In the investment world, many people, without realizing it, make serious mistakes when investing. The result of these mistakes is that the goal of creating wealth ends up being lost.
In this article, I will cover the 4 most common mistakes when investing and what you should do to avoid making them.
First mistake: investing without knowledge
There are those who follow social networks and the news and, suddenly, invest in what is considered the opportunity of the moment – it can be the action, the property, or the most promising business.
However, these investors did not set up a plan to invest in that asset. They do not have instruments that say whether this would be the right path or whether that asset is deteriorating or not.
As a consequence, a situation may arise in which that asset will become saturated, simply because many people bought and paid dearly for it. Thus, the profits generated no longer pay as expected or, in some more serious situations, the asset begins to rot. In this way, a company that is heading for bankruptcy or a property that will no longer have an interesting value for resale becomes a mico in your wallet.
This is because this individual is investing just following someone else’s footsteps and tips without a more careful analysis.
If, on the other hand, you follow the recommendation of an investment advisor and find an asset focused on your risk profile and your needs, you know why you are investing and can identify the appropriate moments to dispose of the investment with direct deposit. . That is, the more information you have about that asset, the faster you will act when bad news comes about it.
To invest better, it is important to be equipped with information and understand your investor profile.
Second mistake: not knowing your investor profile
Another mistake when investing is not knowing your own risk profile. The person who invests in something bold like stocks, for example, and has no aptitude for volatility, will be bothered to realize that the asset purchased for R$100 after a while is worth R$90.00. This person doesn’t know that wobbling is part of the problem.
A very common situation is when you buy a property thinking about the increase in value. Maybe the property even has potential, but this investor is not prepared to deal with the lack of liquidity. If an emergency happens in your life and it is necessary to sell the property to raise funds, this transaction will be carried out at a loss.
To make a good investment, in addition to knowledge, you need a good awareness of your investor profile. Do you need or might need the money in the next few years? Do you have other reservations to deal with unforeseen circumstances? Do you tolerate volatility, tolerate risk?
Knowing this information will put you on a much safer path.
Third mistake: selling the asset at inappropriate times
A very common mistake that many don’t realize is how to deal with an unforeseen crisis. For example, when the asset starts to generate losses, the person is uncomfortable with them and ends up selling the asset.
This investor gets rid of real estate, a stock portfolio, a stock fund, and a real estate fund when, in fact, this drop in value, with the information being analyzed correctly, can demonstrate that the moment is more opportune than before. In this case, the person should buy more and not redeem.
What happens with that example of buying an asset for R$100 and selling it for R$90 is that people who truly understand the volatility and fundamentals of the asset will buy for R$90, resell it for R$100 in the future, and guarantee profits.
The crisis is an opportunity to understand the real value of an asset and the potential for earnings. So, with a good analysis, you can make profitable choices that will surf in the best moments of the economy.
Mistake Four: Buying the Asset at Inappropriate Times
Likewise, just as many sell what they shouldn’t sell, there are investors who buy what they shouldn’t buy.
Because they don’t have the patience or time to talk to the investment advisor, they glance at a menu of products available on the market and make a decision based on the history of that asset. However, many times that history denotes that the best moment has passed.
If I’m researching a fixed-income fund and I see that among the available funds there is one that yielded much more than the others, I may be ignoring that that product yielded more as a result of mark-to-market, as it has products in its portfolio that they were linked to some reference that became unbalanced in the short term and brought a very interesting gain to the investor.
Because it brought an above-average gain, what happens from now on is an accommodation of the fund to bring a result below average, to reach the end of the term within again that was already predicted, considering the volatility.
Fixed income products and variable income products that bring a big return in the years that have passed, require you to understand why that income has happened. Evaluate what are the reasons for this additional income and what would be the current perspectives of this product given the economic scenario that is shown at that moment.
Don’t guide your investments by past results. Guide your investments by analysis, based on the current conditions of the economy and what this scenario provides in terms of gains for the investment you are studying.
By doing this, you will make a lot fewer mistakes and have much more interesting results in your portfolio.
The four investing mistakes mentioned in this article are very common. Having knowledge about them will make you more aware and take some care not to fall into traps.
Always study the invested asset and seek the help of your investment advisor. Don’t guide your choices by past performance and, above all, evaluate how that asset fits your risk profile and needs.
That way, you will have a much safer path to building your heritage.