Common investing mistakes

When trying to learn any skill and reach excellence, mistakes are the natural part of process. There is no way around it, but beginner investor are usually more prone to making these mistakes. Even famous and successful investor have made some of these mistakes at least once. We will look over some of the most common mistakes in hope to raise awareness among future and current investors and help them avoid repeating them.

First of all, investing in business and industry that you don't know that well is not a good idea. There is always some "hot" and "up and coming" industry sector but if you don't have much knowledge about that particular industry and don't understand its business model avoid it. For example crypotocurrencies were massive hit, year and a half ago when bitcoin reached its all-time high of $19,500 and then fell to $3,000 a year later. Inexperienced investor could suffer a massive loss if he doesn't fully understand complexity and trend in particular sectors preventing him from making great investment decisions.

Another mistake that investors make is expecting to much and too soon. It is crucial to have appropriate mindset when you are getting into investing. Just be realistic! It is most probable that you will not make small fortune overnight even though that sometimes happen. Be aware how the stocks in which you invested money performed in the previous period and what was the average return which is usually indicative of future stock performance. Patience is a virtue, especially in investing. As in life and in business, good things take time. Slow and steady progress almost always delivers results.

You may think that jumping in and out of position trying to beat the market is a good strategy. But every time you execute a trade broker charge you a fee and if they accumulate this can negatively affect you return on investment. Be careful also to avoid high cost funds and be aware of the expense ratio, percentage that fund takes from your money each year. This mistake can be costly.

Not only fees will eat away your returns but also the idea that you can time the market. The truth is that no one surely knows how market is going to behave. On the same business day you can read or hear completely opposite opinions on where the market is heading. It is better to just invest and not try to catch the perfect timing.

Don't put all your eggs in one basket. it is a big mistake to invest in only one fund, stock or a type of security. By allocating to various sectors and types of securities like stock, bonds and cash equivalents you spread the risk. This doesn't mean that you are guaranteed a profit but it will protect you from losing all or most of your money.

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