MikeLigalig.com

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by Henry Buell on Apr 20th, 2013


If you’re investing, which you should be, then you’ll want to make sure to avoid some of the more common pitfalls. While each of these may seem like common sense, much like eating healthy, people just don’t pay as much attention to them until it is too late. By educating yourself about these risks, you can improve your overall investment strategies, enabling you to come out ahead of the game where you might have taken a costly plunge. Read on for the details.

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2. Diversify to Minimize Exposure

Many people believe that investing in several different areas of the market counts as ‘diversifying’ their portfolio, but in fact diversity is accomplished with much broader strokes. Investments should be diversified not only across geographic areas, but also across various industry sectors and classes of asset. This offers much greater protection and resilience in terms of bounce back when one industry or stock may be underperforming.

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4. Avoid the Herd Mentality

This is perhaps the killer of many a would be trader. While there are many historical examples of herd mentality dictating poor trade practices, such as the dot com bust in the last century, a more recent example would be Facebook. Because nearly everyone uses Facebook, when news of an IPO was announced, everyone jumped on board. Shortly after that time, the stocks nosedived. Following the loss of value, more scrutiny was applied to the business of Facebook. It soon became known that the company was not necessarily as good an investment as it may have first appeared to be. Careful investors saw this, and avoided the initial gain of a few dollars in share value against the potentially greater loss if the stock value dropped.

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The best advice I have learned so far is this:

DO NOT INVEST YOUR EMOTIONS.

Likajan nang instinct bitaw ug kahasol ug pressure nga imbes investment ka nahimo na hinuong trading. Invest in the long-term.

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