There are a few wrong way of thinking about investment which result in why individual investors often fail miserably. It is good we know them and avoid being one of such investors.

Here are six common fallacies about investment:

1. 'I am too young to plan for retirement'

Have you started planning for your retirement? You may be thinking: "Who, me? I am just 20 why should I be thinking about retirement". It is not so. Rethink. You should have rather started thinking about it yesterday, because time flies quickly.

If you were smart and planned for retirement while you were young, your retirement years will be really those 'golden years'. If not, you will need to compromise and work for a longer period of time, retiring later compared to others.

2. Stock markets can yield quick money

This is a another fallacy. Stock markets reward long-term investors. In stock markets, money is transferred from investors who are fearful and greedy to the investors who are balanced and rational. This is the simple truth.

You need to be calm, patient, disciplined and rational. You don't have to be smarter but more disciplined than the rest.

3. Fixed Deposits(FDs) and Treasury bills(TBs) are the safest and best

There is nothing wrong in investing in fixed deposit (FD) or Treasury Bill (TB) . FDs are really safe and give us fixed returns. But this does not mean that investing all your money in FDs is a good idea. FD will hardly beat inflation at the long run. And if your investments are not beating the rate of inflation, your money is losing its purchasing power. TBs and FDs are safe but not always the best option.

4. I can never be as good as Warren Buffet so why try?

lol...says who? In the words of Warren Buffet: "Success in investing doesn't correlate with IQ once you're above the level of 125. Once you have ordinary intelligence, what you need is the temperament to control the urges that get other people into trouble in investing." You don't need a super brain for making investment decisions. You only need common sense and discipline. If you don't have enough time and expertise, you can get assistance from professionals.

Also, investors often spend a lot of their time in trying to figure out when the market is very low or high, to be able to time the purchase and sale of investments accordingly.

In other words, investors want to exit when the market has reached its top and enter when the market has just reached a bottom. This is not a practical idea because there are so many factors that influence the markets. Predicting all the factors and making investments is practically not possible. Instead,stay invested for a long term.

5. There is no such thing as too much diversification

Diversification is needed but don't over diversify. Having more than 20 stocks or investments can dilute your returns. The reason behind this is you are not only investing in best stocks or the best of investments but also in average and above-average ones. Therefore, your returns are likely to come down. You need to rather concentrate on fewer investments. It is possible to achieve the required diversification with a few but solid investments.Andrew Carnegie said:"The wise man puts all his eggs in one basket and watches the basket".

6. The best way to make money is investing in what is hot

If you are investing in what is hot then you are following the crowd. And if you follow the crowd, you will get what others are getting, and not anything more. You need to be fearful when others are greedy and greedy when others are fearful. Don't go by the market trend or the hot pick of the month. Instead, think like a "contrarian" and follow value investing.

You will be an assured successful investor if you could avoid these investment fallacies.

Great write-up.

You don't invest what you don't have.
What a good way to end my week: 3-2-C!!! This is a good sign my Sunday would be great!

Nice post. I just wish most people will see reason with this

I made 1st page

Thanks. What's so special in being first to comment sef

Talking abt money u re talking abt investment..........wrapping my ............

Nice write up. I made 1st page today...... Yay!!

Nice post

Tanx 4 d info

Until we get there! For now ASUU issue na the matter arising. Eniway u try sha

ighoosagie: as far as i am concern u have not spoken anytin, i prefer u telling us what 2 do , rather than telling us wat not 2 do.

Not doing d wrong tin doesn't mean u av done d right tin.


if u re tellin us not 2 eat garri , i tink u should also tell us wat 2 eat, else we die of hunger.

I would think that wen u know wat not to do, then what to do certainly becomes clearer.....wat u just said, is short of being spoon fed.

Nice stuff!

izeek:


I would think that wen u know wat not to do, then what to do certainly becomes clearer.....wat u just said, is short of being spoon fed.

[size=14pt]its just lik tellin a child dat he shouldn't buy anytin frm mama okoro shop, but u also failed 2 tell him where 2 buy frm[/size]

so people like me that hav pension money paid from my salary, do i still need another investment? i rep #team26-30

ighoosagie: d

Are you ok?

Never u invest all your money or money u can't afford to lose into what u have no idea of or experience

Ok.

Nice 1

Wen its tym, i wil com bak 2 ur post. right now ASUU is delayin me.

pendusky: so people like me that hav pension money paid from my salary, do i still need another investment? i rep #team26-30

Pension money is only but one sure way to secure you future. If you can set aside some amount of ur income as investment, fhat wouod not affect immediate family life or plans, yes go ahead and have an alternative. Afterall wat use is spending all now and seeking help or wallowing.in regrets latter.

ighoosagie: as far as i am concern u have not spoken anytin, i prefer u telling us what 2 do , rather than telling us wat not 2 do.

Not doing d wrong tin doesn't mean u av done d right tin.


if u re tellin us not 2 eat garri , i tink u should also tell us wat 2 eat, else we die of hunger.

Must everything be spelt 4 Ʊ?
Can't Ʊ read inbetween †нэ lines?

ighoosagie: its just lik tellin a child dat he shouldn't buy anytin frm mama okoro shop, but u also fail 2 tell him where 2 buy frm

Are you a child? If yes then the write up is not for you. If you can't figure it out with what not to do, you will get more confused with what to do!

Thanks

1. 'I am too young to plan for retirement'

Why should i plan for early retirement when stats prove that those who retire early die early?