3 dumb investments mistakes to avoid

People make dumb investments every year that cost them a lot of money. Even smart people are sometimes blissfully ignorant of dumb financial choices they make and consequently are clueless of how to correct them. If you want to make sound investments and avoid costly financial actions, you need to learn how to make the right decisions. Avoid these three dumb investments mistakes and you will save yourself a lot of headaches and money.

1. Inaction due to many investment choices

Investors can get overwhelmed by the many investments options available in the market. Many people who are overwhelmed by the wide range of options in the market make the dumb investments mistake of not taking any action. Don’t penalise your finances by inaction and settling for super-conservative, low-yielding investment funds because you feel overwhelmed by a surfeit of investment options.

Make the smarter investment decision to limit your investment choices for where to put your money. If you are unable to limit your investment options on your own, contact a trusted insurance consultant or agent whose judgment you respect and request them to help you narrow down your options and tackle the tough choices.

2. Performance chasing

Investors have an infatuation with past performance. Investing in Short-term stocks, for example, is particularly compelling because it promises good performance returns within six months to three years. Short-term investments, however, provide some of the most unreliable predictions of what the future holds. While important, don’t obsess with performance chasing. Avoid investing all your money on, say, mutual funds based solely on the fact that the funds performed well recently. In many cases, it will be nothing more than dumb luck that the funds perfumed well in the past.

3. Not diversifying

Investors know it is important to diversity, but it is surprising to see how many investors still don’t diversify. Don’t make the dumb investments mistake of not diversifying. The reason index funds are popular is because people make money on the stock market by having a diverse portfolio, typically averaging 15 to 20 stocks in many different industries. Have no less than 10 to 20 stocks to ensure you can keep up with inflation costs.

Pitching to investors

If you are pitching investors, don’t make the mistake of appearing desperate. Investors like to put their money in and be associated with clearly thought out projects. If you seem needy or come off like your business cannot move forward without an investment, it sends the wrong message and investors will likely scamper away from your business.

Steer clear of dumb investments mistakes to protect yourself from costly financial actions and people who are likely to take advantage of you, whether you are an investor looking for investment opportunities or a business person pitching investors.

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