If you are new to the investing game, congratulations! It’s a great way to plan for your future and you will, hopefully, get a lot out of it. However, you have to play your cards right. There are plenty of pitfalls that are waiting to catch first-time investors out. And, once you get sucked in, it can have devastating consequences. Today, we’re going to look at several of these issues. Be wary of them – they could be the ruining of you.
Using the wrong money
The first issue is an obvious one – but many fall for it. When you start investing, there is one simple rule to follow: you should only ever invest money that you can afford to lose. That means you should never use money that you use for your day-to-day living, or, indeed, your direct savings accounts. This will give you an important buffer that you can use for rainy days and emergencies. And, most importantly, it means if you experience a loss, it won’t impact your life as much.
Not spreading your wealth
As a first-time investor there might be a temptation to pile all your money into a single investment. Don’t. All successful investors have one thing in common: they all have a mixed portfolio. That means, in essence, that they spread their wealth. In fact, it’s more about spreading their risk. Let’s say that you have all your money in a particular stock – or a particular industry. If something should happen to that industry – which occurs more than you might think – you could lose all your money overnight. Always balance your portfolio with a broad range of investments, right from the very beginning.
Biting off more than you can chew
If you are tempted to put your money into the latest strategies you hear about on the news, don’t bother. Investing in finance of any kind is a complicated business that can take years of learning to understand. Take Forex trading, for example. It’s not just a case of understanding the difference between currencies. You also have to understand Forex trading strategies, and also have a deep knowledge of what is going on in the world. Civil unrest, natural disaster, or even a general election can all cause currencies to crash in a matter of minutes. If you are inexperienced, it’s not something you should be doing – until you learn more.
Playing the short game
You should start off by investing in long-term prospects – it is the safest route for you to begin with. Property, gold, successful companies – they all come with risk attached, but if you play the long game that risk is far less. Take shares in Google, for example. Even ten years ago you could buy a share in the search engine company for a dollar – and many would tell you that was expensive. Perhaps you listened to them and got rid of them as possible – for a dollar twenty, say. But what of you had held and played the long game? Your life would be very different today.
As you can see, there is a lot to think about when it comes to investment. But, follow these simple ideas when you are starting out and you should protect yourself from any risk. Good luck!