Avoiding mistakes is an art that we all wish we can master. And let me tell you this – you will never stop making mistakes when it comes to investing and trading (as with everything we do in life). However, with time and practice, the mistakes will get less and less as you start to make more of the right decisions.
But mistakes can’t be denied. You have to be experienced or at least be extremely aware of the ones that are common. So you will make mistakes when starting out something new and even if we’re pros.
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.