THE BLUNDERS TO AVOID
EVEN experienced investors can get things wrong. Always try to avoid making these common mistakes:
TRYING TO TIME THE MARKET: It is very hard to guess the best time to buy and sell shares and funds, so instead set up a monthly savings plan and drip-feed your money in over time. This means you’ll benefit from when stocks are cheap but also won’t accidentally buy all your shares when they are at their most expensive.
FOLLOWING THE HERD: When making your first investment, following the trend isn’t necessarily the best strategy. The top-performing assets one year could continue to do well or plummet. There is no way of predicting which it will be.
PANICKING DURING A MARKET
SHOCK: During heavy market falls, many investors panic and sell at the wrong time. Take a long-term view rather than reacting to what’s in the news. In fact, when the market falls, experts say it’s a great buying opportunity as you pay less for stocks.
PUTTING ALL YOUR EGGS IN ONE BASKET: Piling all your money into one asset class or one geographical area can be very dangerous if markets fall. Investors should spread their investments in everything from equities to bonds and across different regions from the UK to Asia.
BUYING TOO MANY FUNDS: Experts recommend holding between 15 and 30 funds with exposure to different sectors. If you end up with more than 30, you’re likely to have lots of overlap, which will defeat the point of buying more to spread the risk.
NOT DOING YOUR HOMEWORK: Many people make the mistake of investing without fully understanding what they’re buying. You really need to understand the risks to reap the rewards.