Six Mistakes When Investing

By | December 17, 2014

Success is not just about what you do, but also can avoid the big mistake. This also applies to investment.

In the essay Charles Ellis’s The Loser’s Game in 1975 comparing investments with amateur tennis. Using static work and theories developed by scientists Simon Ramo, Ellis suggests that rare amateur tennis player won the game with a brilliant shot.

Even 80% of the time, the winner of the match is amateur players make fewer mistakes. So if you are a beginner who wants to increase investment, you should start with the basics.

mutual fund

Here are six of the biggest mistakes investors when investing. If you avoid it, may be an advantage to be gained:

1. Failure to store

If you do not save, you can not invest. Unfortunately, according to the Consumer Federation of America survey, nearly one-third of Americans do not save anything. People who keep not save a lot.

According to central bank data showed the United States (US), The Federal Reserve that the personal savings rate is about 4% -5% for 2013. It’s saving money difficult but important.

2. Do not invest in stocks

Over time, the stock has been a gold mine for investors. However, most Americans do not. According to a survey conducted by Gallup, only 24% of Americans think that stocks and mutual funds are the best long-term investment.

Then the others judge that the best investments are the property reaches 30%, and approximately 24% of people consider gold the best investment.

There is no doubt that the real estate investment can get a good result, but it is derived from rental income instead of appreciation. According to Yale economist Robert Shiller, if home prices after inflation is 0.2% per year. Too many Americans consider their home to be the biggest investment.

According to historical data, buy a bigger house or a house that did not generate rental income does not provide the maximum benefit after inflation. While gold, according to Harvard economist Greg Mankiw, gold is not much better in terms of return.

3. Pay the high costs

Over the long term, high cost has a very damaging effect on investment returns and your wealth. The high costs, especially regarding financial advisor.

4. Frequent stock trading

Trading can also be hazardous to your wealth. Brad Barber and Terrance Odean has been investigating the trading activity for 78 thousand accounts for six years.

During the years 1991-1996, the average annual gain of 17.9% market. They are often trading stocks averaged return of approximately 11.4%. While they are a little trading trading results posted returns of 18.5% per year.

5. Not diversification

When investing do not put all your investments in one basket. It is appropriate common sense. So it makes sense when you have other assets out of stock.

6. Trying to get rich quick

Want to get rich quick is human nature. This leads to large errors in invest . Moreover, if investors buy stocks do not have good fundamentals.

Now it’s six big mistake in investment. If you avoid these six mistakes, you will save in stock investing, holding a long-term investment, and portfolio diversification.