People who start investing without making a list of the pitfalls that novice investors can fall into always make the same mistakes.
buy and sell backwardsDon’t include investments in your personal budget or take unnecessary risks Not planning when and how you will need the money invested,
But financial experts believe there are more, some that even run in our DNA.
“There are failures that are too easy to avoid but it is in our DNA. They buy, sell, or buy backwards or look at the past,” Miguel Camina, CEO of MiCapital, warned. Huh.”
these 13 None of the Apabhrams are financial advisors and economic analysts who spoke with Business Insider Spain What will they do with their money if they start investing now?,
1. Not having a withdrawal plan
If you save (in general) to have money in the future, you are not committed to your savings. And your chances of getting kicked out of your financial cushion are much higher if your savings were for your kids’ university, your dream home. or simply to start investing,
These milestones are known as financial objectives or objectives, and in some cases when and how you will need your money in the future, When you start investing you must have an objective and also a time frame to redeem your money from the financial product.
“As one There is a plan to invest money, there should be a plan to withdraw money, For example, there are people who retire and decide to withdraw €2,000 a month because they want to supplement their pension,” explains Unai Ansejo, co-CEO and founder of Indexa Capital.
“The time also comes when I want to withdraw this money that I had invested because I want to buy a house. Well, this is a good time to withdraw it. Whenever it is needed,” he says .
2. Invest whatever money you have in the stock market
right now, Regular contribution is advised If you are investing in share market. Thus, although the expected return is lower, because you will have the money invested in less time than if you invest it in one go, It inoculates you against market downturnsas advised.
“When a customer invests all his money in May and the stock market goes down in June, July, August and so on, he has no option but to hold. But if you convince him to make staggered investments, said, You keep investing and buying cheaper and cheaper“, cites the example of Camina.
3. Invest for the short term
Yes, there are some people who become millionaires overnight. But really “a lot of money and a little time” are words that should never go together.
“You should know about long term investment, We cannot be overcome by fear. We have had moments this year when the stock market has dropped by 20%. why it’s time to buyUsually when private investors believe it is time to sell is because they are scared”, advises Miguel Useda, investment director at Velgia Management.
“You have to invest with that discretion and Keeping an eye on the long term, without fear of falling, which is exactly when we should take advantage To increase the posts. That’s the key. That’s what will give you higher returns in the long run.”
4. Invest without financial cushion
You can start investing from as little as €100 depending on the type of investment and your financial objective. But that shouldn’t be the only money in your checking account. you need at least Fixed expenses always available between 3 and 6 months,
“What you have to do is put together more or less 9 months’ worth of fixed expenses. That is, what’s called a financial cushion. Once you have it saved up, you just leave it in the checking account without touching it. There from, Now you can start taking risks and you can start investing“, says Ansejo.
5. Sell when the market is down
“If you have the best product in the world, but you sell it when it goes down and you buy it when it goes up, you’ll never make money,” warned Camina.
,It is basically selling and buying backwards., When it goes down you get scared and you sell, when it goes up you get excited and want to buy. Then you are selling low and buying high, This is another fairly common mistake.”
6. Follow up time from the market
Uceda also recommends To avoid this, distribute tickets in different periods time from the market And, above all, think long term.
“Finally, which he invests in the stock market he does it in 10, 12, 20 years, where you have to look, When you invest over that period, small movements in 2023 will look very, very small compared to the strength of the stock market. That’s what I would recommend,” he says.
“There are 3 ways to invest when you have a certain amount of money. The first, which is very wrong, is to try find the best time, You’re almost always wrong, because studies show that people who try to find the best of times end up finding the worst. on average, it They lose between 1 and 1.5% of their profitability trying to find the best moment.Ansejo adds.
7. Holding multiple index funds of the same type
The fact that a sector or market is doing very well does not mean that it will continue to do so in the future or in certain economic contexts. According to Camina, many people believe this to be the case and invest all their money in different funds with a single objective.
“It is very important Funds are not the same as there is a lot going on —For example, you really like a management style and the US stock market —and you go and buy 4 US index funds. It’s fine with one. this is a very common error“, Understand.
8. Invest in a Single Security
Luis Martin, a partner at Ebens, would not bet everything on the shares of a single company.
“never, I have not invested in any stock at any point of time, but generally not for the profitability aspect. concerned with whether such a price goes up or down it’s a tough job in present time. Collective investment systems have shown their efficiency and their ability to try to maintain savings generation,” the expert says.
9. Change financial products frequently
Although in your daily life having your money in an investment fund may make you feel like you are doing nothing, in reality behind each fund are some 200 stocks that a team is evaluating, buying and selling as the opportunity arises. Is. or its limits. of development, explains Camina.
,There is a lot of upheaval even from my own perspective., Things are going backwards. It is not necessary to keep changing investment funds all the time. A fund has a strategy, if you think this strategy is valid then you have to give some time to run it and see it.”
10. Keep money in deposits below inflation
With interest rates rising, deposits began to find some appeal. Still, some experts believe this isn’t enough to fight inflation and protect your finances. As long as you have your emergency fund, without having to commit what you had in deposit.
“It is true that Deposit rates are raising and could be interesting, but of course, with an inflation of 10%, this gives me a bit similar to a 1% deposit. It has no value to me right now. I prefer not to keep the money locked up there and it’s almost in the account,” explains Camina.
11. Keep more than 15% of your portfolio in alternative products
Alternative investments, such as handbags, commodities and cryptocurrencies, are not the favorites of financial experts for portfolios of people starting to invest for the first time.
“If you have something that you particularly like, for whatever reason, you can use it because the reason you are interested in money is fickle. There, everyone does what they want. But with a relatively small amount, so 10% or 15%,” Ascenzo says.
12. Get into debt to start investing
With a few exceptions, such as when you start investing in real estate or starting your own business, Financial advisors strongly advise against borrowing, To start investing more.
Going into debt is a possibility, but we strongly discourage it. One can already take on a lot of risk without going into debt, For example, if you have 3,000 euros and you invest in the indexa with the highest risk portfolio, which is close to 80% variable income, it has already fallen by almost 30% in a bad month. Without indebtedness you already have a very high level of risk,” explains Anejo.
“The worst that can happen to you is that you go down to 0 due to a market crash, lose all your money and have nothing to recover from. Indebtedness often becomes the reason. No need to go into debt, what you have to do is take more risk if you want more profits in the portfolio,” he details.
13. Invest in a fund based on its past performance
This is probably one of the most difficult mistakes to make, because you don’t have a crystal ball to know how it will do in the future, but you can’t trust its past either.
Camina cautions, “What matters to you is not what the fund has done in the past, what matters to you is what it is going to do after you invest.” “There are still many people who enter funds with deposit 20, deposit 30, deposit 40… It was going up to deposit 40, now when you enter, let’s see what happens.”
,You have to invest in a fund or product with your future strategy in mind, Maybe a fund over 30 years is still great and very attractive, but not because it has over 30 years, because it doesn’t matter to you anymore, someone else took it,” he explains. Huh.