- Investment options include stocks, real estate, bonds, cryptocurrencies, and more
- However, it is important to note some things before embarking on making an investment
- For example, avoid expecting significant returns in a short time having a lottery mindset, avoid following the crowd blindly, and others
Most individuals in the past, invested in gold, lands, and livestock to secure their future and hope for their value to multiply. However, as time and technology advanced, investment options expanded to include stocks, real estate, bonds, cryptocurrencies, and more.
Unfortunately, previous generations missed out on investing due to various reasons such as lack of funds or unfamiliarity with the investment process.
Today, investing has become a widespread phenomenon, which is beneficial as more individuals grow and protect their wealth. Nevertheless, it appears many people are making mistakes in their investment approach.
This article aims to identify some of these errors so that you can correct them before they hinder your investment journey. Here are some common things to note before investing.
Having a lottery mentality
Having a lottery mindset involves expecting significant returns in a short period despite making small investments. Many individuals enter the investment world with this mindset, leading them to fall for Ponzi schemes.
This leads to them giving up on investing prematurely, and then they become disappointed with actual investment outcomes. It is essential to understand that investing is not a path to overnight riches.
It requires discipline and a long-term perspective to secure your financial future by acquiring and owning assets that appreciate over time.
Attempting to trade stocks or forex independently
With numerous platforms enabling self-trading, it is easy to engage in stock or forex trading by yourself as you can simply select your favourite companies and buy or sell their stocks.
However, don’t forget that each transaction incurs fees when buying and selling. Typically, the returns generated are insufficient to cover these expenses while still making a profit.
Often, people lose money and still pay those fees. Moreover, investing decisions are driven by popularity or media coverage rather than focusing on investments with the best returns. Selling at the first sign of bad news is a detrimental approach to building long-term wealth.
Investing funds needed in the short term
Some individuals treat their investment accounts like regular bank accounts, depositing money today and withdrawing it shortly after. This is an incorrect approach to investing.
Only invest funds that you do not require shortly. Investing is akin to planting a seed. As a farmer, you wouldn’t uproot the seeds you planted every few weeks just because you’re hungry.
Investing takes time to yield results, with compound growth typically observed over three to five years. Therefore, if you need access to funds regularly, create a short-term plan and keep the money in your wallet or emergency fund.
Avoid investing it and hastily withdrawing it within a short period, as this will yield unsatisfactory results.
Following the crowd blindly
Mimicking others’ investment decisions is not a reliable strategy. Investing based on trends or what is popular at the moment is not sound advice. Avoid chasing after what is trending or where everyone else is putting their money.
Instead, conduct thorough research to find the right investments. If you find yourself relying on others to determine where to invest, it may be wise to reconsider doing your investing independently.
While there may be safety in numbers, it’s essential to cultivate an independent mindset and invest in resilient assets that demonstrate long-term growth potential. Your investment journey should not be driven by popularity.
It might be true that there is safety in numbers, but it’s important to have a mindset of your own and also do thorough research before you invest. Invest in things you understand that are resilient and will perform well over time because your investment journey is not a popularity contest.