4 Investment Mistakes That People Make When They Are Just Starting Out

Investing can be a great way to help you to accumulate wealth for your desired lifestyle and even retirement. However, investing comes with its own set of risks and can be a difficult path to navigate. You’ll have many questions with regard to investment – how much should you invest, what should you invest in and what kind of platforms should you use?

We’ve compiled four common investment mistakes at the beginning of people’s investing journey, which you can learn from.

Investing when you don’t have a lot of savings

Making the right investments while the market is positive can be a good way for you to grow your money. But before you jump right into investing, are you investing with money that you may need in the short term?

All types of investments come with their own set of risks. Investments such as stocks tend to have greater risk as they can be more volatile and responsive to the market. The general rule of thumb for making investments is that you should always ensure that you have enough cash liquidity at hand, and will be able to tolerate the ups and downs of the market. You’ll want to make sure that you are investing with money that you have in excess.

If you are planning to get married or purchase a house in the coming years, then perhaps think twice before investing your money saved for these purposes.

Having the “Herd Mentality”

The second mistake that many make is to follow the crowd. Perhaps there is a certain investment product that has been gaining a lot of traction and many people are buying it. You may be tempted to be part of the crowd but having the “follow the herd” mentality can be a huge no-no when it comes to investment. It is more important to assess the benefits and risks for yourself before making any investment.

For example, 2013 was the year Bitcoin started gaining attention and was actively being traded at price of $13.50 per coin. Just four years later, the coin was priced at $20,000 and many speculated that its value could increase till $100,000 per coin. Such speculations led to high demand for the coin and created a pricing bubble that eventually caused the price of the Bitcoin to drop to $3,500 in 2018!

When a particular stock or investment instrument becomes popular, chances are it is already reaching its peak. In such cases, following the crowd may cost you to invest at a high price resulting in even greater losses when the prices fall.

Listening to people you know

Perhaps you’ve heard about a particular product from your colleagues, your relatives or your closest friends. That doesn’t mean that it is a safe bet for you to purchase. Everyone has a different risk appetite and financial health. Investing in a product just because someone you know recommended it can be dangerous.

If the investment fails, you would lose the money and cause strain to the relationship you have with that person.

You are responsible for your own money, and so you should do your research and make sure that you fully understand the product as well as the risk involved. It would also help to contact a professional and ask for expert advice before you make your move.

Not Investing

The last, and the biggest mistake, is not investing. Many may be deterred from investing due to the possibility of losing their money as well as the belief that investing is very complicated. But when you don’t invest at all, you have already lost the opportunity to leverage on a tool to potentially grow your wealth. It is okay to make some mistakes when you are just starting out. These mistakes and losses give you a better sense of your investment style and should be seen as an opportunity for you to learn from.

Doing a lot of research and arming yourself with ample knowledge can also help you to make confident investment decisions. Investing is not a short process and has its ups and downs. Be patient and ride out the tide, and you may just see the fruits of your labour.

Disclaimer:

This article is for general information only and does not take into account the specific investment objectives, financial situation or needs of any particular person. The views expressed herein do not necessarily reflect the views of AXA Insurance Pte Ltd and should not be construed as the provision of advice or making of any recommendation. There is no intention to distribute, or offer to sell, or solicit any offer to purchase any product. We recommend that you seek the advice of a qualified financial advisory professional before making any decision to purchase an insurance or investment product. Whilst we have taken reasonable care to ensure that all information provided was obtained from reliable sources and correct at time of publishing, information may become outdated and opinions may change. We are not liable for any loss that may result from the access or use of the information herein provided.