10 Investing Mistakes to Avoid for 2022
For most investors, a new year usually marks a new opportunity, a time to correct past mistakes and strategies for maximum profits in the new year. A good investor takes time to weigh their past habits and weigh whether they have been successful or not.
The truth is that investors are faced with a future they know nothing about, I mean who knows what this year holds for us? We would certainly love a glimpse into the future. With these uncertainties, they must apply effective investments strategies and avoid ineffective ones.
Figure: investment mistakes (source ETmoney)
10 Investing mistakes to avoid for 2022
1. Overreacting to a Stock Market Drop
If you have ever invested in the stock market, you should know that market drops are inevitable. Market corrections take place approximately every 19 months since 1928. As of now, it has been a while since the market faced a major correction. The last time, we had a major market correction was in 2020 due to the pandemic.
Since 2020, the market has been on a general upward trend making experts believe that there is an impending correction. However, that should not be cause for panic and sell low dumping your assets; the market will always recover. Those who ride out corrections will always bag handsome returns.
2. Investing in projects that you do not understand
It is critical to steer away from investment ventures that you do not understand. It may sound like common sense, but most investors often find themselves in sticky situations. Especially with the explosion of cryptocurrencies and meme stocks, it is not uncommon for people’s judgment to get clouded.
You need to keep in mind that most coins are fads rather than legitimate investments. The list of Ponzi schemes continues to increase at an alarming rate therefore you should be very careful. Do not allow your greed for riches to cost you all your investment capital. Always be clear about what the underlying asset is that you are investing in.
3. Investing Your Entire Asset Portfolio in Crypto
Even the most conservative investors are getting into crypto these days. I mean how could you not when we continue to see overnight millionaires thanks the like of Shiba Inu posting returns of 43 million percent in a year.
Wanting to bag similar returns, investors are usually drawn to crypto which is completely okay if you are investing a speculative amount. However, the problem arises when you invest all your capital in crypto. It is not different from placing all your eggs in one basket. Only invest what you can afford to lose and ensure to diversify your portfolio.
4. Failing to do your due diligence
There is no faster way to sink your investment than failing to conduct adequate research or to even consult any financial advisors or experts while buying financial assets. How do you expect to make the right calls when you don’t know what you are doing?
Read as many books as you can, watch the vast available material on YouTube and other platforms and always ask questions. Every successful investor takes time to educate themselves.
5. Conducting your trades with expensive brokers
This year there is no need for investors to conduct their trading at high-cost brokers. There are few avenues where it makes sense to pay for specialized financial services; these include wealth preservation and estate planning.
However, it makes no sense to pay for your stock and ETF trades. Especially now when online brokers allow you to trade stocks for free. Insisting to pay to invest is unnecessary and expensive.
6. Mindless jitters
This year you simply cannot afford to make investment moves out of nervousness. It is time for investors to stop listening and reacting to unsolicited news and advice without properly authenticating or understanding it. That is why it is good to consult with an expert.
7. Being unable to re-establish balance
The beginning of the year is the best time to rebalance your portfolio. Remember that taking the time to rebalance your portfolio is what makes all the difference. Sit down today and trim your overweighed positions and then reallocate that money to lower-performing investments in your portfolio. This will not only reduce your risk significantly but will also significantly increase your chance of making a profit.
8. Indulging in overtrading
I have certainly fallen victim to this one. Did you know that there is such a thing as overtrading? Well, there is and it is only a problem because trading frequently usually leaves you susceptible to substantial trading fees, commission, or brokerage to brokers which only dents your investment and profits.
9. Chasing after performance
Chasing after performance has always been a dangerous affair. Being that cryptocurrencies and meme stocks showed significant performance in 2021, it is easy for investors to pile their money in such assets mindlessly this year.
For the average investor, piling on speculative winners often ends up in disaster. It becomes difficult to determine the right time to buy and sell because often other buyers are doing the same thing that you are and pushing the price up even higher. Invest wisely, have a good reason for putting your money anywhere.
10. Investing without strategy
Sadly, most people think that investing is like gambling in a casino where you can depend on lack. Hope is not a strategy when it comes to investing, you must have a written strategy. This will help you not to react based on your emotions. Sticking to your well-thought-out plan will help prevent ill-time investment decisions and increase your chance to achieve long-term financial success.