Major mistakes that beginner investors make
As a millennial money coach, I spend lots of my time talking to clients and discussing their financial goals, as well as their emotional challenges and how to build a better relationship with money.
Naturally, one of the most common questions that pops up is about how to start investing as an absolute beginner. Investing can feel like a minefield, so I’m here to help you break it down.
If you’re curious about investing but not sure what not to do, here are four major mistakes to avoid when you begin your investing journey.
Focusing on investing first
Investing is an important part of building your wealth for the long term, but if you’re thinking about investing when you’re paying off expensive debt, now’s the time to press pause on the idea. It might seem uncomfortable focusing all of your financial efforts on debt repayments, but the sooner you can make a dent in the debt balance, the sooner you’ll be in a better position to save and invest for the future.
Not having a plan
If you’re new to investing, it can be tempting to jump in straight away and get started. After all, there are so many options out there and now you’ve committed, you want to jump in, right? Wrong. Stop for a second and make sure you have a clear and defined strategy for investing before you start. Otherwise, you risk getting carried away or shiny object syndrome can creep in and in turn, you might end up compromising your future goals.
Panicking early on
No matter how many times you read about the fact that markets fluctuate and your investments can move both up and down, the first time you experience a dip and your investments go red, it’s only natural to panic. Often, new investors will stress at the red and cash out on investments, taking the losses in the fear of further drops. But investing is a long term plan and by cashing out, you miss the opportunity for your investments to recover. Stay calm.
Investing emotionally
The idea of investing in companies that you buy from, or brands who have great values can sound like fun, but relying on this alone can lead to trouble. There are certainly ways to align your investments with your personal values and build your wealth at the same time. Equally, investing in brands because you like them isn’t a solid investment strategy and can slow down your progress towards your investment goals.