As the global financial markets have become increasingly accessible over time, we’ve seen a growing number of Brits take on a larger and more diverse selection of assets.
To this end, it was thought that 33% of Brits owned shares as of 2019, while some 67% of the population are planning to invest in stocks in the future. This figure increases to 75% in the case of Gen Z, so the trend is expected to increase considerably going forward.
However, inexperienced and younger investors are more prone to making costly errors. But what are the most common investment mistakes and how can you avoid them?
1. Failing to Invest!
This may sound counterintuitive, but one of the biggest mistakes made by aspiring investors is failing to invest!
This can be for a number of reasons, whether they’re loath to take the plunge and risk their hard-earned capital or simply lack the knowledge to take their initial steps in the marketplace.
In this case, you may want to speak with qualified wealth managers to help you get started. These professionals can connect you with relevant asset classes and lay the foundations for a diverse investment portfolio, allowing you to accumulate wealth safely and effectively over time.
2. Chasing Stock and Financial Market Trends
As a new investor, you may also struggle to find inspiration or insight to help inform your trades.
As a result, people tend to blindly follow market trends and adopt a completely reactive approach to investing, which can ultimately cause them to chase their tales and become trapped in a cycle loss and failed investments.
You have a duty to research every single one of your investments so that you can create a deterministic outlook that recognises the underlying laws that govern change in the financial markets. This way, you can assume control of your portfolio and identify assets that offer the best long-term potential.
The only exception to this broad rule lies with so-called “copy trading”, through which you target and follow experienced investors and replicate individual trades in a chosen marketplace.
3. Not Diversifying Your Interests
While it makes sense to start small with one or two assets before scaling your efforts organically over time, it’s all too easy to become stuck in your ways as a novice investor.
However, investments that have been profitable before may not deliver a return in the future, so you’ll need to continually adjust your portfolio while also looking to diversify your interests.
This helps to minimise your exposure to real-time market risk, while optimising your chances of recording a sustainable profit over time. It’s also important to select assets that have inverse correlations, so that you can look to remain profitable regardless of the prevailing market conditions.
Just strive to avoid over-diversification, which can dilute your potential profits and cause your capital to be spread too thinly.