5 most common mistakes of a new investor
If you are new to the financial markets, you might have already been there. Invested money you might have even borrowed in something without a plan or strategy. Sold in panic, when the stock started to fall. Well, every investor has to start somewhere. The best way is to learn from the mistakes of others so you do not have to repeat them. These are the following five most common mistakes:
- Buying random assets without a strategy or plan
- Selling in panic when they start to fall (weak hands or FUD)
- Trying to catch the bottom or the top without knowing the fundamental or technical analysis
- Lending money to buy an asset based on a sure tip
- Not diversifying the investment
And how to avoid these most common mistakes?
- Set up a plan, divide it in an investment strategy and stick to it. Even if your plan is to invest 5% of your income every month and your strategy is to hold on to your assets. You can change the plan and adjust the strategy later as you learn more about how the whole investment works. But remember two golden rules of investing right from the start. Never invest more than you can afford to loose. And diversify your investment.
- Your strategy will get you over the drops on the market, where you would otherwise sell in panic under the influence of FUD market sentiment for unprofitable price.
- Your strategy will also prevent you from trying to catch the dip or the top of the market without knowing what you are doing. Instead, spend the time and money saved on that on a course that will explain more in depth, how investing works, what you need to look out for and how to work with technical and fundamental analysis. Not to mention that you should know your investment from the start, you should know what you are investing into and why.
- If you are not willing to take chance with your savings and to literally play a roullette, do not invest in assets promising astronomically high returns in short periods of time. That should be quite the opposite, the red flag, signalling that something is not correct with this investment. And to invest money you do not even have is the worst idea of all, breaking the first golden rule of investment.
- And finally the second rule of investment is to diversify your funds. Do not bet everything on just one egg in the basket. Ideally have more eggs in more baskets, i.e. choose an asset from each asset group and invest part of your funds in each of them. Choose investment according to the goal and purpose you want to achieve. The longer the timeline, the more conservative your investment should be, but do not forget to have some hedge against inflation threat in all of your investments.
What about inflation?
Do not forget to include a hedge against inflation in your investment strategy. If you would like to know more about how to hedge your investment against inflation, one of the possibilities is investing in digital assets. Due to the fact that there is a limited amount of digital coins or tokens, it is a natural deflationary tool. Choose one or more digital assets in appropriate portion to the rest of your investment. For example you can allocate part of your funds in so called staking, where you hold coins for a certain period of time and receive a guaranteed profit. If you would like to learn more, give a call to our business representative.