5 Critical Financial Investment Mistakes to Avoid in 2021

Written by Tonia K. Simon

Publish Date: May 4, 2021

The concept of investing has always been an integral part of life since the beginning of human existence. We all put our resources in one thing or the other in the hope for future returns – it could be time, money, or any other element of value. Investing is one thing that gives us a feeling of purpose as humans and is even the basis of some individual’s continued existence.

Financial investment is a subset of the concept that deals with how, where, and why you allocate your financial resources for positive future benefits and returns. The “how?” question talks about the medium through which you invest your funds, “where?” has to do with the location/institution used, while “why?” seeks to explain your investment goals, i.e., your expectations.

If you’re an ambitious golf player, you can’t become skilled at the game by relying solely on outdoor courses, due to the ever-changing nature of the weather. You might have to build your own indoor course for private practice, and there’s no better option to consider than a golf simulator. It’s an equipment that allows you to play golf from the comfort of your home while exploring diverse courses. 

Similarly, as an aspiring investor looking to end up with an excellent portfolio, it’d be unproductive to rely solely on unfounded opinions to make key investment decisions. You need to arm yourself with adequate knowledge of the field to become an investment guru. It’s essential to know that mistakes are common, and you stand a risk of falling victim to them.

Failing to diversify your portfolio, not setting up a long-term plan, and allowing fear and emotion to get the better of you are only a few of the mistakes you can make as an investor. They can harm your finances if not avoided.

To ensure you have a thriving investment journey in 2021, we’ll be showing you the top five mistakes to avoid as an investor.

1.  Investing without Knowledge or Guidance

It’s no news that a good deal of salaried personnel and casual workers have little or no knowledge about viable investment options other than traditional saving techniques. They’re primarily knowledgeable in concepts like Fixed Deposits, Savings Accounts, and other low-level financial instruments. Bonds, stocks, and forex sound foreign to them.

If you belong to this category, pumping your hard-earned funds into the more advanced investment options you know little to nothing about would be a mistake. You can only escape unscathed from such an endeavor by sheer luck.

Don’t invest in an option you don’t know about, neither should you be quick to act on the ill-informed investment ideas or advice from friends. Doing so would be harmful to your financial health. Instead, seek quality financial investment education from reputable business coaches as they’re in the best position to guide you on the options to consider. They’ll train you on how to spot viable investment options to attain financial freedom.

2. Succumbing to Fear and Emotions

Although investors need to always look for ways to boost their strategies, successful investing requires a logical mind and an ability to identify and address personal biases. Sentiments don’t win investment battles – they’re usually damaging to an investor’s portfolio.

You don’t pump your hard-earned cash on a supposedly viable investment idea just because it sounds good to you. If you do that, a blowback is inevitable.

Avoid letting emotions and fear get the better of you while investing, as it may lead to significant financial losses. Don’t be greedy, know when to pull out, and don’t succumb to fear. For instance, rushing to sell your stocks because of unfounded news shows that you allow emotions to dictate your actions.

3.  Making Poor Investment Choices

Making poor investment choices and decisions kills your finances faster than you can imagine. So, before choosing an option or sector to invest in, embark on research, look out for its potential and viability.

Please don’t make the mistake of judging the practicability and possibility of an investment based solely on its historical exploits. Check other parameters, current performance, and experts’ views before committing to it.

4.  Ignoring the Principle of Diversification

There’s a specific risk level attached to every individual asset. In some, it’s high while it’s considerably low in others. Spreading your financial resources over several assets instead of banking solely on one is good investment practice. Doing otherwise could prove fatal to your portfolio.

While it’s easy for seasoned investors to generate massive returns by concentrating on a specific position because of their wealth of experience, inexperienced ones like you will find it challenging to pull such off and shouldn’t even try doing so. Stick to the principle of diversification and watch your portfolio improve in no time.

5.  Lack of Well-Defined Investment Goals and Plans

“He who cannot plan plans to fail” is a common saying among seasoned investors used to underscore the significance of formulating clear investment goals and plans. Goals are central to the success of any investment idea.

Ensure you set short, mid, and long-term financial goals as they will guide your journey. Making a foray into the investment world without setting clearly defined goals and plans would be synonymous with going on a fool’s errand.

Conclusion

Anyone seeking financial freedom and growth has to consider investing their funds in profitable ventures. However, investing isn’t merely about putting your money somewhere and expecting a massive return after a specific period.

It goes beyond infusing funds into any financial growth idea that gets sold to you. Investing is an art that requires lots of research, planning, and strategizing. It involves following a systematic process.

Avoiding the mistakes examined above will ensure you enjoy a good investment run and boost your portfolio.