Your first big investment is such an adult milestone that no matter how hard you try to wear your business face, you probably won't be able to hide your excitement. And why should you? You deserve to celebrate! After much planning and hard work, you finally have the money for it.
But while being financially stable is something good to look forward to, a lot of different factors come into what makes an investment practical and sound. Don’t jump into something you’re not yet familiar with as the waters may be a little too deep for your liking. Have a bit of foresight, and avoid these common pitfalls of first-time investors:
1. Jumping into a deal without learning about it first
Throwing caution to the wind and just placing your eggs in the only investing vehicle you’re familiar with is probably one of the worst ways to get an initial know-how on investments. Remember, we’re talking about your hard-earned money here. Wouldn’t you want to know the ins and out of what you're getting yourself into?
There are many online resources from which you can read about the right investment for you. You can also attend seminars and classes to get a feel of your options. The best way to go about it, though, is to actually speak with a financial adviser. From there, you’ll more or less have a guide on how to proceed.
2. Investing your savings
When you invest your money, consider it gone. Earning from your investment is never guaranteed, which is why it’s important to put in money you can let go of, and not use your rainy day fund. Whatever vehicle you choose, investing is a risk, so only put cash that won’t hurt you to lose.
3. Being impatient
A lot of people think that investing immediately grants you financial rewards, when in fact, some of the best investments need to mature for many, many years before you can enjoy their benefits. Unless you’re knowledgeable enough to put in money in volatile stocks and other risky ventures, it’s advisable for you to sit back, relax, and wait.
4. Buying stocks that are cheap without knowing why they are cheap
If you’re into trading, it can be very tempting to buy stocks that look cheap and have been cheap for a very long time. Unless you have a broker or someone reliable to give you a good reason to get them, chances are those cheap stocks aren’t going to rise in value anytime soon. Better think long and hard and ask for a legit second opinion before buying something that looks like a bargain.
5. Not looking at the bigger picture
Whatever kind of investment you’re interested in, it’s important to have an ample knowledge of current events. Elections, calamities, bankruptcies, and even having Miss Universe happen in your country can shift certain economic factors short- or long-term. Not incorporating these goings-on can cause you to either invest too soon or too late, which can lessen your earnings, or even lead to losses. Always be observant. With a bit of practice, you can ride the wave at just the right time.
Forbes – 3 Costly Investments to Avoid
Investopedia -- 7 Investing Mistakes And How To Avoid Them