Financial markets are increasingly getting complex
and volatile; so, choosing the right types of
investments is important for long-term financial
security, ADEMOLA ALAWIYE writes
When you are investing in the stock market or
other financial ventures, there is always the risk
that you will lose money. Sometimes this is
because a stock or an investment fails to live up to
its potential. At other times, this is because you
may simply have chosen to invest in the wrong
thing at the wrong time. It is possible to avoid
investment mistakes, but it is also important to
learn from them.
When it comes to making investment decisions,
not many people are capable of calling the shots.
Yet, many people do this, ignoring professional
advice and studies that caution against this. The
consequence can be severe – in some cases,
leading to the loss of investment. In essence, the
investor becomes his or her own enemy.
As an investor, rather than pointing to the economic
situation in the country, studies have shown and
experts say that you will be better off by avoiding
as many mistakes as possible. Some of them are
highlighted below.
Being in a hurry to make returns
Many investors expect quick returns on their
investments, regardless of the nature of the
investment. Such people often get tempted to react
when another investor informs them of how great a
return they made on their investment. But not all
investments can make quick returns. According to
experts, it is safer for investors to take a long-
term view rather than a short-term view, which
many prefer.
“Many Nigerians will insist that they want a stock
in which they can get up to 100 per cent returns in
one month,” the Chief Executive Officer, Caract
Investment Company, Mr. Dayo Awe, says.
According to him, when a broker tells them it is not
possible, they will say the broker is not good and
go to some high-risk companies where they will
lose everything.
Trying to time the market
According to experts, timing the market is
something that most investors have difficulty in
doing on a regular basis. To them, it is therefore
very risk for investors to try to do it on their own.
Failing to boost your portfolio
Financial analysts have continuously advised
investors to diversify their investment portfolio.
This, according to them, will help to minimise their
risks, and ensure depth in investments.
Yet, studies show that many investors don’t bother
to do this. They would rather put their money on
what they consider a sure bet. One big hit and they
are okay. But things don’t always pan out that way,
actually it rarely does.
Getting on the bandwagon
For many investors, it is okay to invest only when
everybody else is doing so. They believe that to be
a sign that they are doing the right thing. But
Sommer, in his article entitled, ‘Joining the
Bandwagon? Don’t Lose Your Balance,’ warned
that this could be a huge mistake.
For those who are easily moved to get on the
bandwagon, he advised, “I’d say, if you can
reliably predict where the market is going, then
jump in feet first – just buy, buy, buy. But if you
don’t know what the future will be, caution is the
wiser course.”
Sticking with ‘a good investment’
Another common mistake investors make is that
when they make an investment that turns out
great, they hold on to it. To them, it is tested and
trusted; a sure bet. They no longer heed warning
signs and are likely to be caught napping when the
investment goes bad. The fact is that what is a
good investment today is not guaranteed to remain
that way tomorrow.
Ignoring professionals
This, according to Awe, is the biggest mistake
shareholders and investors make.
He explains, “Nigerians don’t like to pay for
services; they like to pay for physical goods that
they can see. So, when you say ‘go to your
professional adviser for help as a shareholder,’
they say, ‘Oh, these people are just trying to make
money for themselves; by the way, I know what
they are talking about.’”
Bear in mind that as an investor, you need the
advice of brokers, lawyers, accountants, etc. If you
are into the real estate, you need experts in that
sector. Depending on your own analysis, which
may be limited, is risky.
Failing to admit mistakes
Your broker gives you a piece of advice, you reject
it. However, when you make a loss, you blame it
on him or her. Even if you are reminded of the fact
that you were advised appropriately, you say
things like, “You are my adviser you should have
insisted that I listen to you.”
By doing that, you are unlikely to learn from your
mistakes. According to experts, many people fail to
accept blame for their mistakes with some of them
even insisting that they are right. Such people, who
do not like to admit that they made a wrong
decision, are likely to stick to a bad investment
instead of mitigating further loss. They believe
things will work out eventually, even when the
indicators show they would not.
Making investments you don’t understand
Investing in something you do not understand is
like starting a business you have no knowledge
about. And just as you are likely to fail in the
business, so also it is with the investment. Experts
say investors must do some research and ensure
that their investment decision is the right one
before forging ahead.
Neglecting their investments
Many investors do not track their investments;
they have no clue what is happening to them. And
they seem not to care. When financial statements
and other information from the company in which
they have invested in gets to them, they only go
through if they are certain that it contains
information about profit that they have made.
Many shareholders are guilty of this, according to
Awe.
He says, “In my view, shareholders in that
category need to be more involved in the affairs of
a company; there is no need waiting for a mistake
to be done before you exercise your right. You
need to monitor what the management of the
company is doing, especially if you are really
depending on your investment.”


http://www.punchng.com/business/am-business/mistakes-investors-should-avoid/
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