The world of investments is a rewarding, but dangerous world. There are many pitfalls to fall into. It’s paramount that investors, especially those new to the game, identify these problems. Here are some of the most common mistakes investors make.
Being too conservative: Being too conservative is the same as being too safe. When investors leave money in a value fund that’s secure, it’s safe. No money will be lost. However, the money won’t be able to match the increasing rate of inflation. For example, the fund earns 2 percent and inflation is at 2.5 percent, then the loss is .5 percent annually. Being too conservative also has serious negative impacts on retirement funds.
Investing too much in one area: This goes back to the old saying that it is never a good idea to put all the eggs in a single basket. When an investor has a lot of cash to invest, he or she should put it in many different stocks. Some investing experts say that an appropriate maximum amount is around 10 to 15 percent of the entire cash fund.
Trying to time the market: Some investors think they can predict the future of markets by studying patterns. This is a mistake because even if certain trends may be true, history shows that the duration in which these trends occur is unpredictable. Sometimes, downturns take years, sometimes months. Being hesitant leads to lost opportunities.