7 Investment Mistakes to Avoid

Investment mistakes often happen when decisions are influenced by emotion and when basic principles of investing are misunderstood. Confusion also exists about how investments react to economic and political influences. In saying that, losing money on your investments may not be the result of a mistake, and not all mistakes will result in a financial loss.

Help improve your investment performance by avoiding these seven common errors:

1. Investing without the end goal in mind. Keep your goals in mind when considering your investment options so that you can move in the right direction. Your investment should include time frame and your personal tolerance to risk. Planning for your goals should mean that you do not need to make frequent adjustments to your portfolio.

2. Not allowing for the emotions that market cycles will cause. Being human we are all affected by optimism and pessimism which is what affects market cycles – the ups and downs of the market. . Overdoing your involvement in a current trend and then quickly abandoning it creates a buy high/sell low cycle of your own. Remember why you invested in the first place. Has this goal changed? Invest for the medium and long term and forget about cycles. “Buy in gloom and sell in boom” or like Warren Buffett, buy in gloom and hold.

3. Not being diversified. Allocate your funds to different asset classes such as property, bonds and shares but within those asset classes make sure you are diversified too and not relying on one asset to perform. Spread the risk.

4. Becoming bored with your plan and changing direction too frequently. Many investors tend to look at their investments with a short term view even though they have invested for medium and long term. Remember that there is no index that compares with your own personal portfolio.

5. Investing in the latest fad or speculative investment. This can result in a hodgepodge of investments and mean that you are investing because it’s the latest “sure” thing and the easy way to make a quick dollar. History is littered with examples such as Tulip Mania (1630), The Mississippi Scheme (1719), and The Tech Wreck (2000).

6. Having an unrealistic time horizon and comparing “apples with oranges”. Comparing your investments with dissimilar products will only cause you to take a detour from your original portfolio goals.

7. Taking too much notice of the media. It is the job of the media to report the sensational and the negative, after all it sells more papers.

Investing is a personal venture taking into account yours and your family goals and objectives and these are what should influence your investment portfolio.