For those who are new to the investment world, it can be a little frightening and at the very least overwhelming. Those that are new to this will often start doing a great deal of research using the internet as their primary source. There is no doubt that this can be an excellent source of information but only if it is used wisely.
Inaccurate Information
One of the dangers when sourcing out information is to be able to validate whether it is accurate or not. This can be a bit of a challenge for new investors that are just learning the ropes. They have no metrics to use to be able to determine if what they are studying is accurate. One of the ways to avoid this is to first do some research on the site that is providing the information. This can be done by checking out how long the site has been in existence, what types of links are they backlinking to, and if there are any reviews regarding the authors of the site. Quite often some of these sites will encourage fads in investing that don’t always bring the desired results. It is better to avoid these and for newcomers to investing stick to the basics that reliable professionals recommend.
Avoiding the Panic
A fad that crops up every once in a while is to encourage investors to sell when the stock market is becoming volatile. Those who practice this will usually try to sell off their stock quickly. Instead of doing further research. Then in a day or two when the market settles they are more comfortable at re-investing. This can be like riding a roller coaster and can get to the point where no investment is bringing any returns. There can be a lot of reasons why the stock market can become volatile. It is at least worth checking out what the possible causes may be before panicking. It could be something as simple as a correction taking place.
The Chasing Heat Fad
This is where it becomes fashionable to only invest in a market that is showing some significant and positive activity. The risk here is that not enough research is being done to determine what is driving the market. It could be as a result of media hype or a friend is really fired up about a stock and can’t stop talking about it. What can happen here is too much focus is put on this one particular investment and the rest of the happenings on the market are being ignored.
Portfolio Absorption
Another fad that is common is to encourage new investors to be laser-focused on their portfolio. Without providing additional information as to the benefits and risks of diversifying. New investors that fall into this fad could be missing out on some important investments that allow them to build a diversified portfolio.
Avoiding the Tax Fads
On another subject where fads can have some consequences can be in relation to your tax filing. We were through a time frame where everything was “do it yourself”. This includes individuals doing their own tax returns. This is okay when the tax filings are straight forward and simple. But when they are complex or there are investment issues that may affect your taxes you are far better off to rely on a tax professional. If this is a category you may be in when it comes to your taxes I would be happy to complete your tax return and tax filing for you.
