Novice investors obviously want to make smart, sound investments; however, newbies tend to fall prey to same pitfalls that have plagued first-timers for decades. For starters, some of the most common investment mistakes include:
- Lacking a plan, including goals, understanding the concept of risk and determining how much to actually allocate toward investments
- Starting too late: by not allowing adequate time for our investments to collect interest or build, it’s difficult to see a remarkable ROI for our efforts
- Allocating one’s time toward the wrong means of research, including news media and television shows promising “get rich quick” schemes.
The last point is probably the most important for first-time investors: that is, how do we know what resources to dedicate our time and energy toward? How do we know if we’re following sound advice versus the flavor of the week? If you’re new to investing and don’t know where to start in terms of doing your homework, consider the following three-point check list as your next step toward smarter, sound investments.
Show Me the Money
Especially in the digital age, there’s an overwhelming amount of resources for uncovering investment opportunities, but many of these resources are little more than marketing snake oil. Since anyone can promise you a get-rich-quick scheme, but how do you know if you’re getting sound investment advice online?
Perhaps the best way to prevent schemes is by following the advice of those with a proven track record when it comes to investing, making money and doing so over a long period of time. Sure, anyone can be a flash-in-the-pan success story offering advice on Facebook; however, how do such “gurus” stack up against a Warren Buffett or George Sorros?
Also consider financial experts those representing a sort of “middle ground,” such as Timothy Sykes, who offers actionable advice for those getting started with penny stocks. Based on his experience making over $4.2 million in profits over the course of many years, Sykes’ story of wealth isn’t a “pie in the sky” twist of fate, but rather a series of smart decisions resulting in success over time.
In short, seek only the advice of those who can back up their claims with cash.
Only Read the Right Books
Warren Buffett’s statement “the more you learn, the more you earn” has sparked an old-school research mentality for modern investors. For example, serial entrepreneur Tai Lopez encourages aspiring millionaires to “read” (or effectively scan) a book per day as a means of expanding one’s business knowledge.
Although there’s certainly sound advice in a number of traditional business books, consider the following pitfalls of the “book per day” approach:
- The amount of time and energy it takes to read and interpret an entire book will inevitably take time out of your day to focus on investments or other aspects of your business
- More often than not, many modern business books are prone to containing mostly “fluff” versus actionable advice
- Physical books can quickly become dated; for example, bestsellers from 30 years ago about marketing and stocks won’t stand the test of time due to modern technology
Therefore, before picking up any business or investment book, you need to know what you’re getting into. Look at ratings and reviews, reading descriptions carefully; likewise, you may find that you benefit more from reading “mindset” or “insight” books such as The Seven Habits of Highly Effective People and then sticking to the web for day-to-day tips.
Take Trends with a Grain of Salt
Finally, it’s prudent that you follow just about any investment trend with a grain of salt. It’s incredibly easy to get caught up in the hype pushed by financial anchors and marketers; however, the volatility of the stock market is pretty much inevitable.
It’s crucial that any budding investor works to immerse themselves in the world of investments as a means of learning versus simply being a bystander. Sure, you should be aware of day-to-day trends; however, be wary of the hype of anything that seems too good to be true.
Being a successful investor is long-game of trial and error; therefore, first-timers should do everything they can to follow the best advice possible. By focusing carefully on what sources you dedicate your time and energy toward, you may find yourself on the path to wiser investments versus marketing noise.