Last Updated on 1st December 2021

Everybody is looking for a way to earn more money in this competitive world. Investing is something that many people consider, however, they go into it with the wrong mindset. Since the pandemic, there has been a brand new group of investors eager to get their foot onto the ladder and get to grips with acquiring extra finances (and extra happiness). As many of us have considered using trading platforms due to the accessibility of stocks and shares we can find ourselves falling flat at the first hurdle because of the most common mistakes. What are some of these? 

Having Unclear Investing Goals

It is pivotal to have clear goals as we venture into investing. Many people think that the goal of investing is simple: to make money. However, investing to make more money is not always the goal. Instead, you need to use money as a tool to accomplish your goals in life. Because you don’t necessarily have to earn millions, which is why you have to look at your life in combination with your life goals. 

Many people try to diversify, and this is where people fall flat because they are overstretching their capabilities. Many people go beyond a Roth IRA and then venture into a self-directed IRA, which is a completely different kettle of fish. However, you can find more info about self directed IRA rules at this link. You don’t have to chase high returns, because this may correlate with higher risk. Instead, you need to ask yourself a number of valuable questions. For example, how much money is enough for me? What will it take for me to be comfortable? Do I need to be “rich?”

These are all simple questions, but they provide you with insight into what you will want out of life. Investment should be about meeting your life goals, which means that it should be about earning more money. What would you spend money on? 

Watching the Markets Too Much

People think that they need to be checking the markets like a hawk. It is a good idea to keep an eye on what is happening in the economy, but beginner investors can find themselves being swept up by the roller coaster ride that investing creates. Stocks go up, they go down, and they will fluctuate. 

Because the markets are constantly moving, it can be difficult to follow them in real-time. You have to remember that investing is about the long haul, and if you are constantly checking your investments, this could mean selling them hastily or changing your investments, when in fact, you were better off leaving them be. It is best to avoid tracking the investments too frequently, and even though you can get instant feedback on your progress, it’s about getting into that mindset of turning your phone off, or not giving into temptation. 

Long-term investing is something that, believe it or not, should be boring. Make sure you check your investments but only do it on a quarterly basis. 

Following the Trends

There’s a lot of buzz over a certain stock (or cryptocurrency), and people end up chasing what they call a “hot stock,” but this is not advisable. Many people chase a stock because they have the fear of missing out. But you need to conduct due diligence before you start to invest your money. You can go for a more hands-off approach for example by passive investing through index funds. When you start to purchase more diversified mutual and index funds, there is less risk, and it will naturally give you a lesson in not following the trends. 

Likewise, because people are avidly checking their social media as they feel they need to get onto a hot stock right away. But you shouldn’t take any investment advice unless it’s from your financial advisor. One of the biggest trends out there is following YouTubers who are recommending that we all jump on a certain stock or company. But while you may feel the pressure to do this, you would be better off putting that into a retirement account. 

Ultimately, you know your financial situation the best, so always think twice before you start investing in a certain company. Always do your research and make sure you check the credentials of the person giving financial advice on social media. 

Investing Money That You Will Need

People want to dive in because they want to make as much money as humanly possible. But one of the biggest problems during this is that you are potentially investing in things that will not give you a good return so you are placing all your faith in something turning out positively. 

But it’s more important for you to understand how you spend your money. You shouldn’t have to rely on your investments if you run into a cash emergency. The stock market is volatile, and if you’rere saving money for something like a down payment on a new home, is the fact that you are investing in something else going to cause you hardship? 

If you feel you are ready to invest, the best litmus test is to understand if you have a decent amount of cash saved for your short-term goals. If you need money that you will need to spend in the next 3 years, it’s not a good idea to plough this into stocks. 

Not Giving Investments Time to Grow

You need to hold onto investments for as long as possible to maximize your returns. As we’ve already said, investing should be boring. When you find something, you need to hold on for as long as possible, and this is why quick growth comes with a lot more risk. 

When you leave an investment quickly because it didn’t accrue the money that you wanted, you are potentially selling yourself short. 

Many people think they need to double the money quickly and in a matter of weeks. This is why you need to have proper savings in place. 

Delaying Investing

Many people are naturally baffled by the process of investing. People think that it’s something they cannot get into because of complex terms or the fact that the stock market is so volatile that it is really not worth the effort. Choosing to not invest at all is a massive mistake. If you decide to keep all your money in a bank account, you are potentially missing out. 

When you leave your money in your bank account, it is losing its purchasing power. With rising inflation, you can see a significant return. But many people choose to leave the money in their account because they know where it is. But the reality is that there are amazing compound effects that can happen if you invest in the long-term. 

People think that investing is about playing the stocks and having immediate riches, which then means that they think they need to know the ins and outs of what investing is. But people can get started with investing in simple ways. For example, you could put money in your retirement account that is sponsored by your employer, and if your company matches the contributions up to a certain percentage, you are investing in such a simple way that you are making a good return. 

What Does it Take to Start Investing? 

Investing shouldn’t be complex, but it’s important to follow these rules when you start out:

  • Conduct your due diligence. You need to know the subject matter inside out. Investing is such a wide-ranging topic that you may feel that you’ve got to learn every single thing but it’s far better to focus your efforts on one part and really conduct your research. Many people consider real estate as a solid investment, and if this is something that appeals to you, you could naturally become a landlord of a property, and start your own property flipping business. Other approaches could be day trading on the stock market, where you are literally investing in something for a day, which gives you the opportunity to dip your feet in. 
  • Ensuring you have the right mindset. You may think that investing is a really exciting prospect and it is when you first start to see returns but ensuring that you are investing in the right things is about watching the results slowly grow. Every investment comes with risk, which means you need to have the right attitude towards your investments. Getting into the right mindset is so important but many people greatly overlook this component. 
  • Having enough money to invest. Saving enough money that you can invest a certain percentage is important. Even more importantly, you’ve got to be willing to lose it if it all goes wrong. 

There are so many mistakes that people make when it comes to investing but if you learn the discipline you can go a long way. It’s definitely something that you need to try, but conducting a thorough self-assessment of yourself and your finances is pivotal.

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