Thursday, January 28, 2010

Common Pitfalls of Investing

Investing is drive by the anxiety to have the money work for us harder. But you need to set a goal (or goals) of what actually you wanted to achive in long run.

Some common mistake investors make, which they may or may not notice, they may put the blame to the wrong topic.

1. No emergency fund before investing
This will cut into the investment portfolio and a forced selling may happen if cash flow is too tight and emergency happened.

2. Time the market
Warren Buffett don't time the market because it doesn't really work well, at least for him.

3. Delaying to start investing
Do you know people has claim "compounding rate" is the 8th wonder of the world ?

4. Taking too much or too little risk
The rate of risk 'feel' by the investor will increase if they understand more on a particular product. But investor tends to 'not feeling the risk' or "feel like it is very low risk" if they don't really understand that product. Diversification is also a way of reducing risk

5. Decision making == Emotion Feeling
Greed and fear drive the decision making. Investor may not even realised it, and the mistake will repeat, but blame is on the market, not themselves.

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