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A lot can go wrong when you’re deciding how to invest your money.
A range of investment pitfalls can destroy your wealth.
Today, I’ll discuss three of the most common mistakes investors make – and I’ll explain how to minimize the damage they can cause to your portfolio…
|1. Regretting your buys|
Once you’ve entered a buy order, it is common to be flooded with a range of emotions – excitement, pleasure, anxiety… or deep regret.
“Did I just buy the right stock?” “Am I the sucker who just bought at the top of a market bubble?” “What if this company is a total lemon?” All this worrying – or “buyer’s remorse” – can be damaging and could lead to an impulsive, emotional decision to prematurely sell a stock.
Just as you would do when you buy anything from a refrigerator to a new car, do your research. Understand what you’re buying and create an exit strategy (like astop loss).
|2. Doing what everyone else is doing|
People tend to follow the herd. It’s human nature to think that the majority is doing the right thing. This crowd mentality is one of the reasons market bubbles form. When everyone is bullish on a stock, prices skyrocket. Of course, it works the other way, too.
But just like Mom and Dad always said, just because everyone else is doing it doesn’t mean it’s the right thing to do. Do research and form your own opinions.
|3. Assuming that someone else cares about your money as much as you do|
One of the most expensive phrases in the English language is, “My financial adviser is taking care of my money.”
Your adviser isn’t your friend. You’re just a bag full of money, and he’s trying to get as much out of that bag as possible. That doesn’t mean you should ignore your adviser. He isn’t out to get you. But he does want to generate fees for his company.
At the end of the day, you’re the only person who has your best interest in mind. Ask questions. Read the fine print. Ask your broker or adviser to lower his fees. Make sure you understand what you’re buying.
Of course, there’s no way to guarantee that every investment decision you make will turn out as you had planned. But taking these steps will help you grow your portfolio over the long run.