Investment Decision: What To watch-out For

Investment decisions are very important and most times quite risky especially if you are an entry-level investor, below are bunch of things to be considered while making an investment decision, to avoid the common pitfalls.

  DO NOT INVEST IN A BUSINESS YOU DON'T UNDERSTAND 

It is a very big mistake to invest in a business you do not understand how it operates. According to one of the world's most successful businessmen, Warren Buffet "Never invest in a business you don't understand" What this means is that if you must buy say stocks from a company, you must first understand the business model of that company. When you understand clearly, it will help you make smart choices.

 DON'T BE CARRIED AWAY BY BLIND LOVE

As an investor, always remember that the stocks bought from a company is purely for profit, there is no need to fall in love with the company because you have been with them for a long time. If you see any red flags, consider selling off your stocks as soon as possible

 LACK OF PATIENCE

As an investor, you have to have some level of patience. Do not be in too much of a hurry to take decisions that might make you lose money. Apply the principle of slow but steady progress and see how better placed your investment will be. 

 MARKET TIMING

This is another mistake investors need to avoid. Some investors try to time the market instead of following a long time investment strategy known as buy and hold. Buy and Hold is an investment strategy where an investor buys stocks or other forms of securities and holds them for a long period not minding the  fluctuations and changes in prices in the market. Such investor in not interested in the short-time price variations. 

 NOT DIVERSIFYING

If you want to be a successful investor, you have to diversify. Diversification simply means to mix a wide variety of investments in one portfolio. This will help to reduce your risk because you will have a mix of different asset types and investment vehicles thereby limiting exposure to any single asset.

Mistakes are part of the investment process, so identifying them is a plus towards achieving your investment goals.