Investing isn’t simple, because traps and pitfalls can instantly destroy your portfolio. However, you shouldn’t let your fear of losing money prevents you from starting an investment project. You need to grow your portfolio and make sure that you can make real progress. There are many investment instruments that you can choose, such as exchange-traded funds, mutual funds, bonds, stocks and others. Regardless of your investment methods, there are a few reasons why your investment projects tend to fail:
1. You don’t have a goal:
You should make sure that you have a goal in mind and determine whether you can get good results. You shouldn’t be swayed by emotion and you need to set only realistic goals.. With good investment, it is possible for you to afford expensive items, like cars, house and college tuition for your children. However, it is important that you have a realistic expectation, because prices of investment vehicles may vary significantly. Getting 6 or 7 percent of annual profit can be generally considered as realistic for more stable investment options. With more aggressive investment options, it is possible to get between 20 to 30 percent of annual profit, but the risk is proportionally higher.
2. You don’t start early:
Investors will do better if they start early. It is important for you to avoid impulse purchases and investing as soon as possible. People who start investing in the mid 20s will get more profit than those who start at mid 50s. Even if you can’t invest large amount of money during your younger age, it is important for you to start immediately.
3. You don’t diversify:
Diversification is essential in any investment plan and it can minimize investment risks. It is risky to concentrate all of your assets in a single of investment vehicle due to various reasons. Other than investing in different platforms, you should also diversify across different geographical areas and industry sectors. Investing in bonds may appear boring, especially when compared to highly fluctuating stocks. Stocks can promise you higher returns, compared to many other investment vehicles. But, if you can’t stomach significant losses, then you should choose safer platforms.
4. You ignore fees:
You should know that fees will slowly eat into your investment profit. The total annual commissions and fees can be quite excessive. If your annual profit is only 6 percent, then you will get negligible results, because the amount of annual commissions and management fees may reach 4 percent. That’s more than half of your net profit and the actual monetary value of your portfolio steadily decline due to inflation. You should calculate whether fees and commissions are eroding your investment portfolio over time.
5. You don’t hire a professional:
If you are new to investment, then your condition can be very risky. If you can’t afford to hire a financial consultant, you may have a friend who can provide advices. These people could be fellow investors who have gained investment profit for years from various investment platforms. They could show you common pitfalls that cause investors to fail and lose money.
6. You don’t use the right timing:
Market timing can be more important than the amount of time you spend in the market. A single transaction at the right time can result in more profit than multiple transactions that yield little profit. If you examine historical records of the market, it is apparent that most of the gains in one year are made in a few dozens of ebullient days. Successful investors are known for their good interpretation of the market and they can sense, whether it is a good time to invest.
7. You are easily lured by fads:
We often find stocks with the hottest growth and they can become big fads. However, you should know that the bubble will eventually burst and it destroys your investing efforts.
8. You don’t learn from successful investors:
There are many great investors in the local or national scale. You should know how investment wizards managed to gain success in the market. They seem to know that bull market won’t last forever and bear market will also end. New investors often act like dogs that are chasing their tail all the time with no results. They easily get caught up in the panic of the bearish market or the excitements of the bullish market. Some angel investors are eager to help budding, young investors, by teaching them about how to gain success. You should know how billionaire investors became successful. You will know that they always stay calm and know where to invest.
9. You go all in:
Some investors are lucky enough, because they get a huge windfall of cash after a major investment project pays off. When the market is bullish, it’s easy to lose our head and we want to allocate a large portion of the capital. However, this is a risky move. It may be a success and you get huge profit, but if the market becomes bearish all of a sudden, you will lose a lot of money.