Investing mistakes to avoid
Errors can have long-lasting consequences, setting you back financially
As individuals, we all have diverse visions for our future – some may be considering the forthcoming five years, while others may be focused on the next two decades. Regardless of your aspirations, ensuring that your investments are well-positioned and diligently contribute toward achieving your desired outcome is crucial. Ultimately, making the most suitable choice for you and your objectives matters most.
Investing is necessary if you want to grow your money over time – the spending power of cash tends to go backwards because returns on it aren’t enough to keep up with inflation.
Frequent mistakes can accumulate and potentially diminish your portfolio’s worth. Perhaps you need to accurately assess the time frame required for your assets to grow, or your investment goals might not align with your current portfolio approach.
What do I need to consider?
Inflation risk: Keeping all your money in a savings account can cause its value to erode due to inflation. Historically, investing in the stock market has been a more consistent way to combat inflation.
Emergency fund: Set aside an emergency fund, typically six months or more, to cover unexpected expenses without resorting to loans or selling devalued investments.
Tax matters: Utilise tax-efficient wrappers like Individual Savings Accounts (ISAs) or pensions to boost your finances and minimise tax liabilities.
Spread risk: Spread your investments across different asset classes, sectors, and regions to minimise losses when one type of investment underperforms.
5 years or more: Invest for at least five years with a long-term perspective, allowing your money to recover from market downturns and grow in value.
Don’t panic: Avoid panic-selling during market drops, as this could crystallise losses and cause you to miss out on potential gains.
A loss is a loss: Don’t hold onto underperforming stocks in hopes of recovery; reinvest in better prospects for long-term gains.
Stay focused: Don’t copy others’ investment choices mindlessly, as they may not suit your circumstances.
Expert advice: Investing is complex and requires time, research, and knowledge. Consider seeking specialist advice.
Learn from errors: Reflect on past investment decisions, both successful and unsuccessful, to avoid repeating mistakes in the future.
THIS ARTICLE DOES NOT CONSTITUTE TAX OR LEGAL ADVICE AND SHOULD NOT BE RELIED UPON AS SUCH.
THE VALUE OF YOUR INVESTMENTS CAN GO DOWN AS WELL AS UP AND YOU MAY GET BACK LESS THAN YOU INVESTED.
THE TAX TREATMENT IS DEPENDENT ON INDIVIDUAL CIRCUMSTANCES AND MAY BE SUBJECT TO CHANGE IN FUTURE. FOR GUIDANCE, SEEK PROFESSIONAL ADVICE.
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