There are a lot of things that can affect the progress of investments. New investors are by nature nervous about building their investment portfolio and are cautious. They tend to try and follow the markets closely and decipher the volume of information that is available to them. One of the problems that this can cause is having limited knowledge and not really understanding what they are reading. This can lead to some investment mistakes. However, many successful investors today made the same mistakes but they learned from these.
Common Mistakes
Knowing what the common mistakes are that a new investor makes can help to avoid them. Keeping in mind that each investor has their own intentions. Decisions have to be made accordingly.
High Fees
To the novice investor they often don’t do fee comparisons and end up investing in mutual funds with high fees.
Tunnel Vision
Another tendency is to focus on just a few stocks that they feel are safe and not wanting to even look at other opportunities.
Straying In The Wrong Direction
Some new investors get so caught up in the excitement of investment that they will stray away from safer investments like blue-chip stocks and go for those with higher yields. They do this without having enough knowledge or investment experience.
Diversity
There are risks that come with any type of investments. New investors tend to stay within their comfort zone. If last years stocks are performing well they assume that will continue to do so in the current year. Investors have to look at what is happening currently in the market and make decisions based on this.
Fast vs Slow
Another concept that has to be considered is whether to invest all of the investment dollars at once or spread this out over a period of time. This is dollar cost average. Investors are of different minds concerning this. There has been at least one study that shows lump sum investments perform better over dollar cost averaging.
Fee Ignorance
Novice investors often assume that all fees are basically going to be the same. This is not the case and investors need to have a clear understanding of what they are paying for when it comes to the fees they are paying. The fees can actually be used as an indicator as to what is expected by way of return on investment.
Smart Investment
New investors have to become smart about their investments which is different than being cautious. Dividing the money that is available is the key to smart investments. The reasons for investment are to garner a return on the money being invested. Plans for that return are important. Some are doing so for their retirement while others are doing to increase funds to apply against debt or for short term saving. The purpose has to be clearly defined so goals and objectives can be worked towards with the investment portfolio.
Investments And Your Taxes
Another mistake to avoid when it comes to investments is ignoring the impact they can have on their taxes. If you are an investor you want to be sure that your taxes are done correctly. Relying on good accounting services can make sure of this. Give me a call at 416-398-1700 to see how I can help.
