As more and more people become interested in investing, financial planners and investment brokers are seeing an influx of first time investors. Unfortunately, they often don't see these first timers until after they have made a serious investing mistake, and are looking for help in getting some of their money back. For those looking into investing for the first time, here are five common mistakes that if known about, can easily be avoided.
1) The first common mistake in the investment world is not investing. There are plenty of safe investment options, from CDs to interest bearing savings accounts, and there is no excuse for not taking advantage of these safe and easy investment options. Fear can be a useful ally in keeping us safe in life, but standing still isn't always the safe answer in this day and age.
2) If not investing is the first, most common mistake, the second most common mistake is investing before your financial situation is ready. Before investing in anything, it's important to pay off high interest loans and credit cards. The first rule of financial management is to clear your debts, always make this your first priority.
It's hard to invest a decent amount of money when you are paying off other outstanding loans, not to mention stupid. Once you have a decent amount of extra money each month, save enough to support your family and pay your bills for at least three months. This way, if you happen to lose all of your money in a bad investment, you are financially prepared to weather the results. Never gamble money you can't afford to lose.
3) A third common mistake is investing with the wrong mind set. Investing in order to make money quickly is a bad idea, as many first time investors lack knowledge of and experience in high-risk, short term investments. Unless you are experienced in this type of investing, and have money to lose, you will most likely lose the money you put in. And remember that a lot of experts still slip up through occasionally allowing the wrong mindset.
A good mind set to have when entering the investment arena is thinking long term. Allowing your money to grow over a longer period of time, with less risky investments, is the ideal way to reach financial goals such as retirement and college educations for children.
4) It's also a wise idea not to put all of your money into one type of investment. This is a common rookie mistake, and can lead to investors losing all of the money they invested. Rather, divide your money among a variety of investment types, and keep an eye on it. This way, if one investment goes south, you still have money in other investments.
5) Finally, if you are serious about investments that will truly pay off, avoid investing in collectibles. As many people can now tell you, collecting Beanie Babies proved to be bust! For the most part, collectibles should be looked at as a hobby, rather than as something to fund retirement plans.
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