6 Dangerous Traps Investors Step into Too Easily That Lose Them Money
1. Investing without sufficient knowledge or guidance
Knowledge is power and the only real guarantee of success. If you’re investing without a deep understanding of what you’re investing in chances are you’re on the road to disaster. Before investing a dime in any investment, you must fully understand the investment by first researching what information you’re going to need to understand the investment. Then going through the all the information you have gathered with a fine-tooth-comb. As you research an investment be sure to list all the positives, all the negatives and come up with what I call is the “upside and downside risks.”
2. Start off with just a toe in the water. Don’t bet the house.
The biggest losses from investments in my experience come from a lack of good old-fashioned caution. After researching an investment and decide to take the leap don’t jump in with both feet. Instead, dip your toe in and test the investment. If the investment shows success, you can leg in the investment with additional capital, always giving reasonable time for your investing hypothesis to prove itself as being cogent, after each increase in your commitment.
3. Steer clear of rumor, gossip, and fake news sources when researching a potential investment.
Fake news and research isn’t only the stuff of our politics these days; it’s a massive problem that investors unknowingly confront daily. Let’s face it, in today’s mass-media environment there is plenty of bad advice out there, some even purposely designed to screw investors over BIG TIME! You should always make sure that you get your information from reputable sources that will not lead you to bad decisions.
4. Avoid Procrastination
The tendency to overthink without making decisions is a common affliction for many investors from all walks of life. It’s why I always stress putting you small toes into an investment first only after confirming you facts. By having a regular vetting plan in place for investments and a system that tests you investment hypothesis you should find that success is achievable.
5. Becoming Too Greedy. Not Knowing When To Sell.
The famous character from the movie “Wall Street,” Gordon Gecko, asserted to an audience of investors and company stockholders that Greed is good!
Greed is great if only tempered by patience and knowledge. It can also cause investors to be overzealous about a targeted investment and not recognizing when to stop. Just like everything in life, you must learn to know when to stop. You must put a limit to your zeal to have a fruitful and long journey in the investment world. I always tell the subscribers of my investment advisory publications and trading services to take half their investment in any stock, bond or any investment position off the table when it jumps 100%. This way you’re only risking profits, not your core investment dollars.
6. Stay Attentive: Watch Your Investments
Finally, a common mistake that investors make is to maintain their investment in one particular area or product much too long. People these days, are incredibly busy with work, family and leisure activities and tend to lose track of their investments. Not paying attention can lead to just poor investment results. The market is dynamic, and it changes promptly and without warning. The best thing you can do as an investor is always pay attention and keep track of your investments. An hour a week spent on updating your knowledge on your investments can be the difference between success and failure.