Investing isn’t just for experts. It’s for everyone, whether you have $5 or $50,000. Regardless of how much money you have, though, it can be easy to fall into investment traps, making “process” mistakes that can cost you serious money. These are some significant no-nos to avoid.
Mistake No. 1: Comparing yourself to others
It’s easy to look at what others are doing and feel defeated when you aren’t at the same level. But investing is personal. No one has your income, expenses, job, individual responsibilities, and other factors. All of those play a part in how your investments will perform. One of the biggest mistakes is comparing your investment returns to someone else and trying to get the same returns without knowing all the surrounding information.
Mistake No. 2: Making emotional decisions
Investing can be personal, but remember that much of what you do is rooted in making business moves. You’re making long-term investments, but it’s easy to get emotional when a stock or the broader market falls, and you lose money in the short term. So avoid rash decisions as much as possible and skip becoming emotional when things don’t go as planned. Educating yourself on investing and economic cycles will also help you feel confident about your investments and ignore all the noise.
Mistake No. 3: Not actually investing in your investment account
It’s a big step to open an investment account. But if you aren’t investing that money, it will not grow and sit around as cash. So there is a difference between your investment accounts and your actual investments. You’ll want to avoid the mistake of opening an account, depositing money, and letting that money sit without putting it to work by selecting an investment.
Mistake No. 4: Missing employer matches
If you aren’t sure whether your employer offers a match on your 401(k) contributions, you might be missing out on maximizing your investments. Many employers provide one, but people don’t take advantage of it, leaving free money behind. The match from your employer is likely much higher than any return you would get from the market that year. For example, a dollar-for-dollar match is an instant 100 percent return on your contribution. It would take years for your investment portfolio to grow that much.
Mistake No. 5: Trying to time the market
It’s common to hear the advice of “buy low, sell high.” But how do you know when “low” is low enough to get in on the action? Some investors try to “time the market” by buying and selling their investments at what seem like opportune moments. The problem with trying to time the market is that identifying the perfect time is nearly impossible, and the ideal time may never arrive.