As an investor, you should know how to avoid common investing mistakes. It includes relying on historical returns, rushing into “hot” stocks, and investing in industries you do not understand. Avoid these common mistakes, and you can increase your investment returns.
Avoiding rushing into “hot” stocks
Buying into “hot” stocks can be dangerous, especially if the trend continues. If you hear about a big buyout, killer earnings, or a revolutionary new product, you might want to jump on it, but don’t rush into it just yet. Often, a stock’s price can drop a lot in a short period.
Avoiding investing in low-risk, low-yield stocks
While investing in low-risk, low-yield stocks may be tempting; the truth is that most low-yield stocks will not grow as much as you might expect. These investments can be dangerous, so it’s important to choose wisely. Generally, low-yield stocks offer smaller returns than higher-risk investments, but they have their place in a balanced portfolio.
Another option is to invest in low-risk, low-yield stocks, such as Treasury Inflation Protection Securities (TIPS). These are essentially bonds with a fixed interest rate, and the government backs them. Although the rate is lower than that of a traditional savings account or certificate of deposit, TIPS can grow over time, especially when the inflation rate is rising.
Avoid Investing For The Wrong Reason
The third mistake is investing for the wrong reason. Harrison warns that investing for high returns is risky and that investing is about meeting your goals. So please do not fall for the high returns, always analyze the stock, check its finances and perform extensive technical analysis. All these steps will help you to pick the right stocks for investment.