Low commission structures have made it increasingly easy for young consumers to start investing with little money, and although smart, many seem to get it wrong.
With the pandemic bringing a wave of as much as 15% new investors to the U.S. stock market, according to a recent Schwabb study, it may be the perfect time to learn how to invest from industry experts.
SUMMARY
1. Unclear Investment Goals
2. Failing to diversify a Portfolio
3. Paying high fees and commissions
4. Trying to maximize returns too fast
5. Attempting to ‘time’ the market
6. Responding to media insights
7. Falling in love with a company
8. Working with the wrong broker
9. Avoiding investment altogether
1. Unclear Investment Goals
Too many investors tend to focus on the latest investment fads or chase high short-term investment returns rather than having a long-term investment strategy in mind. Investors should configure and deploy the best investment tools to align with their investment goals and plan appropriately.
2. Failing to diversify a Portfolio
Investors should be cautious about investing in companies' business models that they do not understand. The best way to avoid this is to diversify and create a portfolio that can provide the appropriate levels of risk and returns in various market scenarios such as ETFs (exchange-traded funds) or mutual funds.
3. Paying high fees and commissions
High-cost funds or paying too much in advisory fees is another common mistake with inexperienced investors. The slightest increase can have a significant impact on long-term investments and is therefore paramount that investors agree to fee structures that make sense.
4. Trying to maximize returns too fast
The basic principle of investing is to buy low and sell high, yet so many investors do the opposite in an attempt to maximize short-term returns. Maintaining realistic goals and having a slow and steady approach to portfolio growth will yield greater investment returns in the long run.
5. Attempting to 'time' the market
Timing the market, although possible, is very difficult and can kill returns. Investors will fare much better by consistently contributing to their investments rather than trying to trade in and out in an attempt to time the market. Ideally, investors should hold onto assets as long as possible.
6. Responding to media insights
Taking advice from others and attempting to keep up with 24-hour media covering financial ideas as a sole source of investment analysis, is difficult and foolish. Always ensure that you do your own research and fact-check the persons providing the information.
7. Falling in love with a company
Many investors fall in love with a company and forget why they bought the stock in the first place, bringing along many emotional investing issues that can interfere with decision-making. Remember to consider other asset classes and opportunities when your chosen stock is doing well, or if any of the fundamentals that prompted you to buy the stock changes, consider selling it.
8. Working with the wrong broker
Much like your banker, your broker should be your partner in obtaining your investment objectives with the ability to solve problems. Take time to choose your ideal broker and ensure that you share similar investment philosophies and needs.
9. Avoiding investment altogether
Individuals often overlook investment altogether due to a lack of knowledge or experience. However, the compounding effect of stock investments far outweighs the purchasing power of cash in a bank account that erodes over time.
CONCLUSION
Though mistakes are part of any investment journey, knowing what they are in advance will make it easier for investors to succeed long-term.
When making risky moves, ensure that money has been put aside if losses are imminent. Furthermore, approaching a reputable fiduciary investment advisor is advised to determine the best approach for your investment goals.
MEXEM understands that broker’s commission may be the difference between success and failure with investments. That is why the company remains committed to a low commission structure and leading the way for lower fees in Global Markets.
To begin your investment journey visit MEXEM today.
