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5 Blunders You Should Be Avoiding While Investing

Money is earned through many means. Occupation, business and other methods of earning money have been known to mankind for long. Investing is probably the newest trend in the modern world. People with money are no more hesitant to put their money out in the market and reap benefits.

However, with fluctuations in the international monetary market investments can be a tough business indeed. So we have enlisted five steps which you should in keep in mind if you do not want your money to go in vain.

  1. Don’t Chase Recent Numbers:
  • Amateur investors look for high performance in a company before investing.
  • However, this has been considered as one of the biggest myths in the domain of investing.
  • Paying preference to recent performance and believing that it would continue in the future and deliver excellent returns is termed as ‘recencybias’ in psychology.
  • However, there are many examples where sectors showing promising returns on investment failed, in the long run, such as real estate.
  • Gold is also another example of investment looking at recent performance.
  • This problem can be handled by referring to long term history of the sector and the fluctuations in investment.
  1. Don’t Gloat:
  • Investors commit the simple mistake of thinking that they know everything about the investment sector.
  • Let us show you an example how overconfidence took the better off an investor.
  • Eric Glohr had planned to buy Microsoft shares in 1986 when the initial public offering was set at $21 per share.
  • He decided that he would go for the shares when their prices went down.
  • However, this mistake went down too hard on Eric as he could only see the stocks of Microsoft rising in value.
  • The effective way to deal with such imprudent practice is to keep the company with the third party of investors who can provide a comprehensive account of investment options.
  • This would give way to extensive research on sectors to invest in and practical solutions for investment.
  1. Don’t Forget The Costs:
  • The expense ratio is one key factor of investment which escapes the eyes of investors.
  • Usually, investors look for recent performance and reputation which do not hold any credibility in the investment sector.
  • People prefer to buy expensive shares rather than cheap ones despite the fact that the latter outperforms the former regarding savings.
  1. Don’t Follow The Herd:
  • Another generic mistake committed by investors is following the trend.
  • Overpricing of stocks is sometimes caused due to flocking of investors for purchasing shares of a single company.
  • Before Facebook put up its IPO in May 2012, many individuals called to buy stocks just because of the limited number of stocks.
  • This behavior has been credited to a human tendency to be part of something exclusive.
  • Thus, investors should be careful while selecting an investment plan and should not do so just because ‘everyone’ is doing it!
  1. Learn From Your Flaws:
  • There is no better teacher than you! Investment can take you to ultimate heights of monetary abundance and can also reduce you to paper.
  • However, keeping track of your blunders and working on them would turn you into a player of the long run.