Most problems with investing can be completely avoided if you do your due diligence, don’t expect something for nothing and avoid being greedy. It can be hard, though, when you see those dollar signs in your eyes.
To avoid common problems, be sure to consider the following:
Educate Yourself before You Spend Your Money
There is no reason why you need to invest in anything that you don’t understand or “get” unless you are investing in a mutual fund that has a professional manager. Buying stocks on your own is possible and something you may want do, but it’s not like playing a slot machine where you put your coins in any old machine and hope for a payout. You can make very good investments that pay off most of the time if you educate yourself. Thus, you avoid the problem of losing your money and trying to “play the stock market” like a slot machine.
Invest with Logic Not Love
Money is often a very emotional part of our lives. Suze Orman does a great job explaining the emotional aspects of money, but she’s clear that when you invest it needs to be based on the financial benefits of doing so and not just because you are in love with the business. Love has nothing to do with it and can get you into trouble. You can start with love, and use that as your basis to investigate, but don’t allow love to cloud your judgement. Money is not something to play with.
Understand That Investing Is a Long-Term Plan
With the exception of day traders, for most people investing is a long-term plan. Do not think you can make money day trading until you’ve received a Master’s level of education. You can teach yourself – there are enough books and enough information online to get that education – but realize that investing is a long-term plan for your future. The market will rise and fall, and it’ll be like a rollercoaster, but over time you’ll be happy you invested wisely and let things ride.
Know What Fees, Charges and Commissions You’re Paying
This goes back to the idea that investing is a long-term plan, because some people run into huge problems due to not understanding the cost of going in and out of a market – as well as switching stocks, selling and buying. It’s better to study your options and make the choice based on being educated about a stock, then once you buy stick to it for the long haul. Even with some ebb in the flow due to the charges, you’ll come out ahead.
Don’t Try to Time the Market
Very well-trained financial planners and investors often make bad decisions when they try to time the market and guess when the stocks have reached a peak and sell and buy something else low. Unless you are 100 percent sure, don’t try to do this. Instead, ride the wave and stick to your choices long term. See a theme yet?
Finally, do not allow your emotions to rule you when it comes to investing. There is risk. You will lose money. But, overall you will gain money. It can be very hard to let go of emotions when you see one of your investments go through the basement. However, you have to only invest money you can lose, and keep doing it for the long-term benefits.