Avoiding mistakes is an art that we all wish we can master. But with all things in life, we have to experience or at least be extremely aware of the mistakes that are common and can/will be made when starting out something new and even if we’re pros.
What are the most common Financial, Investing Mistakes to Avoid:
Diversification- or lack of it. This can be a mistake in both ways:
1. Not enough diversification – keeping your investments too limited and not broadening your money so that if one fails, you don’t lose it all
2. Too much diversification – this can happen to the best of us. It’s called over excitement and should be watched. It’s very easy to be tempted to buy everything that sounds good. But you also don’t want to be spending most of your money on commissions to brokers and not having enough in each area to really earn any money.
Unrealistic goals – who hasn’t fallen victim to this one? I mean, come on, I know I want to earn 50% on my returns each year. But even the best in the biz have yet to exceed 24%! Know your limitations and know that you have to learn and educate yourself before you can play with the big boys. However, having 8-12% return yearly isn’t at all a far fetched figure.
Tax advantage accounts – this mainly falls into the Roth Ira and 401k’s for retirement funds. Why have anything that you pay taxes on when you take it out?
Financial plan – Like I said before, I’m not big on having a very detailed plan. There is no such thing. But you certainly can and should have an outline of where you want to invest and as you start the plan will fill in on it’s own.