One of the things you have learned as an investment advisor for almost 20 years is how people think and act when it comes to their investments.
After working for a large international brokerage company and then managed my own investment advisory business, I saw the peaks and low levels when it comes to all aspects of financial planning. My goal was always to train my clients to become better, more independent investors and to direct them back to the right course if they started to be misled.
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But along the way I saw a very common financial mistakes. Here are some of the most common. If you can avoid these wrong steps, you will be about to build a solid financial plan and become a successful investor.
Individual investors are often a very confident group. According to a study by the Regulatory Authority of the Financial Industry (Finra) in 2022, approximately 64% of investors highly appreciate their investment knowledge. However, the respondents in this category have actually received more answers in an investment test.
Overwhelming as an investor can be a great failure. This can blind you to the realities of the investment world and encourage you to think that you cannot lose when it comes to choosing individual profitable shares. This, in turn, often leads to over -concentration in a small handful of shares, taking away the benefits of diversification.
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Investors from the other end of the spectrum are too conservative. If you do not enter at least some level of risk in your wallet, you will probably actually lose money after taking into account taxes and inflation.
This is especially problematic for younger investors seeking long-term growth in their portfolios and who have the luxury of time to bounce from any temporary market failures.
Financial planning is a complete enterprise. It cannot be denied that cutting money for investment is a great thing. But if you first do not build an emergency fund, then you accept a shortcut that can transfer you.
Without money allocated to cover unexpected expenses, you run the risk of either debt or being forced to withdraw money from your investments. Both are anathema of a successful financial plan.
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