3 Simple Mistakes to Avoid for New Investors
If you’re just getting started with investing, you may be overwhelmed by the sheer volume of information out there. The last thing you want to do is make a blunder right out of the gate!
This post will help prevent those common mistakes you might make. We’ve outlined three of the most common “newbie” mistakes you should avoid as a new investor. We hope they help you!
1. Chasing the Heat (and Not Watching the Trends)
When you’re first starting out, you may be drawn to what’s currently “hot” in the market. And there’s good reason to make this mistake. If everyone is talking about a company, and all the news is talking about how it’s suddenly performing so well, why wouldn’t you invest?
The problem with this line of reasoning is that current performance does not necessarily indicate longer-term performance. There is no guarantee that a stock that’s doing great this month will keep that type of heat so high. And all the buzz attracts inexperienced investors the same way light attracts bugs.
Rather than focusing on pop trends and what’s hot, keep your focus on better-performing investment avenues over time. Assessing longer-term trends will give you more insight into what you can expect. While there is no guarantee for anything, you’ll have some more reliable insight going this route.
2. Letting FOMO Control Your Decisions
You’ve probably heard the term FOMO before with the latest iPhone or other tech gadget. Unfortunately, this same line of reasoning can negatively impact your investment strategy as well.
If you’re seeing big investing trends toward one area, that shouldn’t suggest that this area will continue to post solid returns. And you shouldn’t allow the emotional response of fear or envy drive your logical investment choices!
These types of trends are unpredictable. If you’re more interested in the thrill of the gamble, this could be attractive to you. But if you’re seeking out longer-term objectives, don’t jump the gun just because you’re afraid you’re missing out.
3. Panic Selling in the Dip
Consider this example: you work with a financial advisor who takes a modest sum of $5,000 into several areas of well-researched stocks and bonds. Then, much like what’s going on right now, everything takes a turn into a bear market.
As you see your fresh, new investment drop, you may start feeling panic. After all, you’re just starting out and you’re supposed to make money through investing, right?
The best method to weather these storms is to try your best not to panic. Much like FOMO, decision-making that comes impulsively is likely against your best interests. If you panic and sell because you’re just starting out and dipping, you may work against your long-term investment strategy.
The best way out of this type of thinking is to partner with someone who can walk you through the storm. An experienced financial advisor understands market trends and how to connect long and short-term investments to your overall goals.
Rather than panicking, working with a professional can help to put your mind at ease and make much more logically grounded decisions about your investments.