The stock market has caused some alarm as of late. Will investors wake up panicked or encouraged tomorrow? It’s hard to say.
But one thing is clear: basing your peace of mind on market signals is no way to live.
That said, I’d love to see my clients be wise about how they are approaching their savings and investment strategies. For some, it’s a simple admonition: start investing.
And for others, it’s avoiding certain common mistakes. Tolstoy once wrote: “Everyone thinks of changing the world, but no one thinks of changing himself.”
Perhaps it’s time that we take a look in the mirror — together — and make some changes that would help you better build for the future.
So today let’s look at four mistakes you can avoid when it comes to stock market pitfalls.
Emelia Mensa CPA’s Four Common Investment Mistakes
“Beware the investment activity that produces applause; the great moves are usually greeted by yawns.” -Warren Buffett
Before I get to these mistakes, I must hasten to add: every person’s situation is different. And without looking at the specifics of your financial picture, it’s impossible to make the right recommendation. And some recommendations require specific licenses in order to make them. So, consider this a disclaimer: nothing in this article is intended to be a specific piece of investment advice for your situation.
That said, here are some common mistakes I’ve seen when people begin financial investments…
1. Eggs in One Basket
You know the expression, but have you divulged in its (tempting) strategy? To research one company and invest in them alone is a mistake. Plain and simple. Especially if you think “but they’re doing great lately” is a good enough reason to invest.
This is where diversification (and sectors and asset classes) comes into play, and it’s vital to your wealth. The kind of investing you should pursue is another topic for another day.
But for now, please avoid the “all in on one approach”. Fretting over which individual stock to buy will only cause stress and limit your chance of investing success.
2. Playing the Compare Game
It’s been said to “never count another man’s money”. And the same goes with investing.
Yes, you can have mentors in this area, but this is ultimately YOUR money and YOUR investment. Stocks are so nuanced (especially when you get into international investments) that comparing your investments to other “seemingly successful” moves is not wise for your own strategy or psyche.
3. You’re Too Patient
Waiting for the right time to invest isn’t a problem at the beginning … but it does become a problem the longer you wait.
Although the market is volatile, many fret over when to buy or sell. As a result, many sell off their investments when the market is trending downward. But many also end up regretting that decision when the market inevitably rises again.
The key: it’s not the time you choose to enter the market — it’s the amount of time you’re willing to stay in.
Don’t get 20 years down the line only to wonder, “What if I had started investing 20 years ago?” It’s one of the reasons investing in something like a 401(k) is so important now. It will only grow with time — which means patience on your part!
If you’ve never explored various investment strategies, perhaps now is the time to consult somebody who can come alongside you, with wisdom. I would hate for you to just not invest because you don’t understand some basic principles of investing. There are many people who would love to help you.
I am definitely one of those people in your corner. Let me know if I can help in any way.
Emelia Mensa EA, CPA
Emelia Mensa CPA