The first investment mistake that most novice investors make is to speculate too much. When you bet your money on an investment instrument, say stocks in the capital market or peer to peer lending like when you bet on who will win between Real Madrid or Barcelona in an El Clasico match, that means you are not investing.
Never gamble or speculate when investing. Invest based on knowledge and understanding of all relevant information that you can learn. Also, the decisions you make when investing must be ready to be accounted for according to the level of risk and committed to it for a while.
Not Making Research The Key of Investment
Many people are at a loss because they don’t consider the core things and make it a research. Generally, research helps investors to understand the investment so they make a mistake. Not doing research before investing is like not preparing weapons when you go to battle. If you intend to invest in the stock market, do research on the company data, how the business plans, to the market level.
If you invest in peer to peer lending, do research on loans through a factsheet that can be downloaded. In the factsheet there is data about the borrower starting from the loan objective, character, to financial performance. Also find out information about Borrowers through their online business performance, and other data that you can get. That way, you can understand how much risk you have to take to get the benefits. Also, you can be more careful in investing your funds so you don’t make investment mistakes.
Not Considering the Timeframe is Big Investment Mistake
This is the next investment mistake that you need to avoid. It’s best to consider the timeframe before investing. Various types of investments take several periods. So that the principal of your investment funds is fully back along with the interest. You are required to commit according to the timeframe. If you think you need these investment funds in the near future, you should not invest all of them.
In addition, if you have a target within a certain period of time, for example using investment profits to send your children to school in the future. Then choosing an investment with the right timeframe can help realize your long-term target.
Not Diversifying Investment Funds
If an investor places all of his investment funds in one place. It is certain that the investor will experience tremendous losses if his investment is losing money. Therefore, you must avoid this investment mistake. On the other hand, diversification is very important regardless of the investment instrument you are aiming for. In addition to dividing the level of risk that must be borne by investment funds. Diversification also expands opportunities for profit.
In peer to peer lending, for example, if you allocate all of your investment funds to one borrower and if that borrower fails to pay. Then of course the investment funds will lose. So, you should invest your investments in various borrowers with varying levels of risk, loan objectives, and tenors.
Not Balancing Profit with Risk is Also Investment Mistake
The final investment mistake on this list is that most novice investors focus on profit without analyzing the risks involved. In fact, every expected profit must be accompanied by a level of risk. If a type of investment offers an attractive return, consider the risks behind it. Also, calculate how much nominal money you are ready to bear if the investment is losing money. And keep in mind, never invest a nominal amount of money that you yourself are not ready to lose if you lose. Always remember that there is no benefit if it is not accompanied by a risk that must be borne. Therefore, balance the benefits with risks every time you invest.
So, those are 5 investment mistakes that investors often make.
Next, hopefully you can avoid the same mistakes so that you as an investor can be more focused on getting maximum investment benefits. Of course you also want to experience it right?