When the market is choppy or it’s on a downturn, it can seem intimidating to start, and appear to be a smart choice to wait.
This leads to one of the quintessential beginning investing mistakes; buying high. It seems counter-intuitive, but if you’re diversely investing for the long-term, a down market is a perfect time to buy. Because the market as a whole is highly likely to recover, you can essentially buy in “on sale” (instead of waiting to invest while prices are higher).
Having a narrow time frame
While it’s great to be eager to start investing, one of the largest beginning investing mistakes is to use wealth you’ll need soon. Having too narrow of a time-frame blurs the line between speculating and investing. Generally, you should be able to invest for at least two to three years (although it may vary slightly based on your goals).
Although your investments may gain value in that time-frame, it’s nearly impossible to predict how they’ll perform. Over history, the stock market has always recovered and reached new highs. But over a time-span of a year (or two) it can experience a down period.
Some options you may want to consider for short-term wealth-building include a high-yield savings account or a Certificate of Deposit.
Investing in a hot tip
If you mention you’re starting to invest, everyone from your Uncle to your co-worker will probably give you tips on which stocks to invest in.
While it might be fun to speculate with friends on which individual stocks will perform well, it’s usually not the smartest way to invest. Making a bet on a few stocks is more akin to betting, because you’re concentrating your wealth.
Instead of investing in a “surefire” tip, you should invest in a well-diversified portfolio for the long-term.
Learn more about the beginning investing mistakes to avoid
At LexION Capital, we craft bespoke portfolios that help our clients reach their long-term goals and needs. If you’d like to learn more about how we can help you avoid investing mistakes, don’t hesitate to contact us.
