4 Financial Traps You Must Avoid When Investing !

4 Financial Traps You Must Avoid When Investing

When you watch the investment adverts on your television or listen to them on your radio, you will always notice them warning you against investing without looking into the terms and conditions. They specifically warn you about the market risks and that you should read up on the offer document carefully. When you are looking to invest, you are usually in a hurry to get it done as quickly as possible since the economy is not a stable entity and you never know how or when the value of money may rise or fall. Then there is the matter of interest rates and premiums where you want the former to be high and the latter to be a low as possible but often you end up compromising on one or the other and your investment plans fall through.

The biggest fear, however, comes when choosing a fund and deciding on the requirements. It’s not easy when the market is flooded with so many options and you don’t know where to turn to. They all make their choices look alluring and promise the best returns. So how to make up your mind? Well for that you will need to decide your needs. But for the those who still can’t make up their mind, here are a few common pointers to keep in mind:

It'S A Trap Fly GIF - Find & Share on GIPHY

Things to consider before investing

  1. 1. Going With the Flow: The most common mistake people make while investing is going for a plan that people they knew have applied for or are applying to. This is a strict no because you have your own requirements which are different from those of others. You cannot blindly follow the path other people are walking on. You have to list out your own requirements and check out the best plans that meet them all and only then should you dive headfirst into investing. You need to secure your future as per your needs.

 

  1. 2. Buy Low Sell High: While investing it’s the exact opposite of what you should be doing. It’s easy to be caught in the trap of selling when stock prices are decreasing to limit being bled out later and buying when they are rising to get in the game and not be left out. But since investments follow a cyclical pattern the smartest thing to do is to buy when stock prices are low and sell when they are at their zenith so as to avoid this commonplace trap which is more psychological than anything.

Stock Market Finance GIF by PWL Capital Inc.

  1. 3. Not Being Diverse: Another common mistake people make is not diversifying their investment avenues. It is recommended that you spread your investments by buying into a number of options like mutual funds and bonds as well. It adds to your portfolio and the more the number of options, the more avenues you have to distribute your risks and rewards. As you get older spread out your investments to minimize your risk. Your objective should be to spread out your assets amongst investments that vary in different market conditions because they won’t all react in the same way. The law of averages will come into play and your investment’s exposure to risk will reduce drastically.

Tv Land Options GIF by YoungerTV

  1. 4. Getting Emotional While Investing: This is a strict no, do not get attached to the outlets into which you end up investing. You need to be logical and calculative and if something is bleeding you dry take it off the list no matter if it is an asset that has always had your back earlier. Similarly, when you see your assets are increasing and growing obviously you wouldn’t want to sell it off and this desire is not run by a logical thought process but by greed. Some amount of risk-taking is, of course, a part of the gig but you can’t go around thinking investment is a gambler’s den. Most of the times things don’t go the way you want and you end up losing out on a lot more than you could have anticipated.

 

https://giphy.com/gifs/work-office-problems-xUDDzqBnHl0Q0

Investments will always be subject to risks from the market and from your personal emotions and if your investments are not logical or calculated, it could result in your future falling apart. So be careful and read through all the fine print and be very prudent before proceeding.

Leave a Reply