6 Investment Traps to Avoid

For investors, it’s easy to get trapped by some behaviors which can either be emotional or cognitive because we want to make the best use of the resources available to us.
Making your investment decision is an important step, so whatever you do, please don’t fall into any of these Investment Traps:

1. Don’t Invest without a Plan: One of the biggest mistakes investors make is that they invest money without a single goal other than “making money”. Before you invest a Naira in anything, ask yourself why you’re investing the money in the first place. Retirement, Vacation, Wedding, Education? You wouldn’t take a vacation without first having a destination in mind. So, it’s ideal to do the same with your investments. Plan! Plan !! Plan !!!
2. It’s okay to aim for high returns but don’t over chase performance as this can cause you to buy high and sell low. Choosing investments based on past performance is much like driving a car looking through the rearview mirror. It may work for a short while but eventually, it will lead to big problems.
   In the investment industry, one of the most common disclaimers you will find is “past performance is no indication of future performance.” Despite these words of caution, investors continue to practice the one strategy that does not work consistently — chasing performance.
   Basing your investment strategy on past performance (especially recent performance) can easily backfire. They may be so overvalued that they’ve become riskier choices. Your best bet is to look ahead, understand how the performance fits in with your overall investing strategy, and what else should be considered, and then go for it.
3. Diversify to ensure your portfolio has many different investments. How do you divide your income and what do you allocate for investments, savings, emergency funds etc? Now is the time to think of spreading your money among various investments available on Wealth.ng such as Stocks, Bonds, Eurobonds etc. By investing in more than one asset category, you’ll reduce the risk of losing money and your portfolio’s overall investment returns will have a smoother ride.
4. The market will always move in different directions i.e. Up or Down. Rising rates and significant market volatility will always create anxiety for investors. Stay steady and don’t react to every news.
5. Don’t overestimate your knowledge or underestimate risks. Being overconfident in your investment decisions interferes with your ability to practice good risk management. So take a breathe and take decisions based on your tolerance for risk and your ideal time horizon.
6. Lastly, catching feelings is not allowed. Emotional investing clouds your judgment and can lead you to act in ways that are counterproductive to your financial success. Make sound investment choices by weighing your options, but one thing you should never do is leave your money idle when it can be working hard for you.

Stay Safe and Invest Wisely!