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Ibrahim Mustapha Blog of Wednesday, 4 January 2023
Here are the top 5 investment mistakes to avoid, along with some examples
1. Not diversifying your portfolio: Putting all of your money into one investment, or a small number of investments, can be risky. For example, if you invest all of your money in a single stock and that stock performs poorly, you could lose a significant amount of money. Diversifying your portfolio means investing in a range of different asset classes, such as stocks, bonds, and cash, to spread out your risk.
2. Chasing returns: It's natural to want to invest in the investments that have performed the best in the past, but it's important to remember that past performance does not guarantee future results. For example, if you invest in a stock because it has had high returns in the past, but the company's business model is no longer viable, you could still lose money.
3. Not having a plan: It's important to have a clear investment plan in place, with specific goals and a timeline for achieving them. Without a plan, you may make impulsive investment decisions or be swayed by short-term market fluctuations.
4. Not considering your risk tolerance: Different investments carry different levels of risk. It's important to consider your own risk tolerance when choosing investments, as you don't want to invest in something that will cause you undue stress or that you may not be able to stomach if the value of your investment declines.
5. Not staying informed: It's important to stay informed about the investments you hold, as well as the overall market. If you don't keep track of your investments, you may not realize that an investment has declined in value until it's too late to do anything about it.
