The five most common mistakes by investors

Want to invest in the sharemarket, but hope to avoid the mistakes that could end up losing you money?

We’ve identified five of the most common mistakes, so you don’t have to.

Common mistakes by investors

  1. Failure to diversify. You may also recognise the phrase: ‘don’t put all your eggs in one basket’. If you spread your investments across companies, industries and even asset classes like shares & property you have less risk of negative returns on your portfolio of investments.

  2. Trying to time the market. We would all love to purchase our investments when prices are at the lows and sell when prices are at peaks. Some investors may get the timing right one time, but few, if any can claim to do it consistently.

  3. Letting your heart rule your head. Or, in other words, ‘don’t let your emotions guide your investment decisions.’ Having set criteria to assess your investments will reduce the chance of impulsive decisions. And these impulsive decisions can take over when the market is either soaring or slumping.

  4. Not rebalancing your portfolio. This is effectively mistakes 1&3 in practice. For instance, technology may tick all the boxes, but your stock purchases may soon cause your emotions to take over and lead to you having a portfolio of stocks that is unbalanced.

  5. Not having a plan. What are your investment goals? How much risk are you prepared to accept? What is your investment horizon? All these questions must be answered to ensure that you are headed in the right direction.

 

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Disclaimer

© Commonwealth Securities Limited ABN 60 067 254 399 AFSL 238814 (CommSec) is a wholly owned but non-guaranteed subsidiary of the Commonwealth Bank of Australia ABN 48 123 123 124 AFSL 234945. CommSec is a Market Participant of ASX Limited and Cboe Australia Pty Limited, a Clearing Participant of ASX Clear Pty Limited and a Settlement Participant of ASX Settlement Pty Limited.

The information on this page has been prepared without taking into account your objectives, financial situation or needs. For this reason, any individual should, before acting on this information, consider the appropriateness of the information, having regards to their objectives, financial situation or needs, and, if necessary, seek appropriate professional advice.

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