Common Investing Mistakes to Avoid

Making smart investment decisions is neither pure science nor pure sentiment. It is mostly about keeping things simple and manageable. But it seems that it is easier than done for most investors who end up making mistakes that does just the opposite. The end result is disappointment, poor returns and sometimes even worse. Some of the common investing mistakes that lead to poor results are discussed here.

Following the masses and doing what everyone is doing will most likely not get you the results that everyone including you are expecting. Most economy bubbles are created because of this precise reason. There is very little logic in crowd thinking, most of it is pure sentiment, which overestimates the opportunity than what really exists. This means whenever you see a frenzy of buying or selling, it’s best to keep away from it. Panic selling and ecstatic buying are both mostly without logic and give poor returns.

The other common mistake made by investors is to go for complex products that they hardly understand. In such cases the investor doesn’t know what he is getting into and what is the right time to enter or exit such an investment. It is best to stick to products or stocks that you have some knowledge of and can make informed decisions about.

No one gets rich in a day and neither will you. Quickly selling and buying stocks will just take you so far. The real money to be made is in well timed long term investments. Timing in fact is very important as you usually make big money when the market is nearing the top or the bottom.

Many investors pay a lot in terms of investment costs like fees and this cost premium is normally dependent on the past performance of the funds. But the past rarely ever measures the future well. In a number of cases, extrapolations of performance simply don’t work. It is therefore not wise to shell high and exorbitant fees in anticipation of big returns. It is very often a good idea to go for low cost and low risk investments, which even if they give you moderate returns won’t have to payback against heavy initial costs.

Lastly, do not blindly take advice from stock brokers. They are in the business of making money selling and buying stocks, and not in the business of making money for you. This means that they will tell you anything that will help them make the transaction. How much ever friendly they may sound, it is in your best interest to cross check and verify their claims and offers.

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