Investing Mistakes Young People Make.
The two most common errors you might be making or have made is thinking you need to have “extra” money before saving for retirement and deciding that you’d rather invest in specific companies instead of broad index funds. Here are ways to avoid more common errors when investing in the stock market.
Investing in your personally preferred company may be more exciting than putting your money into an index fund , but its definitely a far riskier choice, When J.D Roth, the Portland-based blogger started investing, he, unfortunately, put a years worth of Roth IRA contributions in Sharper Image Stock, which is an American brand that offers consumers electronics, air purifiers, gifts and other high-tech lifestyle products, The Sharper image was then officially bankrupt in 2008, which left J.D Roth at a quite a big loss himself. Since then, Roth puts his money in index funds, aside from it being diversified, index funds also carry the added benefit of having low fees because they are passively managed, which means they don’t rely on a person to research and select stocks.
If you think investing is more suited for the wealthy people you are wrong. If you are waiting for extra money to invest you will ultimately be waiting forever, instead, start by contributing small amounts to your retirement account and slowly raise the percentage over time when you become more comfortable. The benefit of starting early is highly rewarding, U.S. News states “If you put $1,000 into an account that earns a 5 percent annual return when you're 20, you'll have about $26,500 by your 40th birthday. If you wait until age 30 to begin contributing, you'll have just $16,289”
Keeping close eye on the market highs and lows, You see, if your investment portfolio is well diversified, you will only need to check in on it once every few months to make sure it doesn’t need to be rebalanced, If you feel your life is consumed by checking daily fluctuations, your investments may be too risky and you’d be better off putting a greater percentage of your portfolio into relatively safe money market funds.
Diversification, in market sectors, industries, and specific companies reduces your chance of losing everything. One easy way to diversify while investing in the stock market, again, Index Funds. Index funds minimise your chances of being caught up in an orchestrated Ponzi Scheme.
Don’t be afraid to make mistakes, its the only way to learn, try checking up on your accounts regularly and go as far as to even punch numbers onto a spreadsheet, this will help ease your mind and also give you more sense of control, if you would prefer to rely on a professional that's fine, along as you are still playing an active role. Understanding exactly where you are putting your money is much better than trusting someone else to make those decisions for you.