Investments are not needed to prove to everyone around you that you are the smartest or financially successful.
This is not a competition or entertainment.
Not a game of chance and not a way to “tickle” your nerves.
Investment markets are a meeting place between business owners who need money for further growth and scaling, with people who have free money and are willing to take reasonable risks to make a profit.
At the same time, smart investment is more of a philosophy of investing money and strict adherence to the basic principles of investing.
This is why proper investing should be extremely boring.
They should not turn into risky speculation or a game of roulette.
In this article we will talk about the 7 “deadly sins” of investing, the awareness of which will allow you not to slip into speculation, and will also protect your capital from losses and the harmful effects of crises:
1) Lack of investment strategy for investing money
You must develop a detailed plan for working with money (saving + managing + increasing).
Moreover, your investment strategy must be recorded in writing.
Too many new investors have no strategy at all — they simply react to every market swing as they go along.
Completely forgetting that:
“If you are not planning to win, then you are planning to fail.”
2) Lack of discipline
No amount of investment principles, even the most correct ones, will help you succeed if you do not follow them.
It is discipline that will help you stick to your investment strategy.
It is investor self-discipline that will protect you from the phenomenon of the “paradox of choice,” when an incredibly large abundance of investment options leads to complete “paralysis of analysis” and the inability to make a choice.
3) Ignoring market cyclicality
Count on a bear market every four years (give or take).
If you are not ready (morally and financially) to wait out a downward trend for 2 years, then it is too early for you to invest.
Once you understand that markets always move in cycles, and that their declines, as well as their rises, are completely normal and natural, then you will stop overreacting to negative news and events + learn to benefit from them for your investment portfolio.
4) Thinking that you will never grow old
In investments, age is extremely important, because it is a long investment horizon that allows each person (regardless of his income level) to form large capital with small amounts.
The problem is that young people do not think not only about retirement, but even about the immediate future.
Which leads to a complete lack of savings and investments, but to an abundance of loans taken.
5) Lack of asset diversification
Which unjustifiably greatly increases the risks for the invested money, “transforming” investments into some kind of analogue of gambling.
6) Short shelf life of financial literacy
Research shows that financial literacy has an extremely short shelf life — after about six months, the knowledge we have acquired is forgotten or begins to be ignored.
Therefore, it is important to regularly remind ourselves of the basic rules of working with money, to ensure that our investment portfolio is sufficiently diversified and not to worry about news that has no meaning for our investments, financial markets and the economy as a whole.
7) Consider investment bankers as your “friends”
Unfortunately, this is not the case at all.
The investment industry is initially aimed at misleading its clients — because this is the only way they can get into their wallets with impunity, offering pseudo-investments or excessively risky investment schemes under the guise of reliable products.
At the same time, they shift all emerging risks onto clients, and they cynically take most of the profit earned from clients’ money for themselves.