10 Most Common Mistakes Of a Novice Investor

If you have saved money and want to give it the best use, there is no better option than to invest. This alternative seems quite risky to many, but in truth it is not, since it will depend a lot on the previous knowledge you have on this matter so that the decision you make is the best for your personal finances.

mistakes of a novice investor

Investing means that your money will start working for you and regardless of what others think or say, the destiny of your investment will only depend on you. And we do not know if it is because of emotion, excessive ambition or bad advice, but people who place their savings on investments for the first time, make the common mistakes.

Common mistakes of a investor

In the start-up of a business there are many typical setbacks that can be avoided. Know the most common mistakes of entrepreneurs and anticipate them in your project below:

1. Investment objectives are not determined

Establishing objectives such as investment for a business, children study, purchase of a vehicle, retirement or if you only want to obtain profitability are keys for you to choose the strategy of your investment.

It is important to know our financial goals and have a well defined plan over time. This allows the investor to know what financial situation he is in and where he wants to reach. In this way, he can establish the most appropriate strategies to achieve his financial objectives and adapt the plan according to market changes.

2. The products in which they are invested are unknown

The knowledge of the products in which we are going to invest is essential to make sure that it meet our requirements and objectives in terms of expected profitability and tolerated risk.

Some investors make the mistake of investing without having any financial knowledge and without knowing certain essential concepts to be able to make good decisions. An investor must take time to train and understand everything that involves in the investment.

3. Do not be patient

If something requires investments to give results: it is time. Many products that offer good yields have terms of several years. Therefore, when you are building your capital, you should keep in mind that you will not be able to have that money or you will not get the expected profits. Remember, you need patience and perseverance to invest.

emergency fund

4. Not having an emergency fund

Capitalizing the project of a third party subtracts liquidity, since the disposition of your resources is subject to deadlines. However, it is very risky to remain economically unprotected in case you require the money immediately to attend an emergency. Therefore, it is best to have a cumulative minimum of six times your monthly fixed expense so you can take advantage of it when the situation warrants.

5. They do not ‘diversify’ their investments

Many people choose to place their savings on investments of a single item or in the same geographical area, which is risky. And what can happen in the market is unpredictable, so, if you are going to place all your assets as an investment, it is best that you diversify it, even if these are small.

6. Invest ‘there’ just because others say it’s very good

It is one of the most common mistakes that results in following wrong advice. And the fact is that to invest following a rumor not always is as profitable as others paint it.

A venture can be successful in another city, neighborhood or context, without this ensuring that it can be repeated and work in the same way in your environment. Avoid replicating a proposal without doing your own analysis and adjusting to the local reality.

7. Concentrate only in the short term

Do not stay in the short term, also think in the medium and long term because in each of them the objective is different: in the short term it will seek to keep the principal; that is, not to lose money; in the medium, a balance between profitability and security; and finally, in the long term (more than 5 years), what should prevail is to obtain profitability.

8. Having more partners than the business can support

At the time of setting up the business it is easy to think of the partners as collaborators who always add up. Although in most cases it is worth working with partners, it must be borne in mind that each partner implies distributing a part of the profitability, and in small businesses this may be insufficient to distribute and meet everyone’s expectations. On the other hand, it is more complex to organize and make decisions in large groups.

9. Not taking into account the taxes that will be paid for the investments

What you need to do so that the payment of taxes is not an obstacle for the development of your investments, you should make a plan and study well at the type of tax associated with each investment that you will perform.

10. Do not be guided (at all) by the advice of a dependent advisor

There are a large number of people who opt for investment advice from the financial institution where you have saved your money; however, this medium may not always offer you the best recommendations for obvious reasons. Therefore, the best thing to do for your money is to go to experts for advice, but work independently.

We assure you that by avoiding making these mistakes, you can be almost certain that your investments are going well. Remember that it is important to have the right financial advice so that you can meet your goals as you stated.

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