Investment is defined as the money committed or property owned that is acquired for future income. It has two main classes namely: fixed income (e.g., bonds or fixed deposits) and variable income (e.g., property ownership). The choices you make when investing your money can influence your future.
Most of us are unaware of the investment mistakes and other financial missteps that can affect our short-term and long-term financial goals. However, the pandemic has given us no choice but to face our financial nightmares head-on. On that note, please do your best to avoid making costly investment mistakes.
#1: SELLING OFF INVESTMENTS OUT OF FEAR
2020 hit us hard. Many people are maxing out on their credit cards and are breaking their savings to pay for rent, groceries, and other essentials. The market crash triggered a global panic as people are selling off investments, losing billions in the bear market.
Let us be honest. It is impossible to know when another market crash will happen. The market’s recovery has been based on the idea that the pandemic has become more manageable. The reality is that the COVID-19 cases continue to spike each day. The numbers may continue to get worse as the global economy reopens. In Singapore, new closures and safety restrictions have been employed by retail stores and other commercial establishments.
It is tempting to sell off your investments given the current situation. Think about it. You should not sell something due to relatively short-term market conditions. You are in this for the long-haul. Unless your investment beliefs and strategies have changed, you must consider keeping those stocks. Building an emergency fund by investing money can be a lifesaver.
#2: BELIEVING IN MARKET GURUS
Some people eagerly listen to “money gurus” that are believed to predict the market. Media gurus make their money from discussing about investments, selling their advice or charging fees to manage other people’s money. But, their followers are not all rich. If you could predict the market’s future, wouldn’t you shut your mouth and make money for yourself?
Forget about the money gurus, what will help you is to diversify your portfolio. Knowing the right companies to allocate your money to takes guts, wits, and luck.
#3: FOLLOWING YOUR PORTFOLIO ON A DAILY BASIS
The market is volatile and people are more concerned about the stock market than before. There is a lot of noise surrounding this. The noise may brew fear inside of you, which can lead to bad decisions. Try not to follow your portfolio on a daily basis.
Do not let fear consume you as many people are screaming voices of gloom and doom. As was mentioned a while ago, you are in it for the long-haul. You are not invested for today or tomorrow. Markets will fall and crash, but good companies will eventually recover as history showed us.
#4: WAITING FOR A BOTTOM TO BUY STOCKS
In theory, you can buy good stocks at a discount when the market crashes. However, it is nearly impossible to purchase something at a perfect price and a perfect time. Do not try to time the market as it can cause you to miss glistening opportunities.
No one knows when a crash will come or where the bottom is exactly. Consider purchasing stocks from good companies at all-time highs. If you are planning to be in this journey for a long time, you can buy shares from the businesses you believe in. Just be strategic and realistic!