Working in an investment company, I often hear clients tell me how frightened they feel when it comes to investing for the very first time. I understand fully where this apprehension arises from, after all, investments are not one hundred percent foolproof. However, I also like to encourage people as much as possible to confront this fear head-on. The reason why is simple; fear is often responsible for people making silly little mistakes when investing, which more than likely ends up seeing them lose money in the market. Ultimately, when you lose money so quickly, fear begins to take over your entire thought process.
Fear can take a stronger grip, and before you know it, you can become paralyzed by the whole concept of investing. Investing is a serious subject and should be approached cautiously. However, it should not make you fear every move you make as investing, when done correctly, should offer you that slight buzz. After all, this can be one of the best paths to wealth provided you are prepared to learn from your mistakes.
To help you eliminate that crippling element of fear, I thought I would offer my own experience as to the few causes that I have found why people will tend to lose money when investing. You can therefore see for yourself that there are indeed ways of improving your investing experience.
Understand That Emotions Can Be a Negative Driving Force Behind Some Investing Decisions
It is a fact that investors can make lousy investment decisions based on common emotions, after all, we are all human! The point is to realize when those times occur when it would not be wise to make an investment during and instead refrain at this time. Invest at a time when you are feeling business like and indeed emotionally stable!
Try not to follow the crowd, referred to as herding in investing, or invest on a whim and refrain from buying into overvalued assets. Make yourself a practical and sensible investment plan and use it as your guide, referring to it as much as possible. Be sure to evaluate the current information you have before you and don’t make mistakes based on behavioral finance.
Investing is not a get rich quick scheme, so never enter it with this frame of mind. In fact, quite often, it is slow and steady that wins the investment race!
Understand the Economic and Investment Market Cycles That Make All the Difference to Investments
By watching the cycles of businesses and the economic world, you will soon see how they can either expand or decline. When the market is good, it usually follows that the economy is growing well, and employment is expanding, alongside many other economic factors. However, on the other hand, when inflation rises so too do prices, equaling a slow GDP growth and ultimately stock market values decrease in value.
Additionally, global factors can have a massive effect on the investment market. This often leads to people rushing to sell instead of allowing a period of steadiness to resume, therefore encountering the most likely scenario of losing money.
Sometimes, there is nothing more to do than just to sit tight and wait and watch as your investments rebound, particularly after a market drop. Never be tempted to panic sell during such times.
I have first-hand experience in the stock market as I too, along with many others, have made such mistakes during my very first few months of investing! The point is you must learn from the smaller mistakes to be able to move on and apply the knowledge you have experienced firsthand, to appreciate and understand the often-complex world of investments.
For myself, though I only suffered small losses, it was certainly a wakeup call which merely inspired me to gather as much knowledge and information as I could about how to invest practically in the markets. Overall, it is most certainly worth bearing in mind how occasional losses can and do indeed occur when you enter the world of investments. However, approach your decision making wisely and, by investing in the markets over the long term, you could just make a nice neat and tidy sum as you make your way along a thrilling and enjoyable financial pathway.