As a new investor there are definitely a number of common pitfalls that you need to avoid. The reason is simple; avoiding them will save you money. Read below to find out what they are and what you can do to avoid them. Enjoy.
First and foremost, doing nothing will net you nothing. What that means is that, while there is no guarantee that the market is going to go up any time after you make your first investments, doing nothing at all will net you nothing as well. It’s better to get started and weather any storms that come along then do nothing.
Similar to doing nothing is starting late, as you should already know that the earlier you start the better off you will be. Now, if you’ve already made it through your 20s and still haven’t started, this should be changed from “starting late” to “not starting right away, now, like today”.
One common pitfall is investing in the short term only. Simply put, the only time you should invest money for short-term time period is if you’re going to need money shortly. Any money that you invest in the stock market should be money that you won’t need for five years or longer.
If you don’t take advantage of a 401(k) retirement plan with your employer, and even worse you don’t take advantage of their matching plan, you are making the common mistake of turning down free money. Simply put, any employer matched savings program that you can take advantage of, but also has tax advantages, should be maxed out whenever possible.
Another common pitfall that a lot of people make is to invest before they pay down any credit card debt that they might have. The fact is, most credit cards have incredibly high annual interest rates that will negate any sort of return that he might get on your investment. You’d be much better off paying off that debt and, once it’s gone, using whatever money you have left over to start investing.
We talked about people who are scared to start investing or put it off, but one mistake that many make is to simply go “all in” and put their money into something that is incredibly risky. Unless you have a magical source of more money and losing everything won’t hurt, this is not recommended.
One very big pitfall that many fall into is looking at their collectibles as a good investment. Look at it this way; if antique G.I. Joe action figures or Beanie Babies were being used to fund people’s retirements, there probably wouldn’t even be a need for a stock market. Unless you have literally millions of dollars in collectibles, and even then, looking at them as a way to fund your retirement is not in your best interest.
Finally there’s the mistake people make of trading in and out of the market too frequently. We’ve already said on many blogs that the best approach to investing is to do it for the long term. If you constantly trade in and out of the market you’ll miss out on any long-term gains that you might’ve gotten and also pay an awful lot more in fees that eat away any returns that you might get.
Okay, so now you know some of the biggest pitfalls, mistakes, blunders and boo-boos that new investors make. Now it’s time to get out there and start investing, safe in the knowledge that you’ll be able to avoid these common mistakes yourself.