Successful investors always seek high returns and for this, they avoid certain mistakes. Find out the mistakes to avoid to get high returns on your investment
Keeping losses to a minimum enables your assets to compound over time, increasing their value. Always strive to keep your portfolio from losing value or impeding your assets’ growth.
Here are 5 mistakes you should avoid to get high returns on your investment.
1. Understand the Investment you make
Warren Buffett, one of the world’s most successful investors, has advised against investing in businesses whose business strategies you can’t understand. Building a diverse portfolio of exchange-traded funds (ETFs) or mutual funds is the best method to avoid this.
If you do decide to invest in specific stocks, be sure you know everything there is to know about the companies they represent.
2. Don’t put all your eggs in one basket
You should put your eggs in different baskets for successful investment. If you put all of your money into one fund or security and it fails, your portfolio could become jumbled. Consider diversity instead.
While this strategy does not guarantee a profit or protect you from losing money, it does help you minimize risk by distributing your assets over a variety of investments and asset types. Stocks, bonds, and cash instruments all fall into this category.
3. Don’t try to time the market
When the stock market is rising, some investors stay fully invested in stock funds, then switch to money market1 or cash equivalents just as the stock market begins to plummet. Investors must know exactly when to exit equities for this technique to work and when it’s time to reinvest in them.
You can stay invested if you design a portfolio that suits your long-term goals and takes your risk tolerance into account. Even when the market is in a state of flux.
4. Don’t buy last year’s winners
Don’t count on last year’s top-performing funds or stocks to repeat their success this year. In any given year, there are just too many factors that might influence stock and bond funds. Economic health, interest rates, consumer confidence, and political difficulties are all factors to consider.
While there’s no assurance that history will repeat itself, you shouldn’t overlook a past-season champion with consistent results and a fund manager with a proven track record.
5. Always think long-term to get high returns on your investment.
Short-term investing may not allow your investments to expand as much as they could. This is especially true if your goal is long-term, like supporting your retirement or your children’s college education. Many investment advisors recommend including stocks in your portfolio for long-term growth.
