With such a wealth of information available in this day an age (some good, and some not so good) it’s easy to be overwhelmed when it comes to making important decisions; and your investments are definitely important decisions. That’s why we’ve decided to simplify things for you, and break down the five worst investment habits you may be making.
If any of the bad habits on this list apply to you, you need to think about finding ways to break them quick!
Having no plan
You. Always. Need. A. Plan. Whether you are flying to Mars or organising a ten year old’s birthday party: chaos is more easily diverted if you have a solid plan.
In terms of your investments this means you need to know why you’re investing, what you want to invest in, how much money you have, and what types of assets you’re interested in and the risk you intend to take. Of course, you can always go ahead and invest without a plan, no one is going to stop you; but without a plan, the first sign of shaky markets can cause total panic to the inexperienced, or unprepared, investor.
Following on from our last point, panic selling is one of the worst things you can do as an investor. Trust us, by the time you’re starting to consider selling it’s probably already too late! By selling anything for less than you bought it for you are doing nothing other than compounding your own loss.
You need to sit tight, do your research, speak to the experts, and wait for the market to recover. Investing is nothing if not a waiting game.
Compulsively checking your investments
For many of us, compulsively checking for updates has become a normal way of life. Consider Facebook, Gmail, Instagram, Snapchat: all of these companies require you to check them numerous times throughout the day to stay on top of the news, your workload, or your (endless) group chats. So much so in fact that, for many of us, this compulsion has almost become a reflex, and something that is very difficult to negate.
When it comes to checking your investments, however, it’s crucial that you find a way to break this compulsive behaviour and leave your investments be! This is for two very good reasons. Firstly, it’s highly unlikely that the future of your stock will be decided within one day. Checking your stock on a daily basis serves you no purpose. Instead, you need to be looking at its performance over the long term.
Second, by checking your stocks every day you are much more likely to give into the “fear” when you see a slight downward trend developing (that in the long term would be inconsequential at best) and so you start panic-selling and losing not only the capital you already have invested, but any that you may have made in the future.
Having no patience
Yes, everyone is after the next big unicorn that will solve all their worries and let them sell up at an astronomical profit and buy a private yacht: all within the first six months of their investment career.
Unfortunately, however, this is highly unlikely. The most important skill you need for investment is patience. Even world famous investor extraordinaire Warren Buffet says that he best thing to do is to buy something that you believe holds intrinsic value, and then to wait patiently for it to increase in value. And by waiting, he means decades, not months.
Doing no research
Much like having a plan, doing your research is a critical step in investing, and going ahead and buying assets without research and forethought can easily spell disaster. Bounding towards an investment you feel is a good choice in your “gut” can lead you to buying up stocks or companies in which no have no particular expertise: meaning that when crunch time comes you are not sure what to do in order to maintain or protect your money.
Listening to investment gurus can be a good way to start (although they may be purposefully vague), but nothing substitutes personal research and education; including reading books and staying on top of financial news.
Oval Money does not provide financial advice. If you need further information we suggest you look for expert advice.