We’ve already written about the things young people fear when first investing. Now, we’re out to explore the major mistakes young investors make when they’re still new to the game. Jason Hartman’s Ten Commandments of Successful Investing advise educating yourself. Sometimes, the best way to avoid a mistake is to know about it, so take note.
First, investors get excited about stocks. They’re sexy, well publicized, and touted in the media. But companies file for bankruptcy all the time, especially these days. If all of your money is sitting in one company and it goes under, you’re looking at significant losses. Stick with investments that are less risky and keep a diversified portfolio.
Second, people tend to think that investing is just for the wealthy. It isn’t—$1,000 in a savings account with a 5% annual return will turn into $26,500 in twenty years. Invest young.
Third, don’t forget to check into possible expenses associated with your investment, should they cut into your return. There may be fees (depending upon the investment) and you may be paying without even realizing it. Mutual funds often carry fees, so it is best to stick with investments that are fee-free and easy to maintain control of.
Next, make sure that you aren’t obsessing over the fluctuation of the market. Young investors tend to watch prices rise and fall, and the internet makes it all too easy. Combine that with the extreme way the media portrays slight market fluctuations, and you’ll drive yourself crazy. It is normal to feel anxious about your investments, but don’t make it worse. Instead, check on your portfolio sparingly to see if changes are required.
Besides, if you’ve diversified your portfolio, there is nothing to worry about. Many young investors don’t, and risk ending up like the Bernie Madoff investors who threw large amounts of money at one man who happened to be running a scam.
The Bottom Line:
Sure, there are bound to be a few mistakes made during your investing career, particularly those early years. But those who learn from their own mistakes (and, more importantly) the mistakes of others are certainly less likely to repeat them.
(photo credit: pcgn7 via photopin cc)
* Read more from Young Wealth
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