What are the most common mistakes new investors make?
When you are on your journey to financial freedom, you need to save some money first, to be able to make that money work for you and make you more money. Yes, the first step is to make money and save it. When you have some money, invest it. But is it that simple?
New investors make few crucial mistakes. I discussed this with Kingsley Kobayashi, CEO of Kobayashi Group Japan. Kingsley Kobayashi is a Japanese Finance Guru and helps many people to invest in various projects. So he is the best person for me to discuss the top mistakes new investors often make.
1. Only invest the money you do not need (and can potentially afford to lose)
Yes, this is a golden rule of investing. Only invest the money you do not need. Not today, not tomorrow, not even this month. Look at every investment from a long-term perspective. Most investment projects need time to yield results. Do not be impatient and start selling your stocks or tokens the next week or next month because you “need the money.” That is one of the biggest mistakes that can cost you thousands of dollars.
Remember, that investment, like any other business, comes with a risk, so do not borrow money to invest, hoping that you can soon sell out, return the borrowed amount and get rich on the profits. That is a recipe for disaster. Only invest money that you have and can afford to lose.
2. Make sure you understand the project
You have to understand the project you are investing your money in. If you do not understand it, don’t do it. It’s simple. If your financial advisor cannot explain it to you like you are a five-year-old, says it’s complicated, etc., do not put your money into it. Not understanding the principles of your investments leads to unnecessary stress, fear of losing money, and a loss of trust.
There is no shame in taking notes about the investment project, then going back and doing your own research. Is that something you like and want to be a part of? Do you understand how it works? Can you handle the pressure?
Don’t invest money in something just because you see your friend doing it. Make sure you understand the pros and cons of the investment to avoid a lot of sleepless nights.
3. Do not let your emotions get in the middle
Emotions are the worst when it comes to investment. People forget that there should not be emotions in business transactions. It’s just that, business.
Do not invest in something just because it belongs to your loved one. Even worse, do not “fell in love” with a stock or a token that is doing well and refuse to sell it. Remember, you bought that as an investment. If your investment is doing well, and it’s appreciating, sell some of it, to get your initial investment back, then you are simply “playing” with your profits. Greed is powerful and harmful to any business transaction and can cost you everything. Fear and greed rule the market. Remember that. Focus on the big picture.
The same goes for patience. Or the lack of it, for that matter. Slow and steady yields greater returns in the long run. Especially if investing in crypto, you must be patient. If you are buying crypto, buy it and forget about it. Stop looking at charts every day. It will kill you. You have to be patient to make money. If somebody promises you high returns quickly, it’s most probably a scam.
4. Do not go All-in right away
One of the most common mistakes new investors make is investing everything at once. The better option is to test the waters. Take a portion of your planned investment amount and “play around” with it. Does the project makes you anxious, or are you comfortable? Can you understand everything about it and easily access your portfolio? Do you know the technical aspects of it? Especially when investing in crypto, you must understand how to open a wallet and secure it, access it if you forget your password, and so on. Make sure you know all of this before you transfer a more significant amount of money/tokens.
5. Have a plan
Yes, everything in life works better if you have a plan. It might sound overbearing, but you must have a plan of action when it comes to investment. As with any other plan, be honest when you make it, assess your abilities, and be honest about the amounts of money you can invest and the risks you can handle. State your long-term goals clearly, so you can always remind yourself why you are investing the money. A solid, consistent strategy is what helps to build wealth over time.
Once you have your plan, put it into action. Be disciplined and focused. But of course, it cannot be all just work and investments; you must have fun too!
Nobody is born an expert. When you are venturing into a new opportunity, don’t rush it. Investigate the project, understand the conditions of your investments, and also the time frame of it. If you are not experienced enough, talk to a financial advisor. Ask him questions, take notes, do your due diligence until you understand completely and are comfortable with the investment. It is your money, you and only you are responsible for it.
If you want to learn more about achieving financial freedom, read The Beginner’s Guide to Financial Freedom by Kingsley Kobayashi and Blanka Kobayashi, available on Amazon worldwide.
You can also follow Kingsley Kobayashi on Instagram, Facebook, and Twitter for more helpful information about money, investing, and business.
