Many new investors end up making similar basic mistakes. To help you avoid some of the pitfalls of investing, here’s what not to do
- Don’t put all your eggs in one basket. Invest in lots of different things, either yourself or through a fund. This is called diversification. It means that if one asset type or investment does badly you’ve got others to fall back on.
- Don’t act on rumours. Do your own research, or get professional financial advice.
- Don’t follow advice blindly. Make sure that you understand the implications of any financial advice you’re given.
- Don’t assume recent trends are stable. Equity markets can behave in unpredictable ways. Just because the market goes up for years on end, doesn’t mean it won’t go the other way tomorrow.
- Don’t take the first opportunity that presents itself. At least compare a few options first.
- Don’t change course at the slightest downturn. There are bound to be ups and downs in an investment. Re-evaluate your objectives and reasons for investing before making a decision to dispose of your investment.
- Don’t invest more than you can afford. Work out how much you’re going to invest and what you want to put into savings, and stick to it unless your circumstances change.
- Don’t take risks if you can’t afford to lose. High-risk investments are only a good idea if you could still get by if they failed.
- Don’t assume you’ll get a stable, consistent income. Income from an investment isn’t fixed and may fall.
- Don’t forget about inflation. Inflation affects the purchasing power of your money. If you’re not keeping up with inflation, you’re actually losing money. Take stock from time to time, and re-think how much you save or invest.
- Don’t rely on the prices in financial publications. You might not actually be able to buy or sell at this price. The price in financial publications may be the official last close price, buy price or selling price, all of which are different – sometimes very different. In some cases, you might not be able to sell all your shares in one go.