If you’ve chosen to start investing your money, we think we can say with some confidence that you have made a good decision.
Investing could be the unsung hero of your future and can lead to consistent and rewarding financial benefits.
But you have to do it right. There are a lot of ways that you can very easily ruin your investing ambition before you’ve even gotten it off the ground.
If you’re new to anything, you’re probably going to make mistakes. Making mistakes as an investor, though, can be catastrophic for your bank account.
Here are three of those mistakes that you should learn about so you can avoid them in the future.
1. Holding Onto Cash
If you’re going to get the most benefits out of this process, you really need to fully commit to the actual act of investing your money.
If you’re more concerned with holding onto as much of your cash as possible and having very few long-term investments, you won’t be seeing much of a return in the future.
While we can understand the logic that you might be investing for retirement and that’s years away anyway, the less you invest now, the less you’ll get out of it come retirement.
We’re sure you want to have some cash to spend at your own leisure and we sympathize with that, but give it some thought.
Make a decision on how much you really need to hang onto. You might have to make some sacrifices, but they will be worth it eventually.
You should also consider the fact that there are different ways to invest which won’t leave you with completely empty pockets.
Look for companies that offer high-yield dividends. These will pay out a share of their profits to all of their investors, meaning that you will get a steady stream of income.
It seems difficult at first, but as an investor you definitely have to avoid holding onto too much cash.
2. Ignoring Tax Implications
Tax implications are a part of investing no matter how you do it. That’s just an unfortunate aside to the practice.
There are several different things relating to tax that you should think about before you start making any investments.
If you’re investing for retirement, you need to consider whether or not you want to pay taxes on your investments now or claim a deduction and pay the taxes once you reach retirement.
Which of these works best for you depends on your own situation, but the decision will affect your finances either way.
You’ve also got the issue of the time period during which you buy and sell shares. You may have increased taxes on your investments if you pay them all within a single tax year for example.
It’s just another important element that you need to plan ahead for so you can avoid finding yourself with outrageous tax bills.
It might even be worth hiring a financial planner if keeping track of your taxes is not something that you’re particularly good at or interested in.
As long as you keep on top of this it shouldn’t be a huge problem, but be sure to get a handle on it early.
3. Selling Too Early
There are a few reasons why people could end up selling too early, but the main ones seem to have to do with frustration or outright panic.
There are certain considerations that go into the initial investment decision, and usually you can get a sense beforehand of which ones lead to a good return on investment.
But the key to actually getting that ROI is sticking with your investments even when things don’t appear to be progressing.
Statistically, the long-term ROI works in your favor but you have to be patient, especially if a more comfortable retirement is your intention.
There’s no guarantee that your ROI will be positive as the decades pass, but if you’re smart about what you invest in then it will probably work out for the best.
Also, trying to time the market yourself to avoid downturns is a recipe for disaster. While you might get lucky, it’s just not a good way to go about investing.
The More You Know….
Investing your money is a practice that can help you a lot in the future, and it’s an especially beneficial thing to start when you’re young.
It’s not an easy thing to get right, though, and it takes an awful lot of thought and patience to actually reap any long-term rewards from it.
Don’t rush into anything, and avoid these mistakes as best you can when you’re starting out. It’s worth doing everything you can to get the best results.