When it comes to financial planning, many Perth residents have a “can do” attitude. It seems like a lot of people try to go the “DIY route” when it comes to making investments. While this is admirable, investing is complicated and competitive. Amateur investors often find themselves competing against professional investors who invest for a living. It is easy to guess who usually wins and who usually loses in this scenario.
Here are five common mistakes that DIY investors make.
Failure to Calibrate Goals
The two most common variations of this are too many goals and unrealistic goals. The most common is expecting to much of a return in too short a time with too little to invest. Often, people set a budget that leaves them a miserable current lifestyle. Eventually, they can become bitter towards their budget and derail their own investment plans.
Failure to Invest Sufficient Time and Effort
It takes time and effort to create a budget and an investment plan, with or without a professional investment planner. This could also be called, “Failure to treat investment like a business.”
Failure to Fully Understand Their Investments
Many investors go for grand schemes and complicated investments that they don’t understand. Sometimes, a simple investment such as a rental property in an area primed for long-term capital growth outperforms the most complicated and “promising” of investment schemes.
Failure to Assess One’s Limitations
“Leveraging” is a term often used in the investment field. It means “borrowing money to invest.” While this strategy can amplify gains, it can also do the same to losses. Some investors borrow more than they can afford to lose, because they don’t know their limitations.
Failure to Hire a Professional Financial Planner
Financial planning and investing are competitive fields, especially in Perth. DIY investors risk losing it all. A qualified, professional financial planner can help investors steer around the pitfalls facing the DIY investor.
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