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Insight & Analysis - February 22, 2022

6 Biggest Mistakes People Make When Investing

Starting an investment, you know nothing about can be one of an investor's biggest mistakes.

Mistakes are inevitable when investing, however, a lot of them can be avoided. The world of investments is highly dynamic, it can be favourable and, at times, detrimental to your finance. Hence, deciding what path to take when undertaking investment is crucial.

The first one is the smart path. This group belongs to investors that gain insights from other investors’ blunders. The second one is the expensive path are those who made their financial blunders and learned from their errors. The best, however, is to learn from other people’s financial blunders.

This is because it helps you prevent losses, which means more money in your wallet and a faster path to financial independence. Here are the eight biggest mistakes to avoid when investing your money.

Lacking Knowledge about the Investment

Aliko Dangote said he wouldn’t start a business without knowing something about it, even when asked in his sleep. This means starting or investing in a business you have zero knowledge about is one of the biggest mistakes an investor could make. Instead, create a diversified portfolio of exchange-traded funds (ETFs) or mutual funds. However, if you decide to invest in specific stocks, be sure you know everything, there is to know about the business.

Falling in Love With a Company

Never forget the priority of investing, which is to make money. Learn to make a distinction between sentiment and business. Investors tend to get attached when a company makes headways, which is risky for investment. 

Patience Deficit

Patience is essential when it comes to investing. This is because long-term investment gains will be higher if you increase your portfolio slowly and steadily. It is a big mistake to expect a portfolio to accomplish something it wasn’t built to do. This implies you should be practical when expecting your growth and returns.

Trying to Predict the Market

Trying to predict the stock market is incredibly tough, which affects return. Institutional investors are not left out as they fail at this attempt. According to research, investment policy accounts for 94% of return changes. Suffice to say that asset allocation decisions, rather than time or even security selection, account for the bulk of a portfolio’s performance.

Failing to Diversify

Professional investors may produce a higher return than the benchmark by investing in a few concentrated positions, but average investors like you should avoid doing so. It is preferable to adhere to the diversity concept. It’s critical to include exposure to all key sectors in an exchange-traded fund (ETF) or mutual fund portfolio. Include all primary industries in your stock portfolio. To be safe, do not put more than 5% to 10% of your portfolio into any single investment.

READ ALSO: 4 Real Estate Investment Platforms in Nigeria

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