DIY investment mistakes to avoid – lesson 1, 2 & 3

Let me share some of the errors I made so that you don’t make the same ones.

Going it alone and making investment decisions for yourself can be very costly and there is no-one else to blame but yourself.  It’s scary and it doesn’t have to be that way.  Having a financial best friend in a money mentor helps you steer your finances with knowledge and confidence. 

Let me share some of the lessons I learnt to help you create wealth for your future.

1  The Journey – have a plan and set some goals

You need to know why you’re investing, have a reason, set goals and a timeline for what you are trying to achieve. For example, I need £xx for a deposit to buy a property in xx years, or to have a family, or for my retirement when I am xx years old.

You WILL be investing for at least 5 years or more, so you won’t be checking your investments daily and you need to be patient. 

💡 Don’t invest money that you are going to need in this timeframe.  Work out how much you can afford to put away and leave it alone.

🗒️ A good guide of how much to put away is : Total income minus your ‘essential’ expenses and halve the balance.  Once you’ve put it away don’t touch it, leave it alone to let it grow.

Not having a clearly defined plan of where you are going is like getting on a bus with no destination in mind.  You have to know where you are going in order to get there and know when you have arrived. 🚌

2  Monitoring and patience

It’s important to monitor your investment but checking your portfolio too often can be problematic, upsetting and cause unnecessary worry due to short-term market fluctuations.  Let me show you what I mean.  Which of these portfolios would you choose:

Which of these portfolios would you choose?

C of course, but all actually, all of them are your portfolio at different times of the market cycle.  The market moves everyday but the only way to achieve C is if you stay invested throughout these cycles, don’t panic like I did and sell because the market is dropping, it will turn around quickly and missing out on a few of the best ‘up’ days can have a big impact on your long-term return.  Be patient, stock markets reward patient investors. 💰

3  Don’t go on a buying spree

Know what you are buying.  How does it fit in with your other investments?  Make sure you research and be careful when buying recommendations, you could be duplicating your holding in companies.  The same company could be in more than one fund or you buy funds which have a holding in shares you already have a high holding in.  Holding too many shares in a single company is very risky.  This is something I didn’t think about and is really tricky to do without professional software tools.  Buying sprees can be very costly, each fund has its own ongoing annual fee and when you buy individual shares you pay retail trading costs.  If you make a bad decision and have to reverse this, it will be very expensive for you, so think and be absolutely sure before you buy.  Know where it fits into your portfolio and why it is there. 👛

If you would also like to discuss any of these further, here is a link to my diary Discovery Call Meeting to book a free no obligation chat with me.  I look forward to chatting with you.

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