If you’re new to investing, it can be an exciting and scary place to be. New investors can go in with a bunch of cash in hand with the idea this is going to be like going to Vegas and hitting the big time. By the end of the month, heck, the end of the week, they might think they’ll have lots of cash in their savings account and strike it rich!
But that’s just not the case.
If you don’t have goals and a plan, new investors are setting themselves up for failure. This is why today, we’re going to go over the biggest mistakes that most new investors make, so you don’t just avoid them but choose better options instead.
1. No goal
If you don’t have a goal, how on earth are you going to know when to say enough is enough? I don’t mean this in just a goal to save towards the downpayment of a house either. When you’re investing, it’s important to also have goals when it comes to each stock’s performance as well. This can help keep you from getting greedy and potentially losing all your returns.
While the buy-and-hold strategy for the long term is certainly a good one, in reality, that’s not always what you need. Each company has a beginning, middle, and end. And if you’re investing on the way down, that might mean your shares aren’t going to come back up.
So, instead of investing with no goal in mind for your investments, have a goal for what you want your performance to do. Once you hit it, get out! This will help you create long-term growth and keep your portfolio on the way up.
2. No diversification
Now that you’ve created goals, you also want to make sure that you create a diverse range of assets that span across bonds, stocks, exchange-traded funds (ETF), and Guaranteed Investment Certificates (GIC). Again, this will help protect your cash, especially through GICs right now.
In fact, I would protect your long-term investments through 10-year GICs right now. This can be a great way to create 5% growth each and every year for a decade! Then, you can use the rest towards diverse investments.
Do your research and even use artificial intelligence (AI) if you want to create a potential portfolio. You can also use AI to help you come up with your own strategic investment plan. AI is also a great tool that can help you dig deeper into stocks, do your research, and understand the risks involved.
3. Going with your gut
Finally, going with your gut can be a huge disadvantage for new investors. This is in several respects. Going with your gut could mean you get excited about a stock trading up and worried you’re going to miss out, so you buy before doing your research. It might mean trying to time the market and invest when the stock hits market bottom. News flash: this is completely impossible.
Going with your gut also means you’re investing with emotions and not with facts. Companies are numbers. Stocks are numbers. And they need to be treated as equations, not as living creatures. If you get scared, greedy, fearful, or anything else, you’re letting this dictate your strategy. Not all the great research you’ve done! This can also lead to overtrading, leading to more payments in commission fees and cutting down your earnings.
Therefore, what is the best thing you can do? Invest in a diverse range through exchange-traded funds (ETF). A great option is iShares MSCI USA Quality Factor Index ETF. This ETF invests in top-notch companies in the United States. You get access to companies like Nvidia, but also strong long-term stocks like Nike. So, get diverse and get some income, but keep it safe by avoiding these mistakes.
