Have you ever been enticed by an intriguing ‘get rich quick’ investment offer? Or, are you the type of person to fall for the typical internet investment scam promising you millions? If you answered ‘yes’ to either of the questions, you can probably consider yourself a perfect candidate for a class on ‘Avoiding Investment Mistakes. One point you will undoubtedly get from the investment pros is: “There is no such thing as a free lunch”. Successful investing requires knowledge, commitment, discipline and patience.
Some of the common mistakes to avoid:
- One of the biggest investing mistakes that you can make is to not invest at all. It is always beneficial to put your money into productive use, what we call, making your money work for you. The amount available for investing will not be the same for everyone, but the key is to start and be confident, which may mean allocating $50 or more a month, based on your income level. Investing is necessary, if your portfolio is to perform above inflation.
- Paying too much for investment services may dramatically affect ‘the bottom line’ – your returns. You should ensure that you are fully informed of the fee structure employed by your investment broker; including management fees and transaction costs, remembering that investment returns should be adjusted for all expenses paid to ascertain the overall performance of your investments.
- Another huge investment mistake is failing to diversify – putting all your eggs in one basket. This may sound cliché, but spreading of investments across the various asset classes is very essential. Because businesses have cycles, whilst one of your investments may be losing, another may be gaining, thus allowing you to positively balance your portfolio returns. Failing to diversify leaves individuals vulnerable to fluctuations in a particular investment security or sector.
- Buying high and selling low is a common mistake of investors, who buy and sell securities. The fundamental principle of investing is buying low and selling high. Typically investors who buy high or sell low most often are either ‘following the band wagon’ or trying to time the market. One of the biggest timing mistakes you can make is to invest in popular stocks after their stock price has increased significantly. Another timing mistake is selling a stock that you think will drop in value. You should not try to time the market on your own, especially if you are not investment savvy. Market timing does not necessarily lead to losses if you rely on the guidance of a professional financial advisor or investment broker. The other side of the buy-high and sell-low mistake can be just as costly. If you bought a stock high and the stock was trading above its current value and then the market no longer sees this value and demand drops, you will then have no choice but to sell and cut your losses. So it is very important that you or your investment broker or advisor, carry out the necessary analysis of the Company’s financial performance in order to ascertain the true value of the company’s stock.
- Another common mistake a lot of investors make is the absence of a reinvestment strategy for their money after the sale of a security. In fact, many investors keep their assets in cash after they make a sale. You may decide to sell an asset to cash in on a gain, but before doing such you must consider the reinvestment option for the cash from the sale of the asset, to ensure that your cash is reinvested at the same or higher rate of return. You may sometimes be frightened by the investment process or simply don’t know what other investments you should try. Again to avoid this problem you should turn to your investment broker or advisor who will be able to help you set up investment goals and help you invest and reinvest your money in securities that will help you reach your financial goals.
To avoid being a victim of these common investment mistakes, you should consider seeking advice from an investment broker or advisor on the pros and cons of investing in any financial asset. Guidance is critical in order to make the right investment decisions and to select the right assets aligned to your investment goals and objectives.
Risk Disclosure
Risk: All investments, depending on their nature, carry a degree of risk and should be carefully considered before making any
decision on an investment or transaction. Please discuss the details of this and all other risks associated with investments with
your Wealth Management Professional.
The buyer of repurchase agreements and other investments are exposed to:
• Interest Rate Risk related to the fair value or future cash flows of a financial instrument
• Credit Risk or risk of loss of principle or interest from the seller’s failure to meet contractual obligations
• Counterparty Risk from the failure to adhere to contractual obligations by each party
• Liquidity Risk from the lack of marketability of an investment
• Operational Risk from the deficiency of the seller’s information and technology and controls system
• Compliance Risk or the risk of financial loss from non-compliance with applicable laws and regulations
• Investments are not deposits and accordingly are not insured
Rights and Obligations: The rights and obligations of the parties to a repurchase agreement are set out in the Master
Repurchase Agreement you may enter into with us and which our Wealth Management Professionals will be happy to discuss
with you.
Separate agreements and further documentation: Your decision to invest in some of the products and services mentioned
in this brochure may require you to sign certain agreements. We recommend that you carefully read the terms and conditions
which are contained in these agreements and which are applicable to the product or service you may request. You can also
request further reading material on each product or service mentioned in this brochure that you may have an interest in.
Our Wealth Management Professionals are available to provide clarification on any concerns that you may have. You are
encouraged to seek further financial or other advice before making any investment decision.