If you want to move into the camp of successful investors or want to climb higher on the ladder to success, avoid the two most common investment mistakes.
Playing the waiting game
Sometimes an investor looks at the market and decides to wait for a better time to buy or sell an investment. While there’s nothing wrong with being a little cautious, waiting too long to act comes with its own price tag.
Markets rise and markets fall, and you can never know exactly what’s around the next corner. Even if you read every single chart and graph of market movements over the past 100 years, the fact is that past performance is not necessarily indicative of future returns.
Some people find this idea so daunting that they are too afraid to act on any investment opportunity. Their fear of loss, or “loss aversion,” as it is known, paralyzes them. But by waiting it out, they lose the chance of potential returns. They think that inaction is better than taking any risk at all and their money continues to stagnate and possibly even lose value to the ravages of inflation.
The second common mistake that some investors make is not using the services of a financial advisor.
The internet provides a wealth of information. There are so many financial websites, providing a variety of opinions and ideas, and some investors think that they don’t need to employ a financial advisor as they can do their own research.
However, many of these folks don’t have the expertise to know how to sift through all of this available information to know what’s specifically relevant to them. And even if they have the expertise and analytical skills to do this, do they have the necessary time? And if they have the time, do they use professional objectivity to prevent making emotional or unwise investment decisions?
The benefits of “financial coaching” by a licensed professional helps not only your bottom line but also encourages you to remain steadfast to your financial plan. Investment decisions shouldn’t be made in a vacuum, and they shouldn’t be made alone.
How to remove obstacles to financial success
Avoiding these two common investment mistakes can help you achieve financial success. To increase your wealth, take these two action steps now:
- Read Charles Schwab’s Study on Market Timing for a compelling reason to avoid timing the market
- Make a meeting with a CFP to get your savings and investment plan on track
Douglas Goldstein, co-author of Rich As A King: How the Wisdom of Chess Can Make You A Grandmaster of Investing, avid chess fan, international investment advisor and Certified Financial Planner (CFP®)