Common mistakes investors make

Common investment mistakes that limit your financial growth.

07:45 02 January 2014

Knowing the most common investment mistakes is the first step to avoiding them.

An investment can be an asset to any financial portfolio. It is important however, that you make the right choice when you are determining, which investments you are looking to add to your portfolio. One of the biggest issues people experience is running into problems because they are not adequately prepared to handle investments.

Here are a few mistakes and how to avoid them.

• Not paying attention to investment associated fees – All investments have fees. These may be broker fees or they may involve a third party. In 2011, it was reported that 80% of stock funds underperformed. This was based on investor expected returns. The reason for the underperformance was directly linked to the fees.

 

• Buying stock from your employers – Stock options are an investment opportunity that is offered by numerous companies. Unfortunately, while it may seem like a good idea, if you look at the statistics, with an increasing number of companies laying people off or going bankrupt, purchasing company stock may not be the best option.

 

• Herd mentality – this gets many investors when they are looking into an investment. Everyone else is buying so in order to prevent being left behind you jump on the investments as well.

 

• Not researching and accepting advice from sources that may not be based on fact. Purchasing based on advice that has no backing may not be the wisest choice for making a choice on, which investment you want to place your money.

Choosing the right investment means obtaining advice from the right sources, making sure to pay attention to things such as fees, and to use logic instead of emotion to make decisions on your investments and avoid these common mistakes.