By editor, MoneywiseIt’s easy to make mistakes when investing and people often fall into the same traps. Here are five of the most-common mistakes to avoid.
1. PUTTING ALL YOUR EGGS IN ONE BASKETInvestment experts agree that investing in just one company, asset class, product or region can be very dangerous. Put bluntly, you need to invest in a range of asset classes from equities to bonds and across different regions from the UK to Asia so if one investment goes bad you won’t lose everything.
If you have a separate pension, remember to check what it’s invested in so your new portfolio isn’t too similar.
2. BACKING LAST YEAR’S WINNERSThe top-performing assets one year can continue to do well or they could just as easily tank the following year. Last year, wheat was the top-performing commodity while Venezuela boasted the hottest stockmarket in the world. But that doesn’t mean investors should pile into those investments this year.
According to Tom Stevenson of Fidelity Worldwide Investment, asset classes bounce around from top to bottom in the performance tables every year.”Unless investors think they can devote the time to study the markets in great detail, a multi-manager or multi-asset fund is often a wise choice.”
3. LEAVING INVESTMENTS TO THE LAST MINUTEIf you’re investing in an Isa, invest earlier rather than later in the tax year to give your money more time to grow in the market over the long run. This will also give you more time to think about what to invest in. “Avoid investing in haste. Don’t invest in the first thing you’re told about.
“There’s nothing more annoying than putting your cash in, only to wish that you’d gone for something else just a little bit later,” advises Andrew Merricks of Skerritts Wealth Management.
4. SWITCHING TOO OFTENAccording to Julian Chillingworth of Rathbones, switching too often becomes a tax on investments due to the costs of buying and selling. “You should invest for the long term; at least five years if you’re investing in equities. Avoid high turnover – if you deal too much, turnover is a tax on investments.”
5. BEING SWAYED BY ADVERTISINGInvestment firms have big budgets and love to advertise their latest funds everywhere. Martin Bamford, managing director of financial planner Informed Choice, says one of the biggest mistakes he sees beginner investors make is buying fad investment funds and getting “suckered into investing in a brand new investment fund just because a lot of money has been spent on advertising”.
He also warns against relying on ‘star fund managers’ who rarely live up to their title and can easily resign or retire.
This article originally appeared on Moneywise Copyright © 2014 Moneywise Publication Ltd. All rights reserved. Distributed by Medialounge AS 
