Avoiding Costly Mistakes When Investing

Avoiding Costly Mistakes When Investing

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Investing your money is risky, take steps to minimise this

When it comes to investing your money, there’s nothing worse than losing it. For the retail investor, this can be done by costly mistakes that are made by many. Avoiding costly mistakes when investing is a great way to maximise your money and make it go further. We’re going to try simplify investing and look at classic mistakes that can be avoided.

It’s understandable that the world of investing might appear complicated, especially given the present global economic situation. Investors are bombarded with market news, numerous investing options, and constantly shifting market circumstances. There are some essential concepts that every investor should adhere to in order to develop a successful long-term strategy to attain their financial objectives.

A low down of principles to follow 

Let’s look at some key principles when it comes to avoiding costly mistakes when investing.

Setting investment goals

Setting investing goals can help you keep focused and on track to achieve your financial goals – with a well-structured strategy in place, you can confidently stay committed to it. When determining your goals, you should consider your age, investing time range, and risk tolerance.

Plan a way ahead and save in accordance with the time frame

People aged 65 in the UK in 2020 may expect to live an additional 19.7 years for men and 22.0 years for females, with this figure expected to climb to 21.9 years for males and 24.1 years for females aged 65 in 2045. Investors should start early, invest with discipline, and have a future plan.

Inflation will eat away at the purchasing power of your cash

Cash is a popular asset class, but keep in mind that it is not always king – inflation can erode your cash’s purchasing power, making it a less appealing alternative in the long term. When inflation is factored in, cash frequently trails behind other asset types such as equities and bonds, which might imply that cash will lose buying power over time.

Invest early on and re-invest to benefit from the miracle of compounding

Compounding is known as the eighth wonder of the world because it allows you to develop your wealth over time by starting to invest early and reinvesting your income. Compounding has such a powerful effect that postponing investing by only a few years, or deciding not to reinvest money, can make a huge impact in your overall results. This concept is so key when it comes to avoiding costly mistakes when investing.

Be realistic about your returns and risks

Of course, you always want to maximise your return while assuming the least amount of risk. However, there is generally a trade-off involved – the greater the possible reward, the greater the danger. And vice versa. As a result, if you want to aim for a greater rate of return, you must be prepared and able to accept larger fluctuations in the value of your assets along the way.

Market fluctuation is all part of the game, keep your cool when others lose theirs

Volatility is a regular element of the market, so don’t be alarmed – keep your cool when everyone else is losing theirs, and remember that the best moment to invest is frequently when everyone else is panicking. So, when the markets fall, don’t panic. Instead, be cool and focused on your long-term objectives.

Perfect investment timing is hard, staying in the game is what counts

It’s no secret that stock market timing is tricky. In fact, it is frequently stated that attempting to timing the market is a fool’s errand. By remaining invested, you ensure that you are sharing in the market’s long-term development, which helps to offset the consequences of volatility. Investing in the market allows you to capitalise on opportunities as they emerge. By remaining involved, you will be able to purchase when prices are low and sell when prices are high.

Don’t make the mistake of putting all your eggs in one basket

You may reduce your risk and increase your chances of success by distributing your money over many assets. Different investments will tend to equal out over time, thus the goal is to increase your money even if certain assets underperform due to market fluctuations.

Review your investments

Reviewing your investment portfolio allows you to track your progress and confirm that your assets are operating as intended, as well as make modifications to your portfolio as needed. It assists you in being disciplined and focused on your long-term goals.

If it seems too good to be true, it probably is

Promises of large profits with little or no risk are nearly always too good to be true; there are numerous frauds out there, as well as many persons attempting to take advantage of unwary investors. Consult with a financial expert before investing to ensure you understand the dangers involved.

Professional advice can really help

Put your money to work in the right way can be tough on your own. Getting the advice of a professional with vast experience can really help. Our financial advisor Tony has over 35 years experience in the industry and has seen a lot in those times. From recessions to long periods of economic growth he has guided clients investment and pension portfolios through all that the markets have to offer. This experience can be invaluable when looking to grow your investment pot. Contact him today for a free impartial meeting to discuss your goals. His experience can be key when avoiding costly mistakes when investing.

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Tony Hollom
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