As the Philippine economy continue to rapidly rise and emerge as one of the strongest growing market, more Filipinos are getting attracted to investing their hard-earned money on assets such as properties and stocks. But the attraction of gaining profitable returns comes with a price. One mistake and you could risk losing all of your life savings in a blink of an eye. This article will guide young professionals planning to venture in to the world of investing by listing the common pitfalls in investments and how to deal with them. Remember, the key to a successful investment is to understand how investments operate and to learn from the experiences of the experts.
1. Investing in an asset you lack knowledge of
One of the most common mistakes of investors is to invest in the shares of business without understanding the organization and operation of the company. It is strongly advisable that you research about the company, its financial structure and its prospects in the market before you invest in it. But if you do not understand completely how the business works, better not invest in it.
2. Assessing the company based on its returns alone
Investors tend to be trapped by their own impatience or greed to gain high returns that they assess the company they will invest in based on its good performance in the market. There is no assurance that this company might continue to do well. Thus, you may suffer heavy loss once its price drops. Choose the company that has already built the reputation of slow but steady progress over time.
3. Getting too attached with the company
When the company they invested in performed well in the market, investors often find it too favorable that they forget there is no guarantee that it will continue to do well. Worst, they might get too attached with it that they never know when to walk away and sell the assets. It is recommended that you set a financial goal for your investments and once you made it, oblige yourself to sell it. Do not go after the returns, but focus more on the money you invested in since over-valuing the asset may backfire on you once its value go into a slump in the market. Better yet, seek the advice of an investment adviser on the best time to sell your assets.
4. Failing to recognize right timing
When the asset performed poorly, investors are inclined to wait until it returns to its original cost, which would further place them in a risky situation. Odds are the asset would continue to decline until it is rendered worthless and they have already missed the opportunity to sell it for a better price. It is wise to keep consistent track of your investments and their performance in the market. Being too emotional with the investment is too dangerous, so decide to let go when signs show it is hopeless. Hiring a financial adviser is beneficial during this time of difficult decision since they could give you expert advice on the asset’s potentials and market condition.
5. Relying too much on negative news headlines
Filipinos love gossips, but do not let it overtake you when tracking the daily movements of the market. Investors commit the mistake of deciding based on what they have heard on the news, which could be deemed as problematic. These news headlines are not unlike gossips which often contain unreliable information. Fluctuations in the market are normal so there is no need to overreact on such changes. But if you need assurance, better seek the perspective of an investment expert to provide you the correct data as well as guide you on what decisions to make.
Mistakes are part of the investment game. After all, there is always room for improvement as long as you identify the problem and commit to never do it again. One may risk losses but a wise investor does not focus on the financial threat; instead, he goes past the challenges and keeps an eye on the long-term rewards.