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Investing can be the key to gaining financial freedom, but it’s not without risks. For many people, making money is never a walk in the park. A wrong investment can make the pain of losing it hurt to the marrow. Expert investors say avoiding these mistakes can help you make smarter decisions and increase your chances of achieving your financial goals.
1. Lacking Financial Education
Investing without adequate education is considered gambling by most financial advisors. Financial education should precede investing because how else are you expected to make the right chess move if you don’t understand the rules? Learning precedes earning, and investors who put the horse before the cart hardly ever end in profit.
2. Not Beginning With the End in Mind
Of course, every investor looks toward profit when buying into a business or splashing cash on an idea, but having the end in mind is vital to creating the steps that lead to the eventual goal. Studies suggest that people with written-out investment plans have higher chances of achieving their financial objectives than peers who let markets play out.
3. Investing More Than You Can Afford To Lose
Many investors make the mistake of investing capital that may alter their financial stability if lost. You must understand that loss is part of business, and no investment niche is immune to it.
4. Singularising Your Portfolio
Putting your eggs in one basket, no matter how secure and promising, can lead to sudden capital loss if something goes wrong. Consider investing in independent markets like real estate, gold, bonds, and commodities to be on the safe side.
5. Investing Based on Past Results
The financial world is highly volatile, and nothing is guaranteed in the short or long term, irrespective of historical returns. You should manage your portfolio more carefully, regardless of what past data suggests.
6. Thinking Short
It’s exciting to want to see returns on your investment within weeks or months, but most experienced investors say that in itself could increase your risk level and lead to capital loss. Profitable investors think and plan long-term and are hardly affected by sudden downward trends that characterize short-term investments.
7. Fear of Missing Out (FOMO)
The fear of missing out is real, and many amateur investors, in the bid to cash out on a hyped business model, put money in wrong trades that lack sustainability. When the hype dies down, investors with late entries mostly end up at a loss.
8. Not Setting Realistic Expectations
Many first-time investors are usually over-excited about making money and could be gunning for unrealistic profit margins that disappoint them at the close of the day. According to many financial experts, the first investment objective should be to break even before accruing profit. It also helps an investor’s mental state to aim lower than forecast.
9. Chasing Trends
From crypto to NFTs, trends culminating in sudden profit come and go and could be attractive while at it. But so is the risk of losing your investments overnight, as investments based on trends can be highly volatile.
10. Failing to Build Emergency Funds
Emergencies are part of human living conditions, and it is not unusual to have unplanned needs for money when you least expect it. Failing to build your emergency wallet could mean premature termination of your investment to cater for impromptu bills, altering the maturation of your investment goals.
11. Undermining Risk Management
Investing is mostly about balancing risk with reward, and the better a risk manager you are, the more rewards you’ll likely amass. If the prize is what the trouble is, go for it. But always count your cost before you set your investment ship sailing.
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