6 WAYS YOU SHOULD NEVER INVEST
Here’s some things you need to know to avoid the pitfalls many others face if you’ve ever
thought about investing.
1. Letting Emotions Run Wild
We’ve said before that the biggest killer of investment return is your emotions and it bears repeating.
1. Letting Emotions Run Wild
Fear and greed rule the market, and the market is irrational. Do not let your emotions overtake you.
1. Letting Emotions Run Wild
Focus on the bigger picture; your investment plan and goals. Rather than be ruled by your own emotions, use the irrational decisions of other investors to your advantage!
2. Investing in Something You Don’t Understand
One of the world’s most successful investors, Warren
Buffett, cautions against investing in businesses you
don’t understand. This means that you should not
be buying stock in companies if you don’t
understand their business models.
3. Falling in Love with a Company
Too often, when we see a company we’ve invested in do well, we love their products, what they’re doing, it’s easy to fall in love with it and forget WHY we bought their stock in the first place.
3. Falling in Love with a Company
You bought this stock to make money. If anything
changes, it’s time to objectively reassess your investment and
even consider selling the stock.
4. Unrealistic Expectations
Slow and steady usually comes out on top – be it at the gym, in school or in your career. Why, then, do we expect it to be different with investing?
4. Unrealistic Expectations
A slow, steady and disciplined approach will go a lot farther over the long term. This means you need to keep your expectations realistic in regard to the length, time and growth that each stock will encounter.
5. Attempting to Time the Market
Successfully timing the market is extremely difficult to do. Even institutional investors often fail to do it successfully.
5. Attempting to Time the Market
In fact, one of our speakers, Marcus De Maria says, “It's
not about timing the market, it’s about time in the market.” Don’t try to
play the market like you do in a casino, it’s asking for
trouble and inviting unnecessary risk.
6. Failing to Diversify
While professional investors may be able to succeed by investing in a few concentrated positions, it’s not recommended for most
people. Stick to the principal of diversification. Do not allocate more than 5 to
10% to any one investment.
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