Grayson Rainier, marketing manager at M&G Investments, said many investors make fundamental mistakes that can impact their ability to grow their wealth.
These mistakes, Rainier said, are mainly associated with new investors. Wealthy investors avoid these investment blunders.
The good news is that these mistakes are easy to avoid. The errors can be identified and avoided following a few basic principles.
Here is a list which Rainier provided about investment mistakes to avoid.
Diversify your investments
Wealthy people have always embraced the first rule of investing: diversification. Forgetting to do so can raise your risk profile and impact your investment returns.
There are many opportunities to invest in different geographic locations, intangible and tangible assets, listed or private companies, fine arts, or collectable wines.
By investing in a broad spectrum of assets that all grow at different rates and stages and in varying conditions, the wealthy minimise risk across their investment portfolios.
Don’t try to time the market
Wealthy investors aren’t gamblers and don’t entertain illusions of being able to time the market by buying in before prices rise and then getting out before prices fall.
Timing the market may work once or twice by accident, but it’s bound to end in heartache in the long run.
Even financial analysts and fund managers are unable to accurately predict these market shifts since no two business cycles are the same.
Don’t get emotional about investments
The wealthy aren’t emotional about their investment choices and don’t bother to keep up with the Joneses.
They embrace frugality, remain optimistic, and invest spare money to compound their investment returns.
Even if their portfolios lose substantial value in a market downturn, the wealthy don’t panic.
They realise the losses are only temporary since, over the longer term, markets rebound and produce solid returns.
Rebalance your investment portfolios
Rebalancing your investments is the process of readjusting the overall asset allocation in your portfolio to maintain your original investment objectives.
It’s necessary to do this periodically since investment values move over time, giving better-performing assets a higher weighting.
Rebalancing usually entails buying and selling varying proportions of unit trusts and other assets. It protects your gains.