Everyone has to get started somewhere when it comes to investing — and, as we always say, the sooner, the better. Of course, there will be a learning curve and lessons along the way. But, while we are all only human, there are certain investing mistakes you should avoid if you can. After all, they’ll save you a lot of stress and dollars in the long run.
5 Common Investing Mistakes
Being aware of these common investing mistakes is the first step in preventing them from happening. Remember: At the end of the day, investing takes time. But you can save yourself a lot of headaches by avoiding these.
1. Waiting too long to get started
We’ve said it before, and we’ll say it again: The sooner you get started investing, the more time your money has to make more money. The longer your investment period, the more your investments can compound over time. Plus, the longer you leave your investments, the more potential they have to overcome inevitable market volatility.
The first step is understand your investment goals. Once you can clearly define why or for what you are investing, you can get started funding your account right away. Whether you are saving for retirement way down the line or for a mortgage in the next two years is going to influence your investment strategy once you get going.
2. Not investing enough money to see a real impact
Contrary to popular belief, you don’t need a ton of money to get started investing. With Q.ai for example, you only need to fund your account with a minimum of $100. But that doesn’t mean that that’s all you should invest.
In fact, research suggests that investing generally sees annual returns of about eight to 10 percent, which means that, if you invest $1,000, you’re likely to see that number climb due to market upswings and compounded interest over time. This is especially true if you diversify your portfolio to mitigate risk, minimize potential losses and maximize gains through inevitable market volatility.
3. Not leaving your money long enough to see give it the opportunity to grow
While trading may be thrilling and, if you do it well, you can make off well, it’s a lot riskier than making longer-term investments. Again, the longer you leave your money, the more time it has to navigate market cycles and grow. You need to give your investment strategy a chance to really perform.
Besides, trading takes a lot more time and attention to pull off well. And, frankly, most people — especially beginner investors — don’t have the bandwidth, knowledge or resources to get started day trading off the bat.
4. Failing to diversify your portfolio enough
Portfolio diversification is key. You never want to put all of your eggs in one basket. It refers to an investment strategy that manages risk while capitalizing on gains. You do this by spreading your investments around in various types of assets to cover different bases. Doing so also limits your exposure to any one type of asset, which can reduce the volatility of your portfolio over time. So, if one area plummets, you won’t lose everything you have.
5. Paying too many fees
Fees can add up, and you won’t always see them hitting you! Be careful of hidden fees, especially trading commissions and brokerage fees when investing. Even if you are making a ton of money from your investments, you could be paying a ton of money in fees that you don’t necessarily need to be paying. Shop around for a robo-advisor or financial advisor that’s transparent about what they’re charging you, so you can make an informed decision and know exactly where your money is going.
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