5 Pieces of Terrible Advice for Investors - Quicken Loans Zing Blog

Do you have a large expense you’re saving for in the long term, like a college education or retirement?

Do you have a surplus of disposable income that you’re looking to play around with?

Are you ready to start doing that magical thing where wealthy people turn their money into more money?

Sounds like you’re ready to start investing!

As you prepare to take the plunge into stocks, bonds, ETFs and all of the innovative methods our financial system has devised to make you rich, you’re going to come across a lot of advice. Some of this advice will be from qualified sources. Others – not so much.

To assist you in your quest to obtain the best investment advice possible, we want to make sure you know what truly bad investment advice looks like so you don’t follow it.

Here are five really bad investment recommendations that you should not follow, and why.

Don’t Bother Investing Until You Have a Lot of Money

Bad Advice:

You’re not going to make any substantial returns on your investments until you save up a lump sum and then invest it. What’s the point in putting $20 or $50 or $100 into an investment account? You’re only going to make a few cents to a couple of dollars anyway. Wait until you’ve saved up a good chunk of change, and then go for it.

Why That’s Wrong:

Investing is not exclusively for rich people who frequently have thousands of dollars to buy stocks. Many brokerage accounts allow you to start accounts with as little as a few dollars. You don’t need to plop down serious cash to get started.

If you wait to get started, you could end up missing the opportunity to earn returns, or life could get in the way and you could not invest at all. Any good long-term savings and investment plan should include regular contributions. It doesn’t matter how small the contributions are;investing is about growth over the long haul. These seemingly small contributions will add up and pay dividends over time.

You Don’t Need to Understand It; You Just Need to Invest in It

Bad Advice:

Investment opportunities are complex – too complex to be understood by most of the people who put money into them. Just trust the people who are selling the investments to you. They wouldn’t steer you wrong.

Why That’s Wrong:

You should never put your money into investments that you don’t understand. Your investment performance is dependent upon the financial success of the companies that you invest in. So why would you buy into a mutual fund if you don’t know which companies make it up, or why would you buy the stock of a company if you don’t know what they do?

Be Super Aggressive. Go Big or Go Home!

Bad Advice:

You have to spend money to make money, right? If a great opportunity comes along, bet big. Nobody made a fortune sitting on the sidelines. If you want to make a lot of money in a short period of time, you need to invest big and often.

Why That’s Wrong:

Smart investing is about growing your money over the long haul. Not only should you not invest more than you can afford to lose, but investment opportunities that carry big short-term growth potential also carry huge risks.

Think about it. If there was a reliable way to make huge sums of money quickly without risk, don’t you think everyone else would know about it and want in? Instead, figure out an amount of money that you can afford, and invest in a portfolio that’s tailored to your goals and your timeline.

Take retirement investments for example. Someone who is just getting started in their 20s has a lot more time to ride out small fluctuations in the market, compared to someone who is 50 and just starting out. So the 20-year-old can afford to be a little more aggressive, as losses have more time to bounce back.

Work with a financial planner to figure out a strategy that makes sense for you. And never invest more than you can afford to lose.

Don’t Waste Your Time Watching the Results

Bad Advice:

You don’t need to concern yourself with the day-to-day performance of your investments. Just trust the experts. They’re the ones you pay to keep an eye on your money.

Why That’s Wrong:

It’s your money, so don’t you have a vested interest in keeping an eye on it?

While it’s true that you shouldn’t overreact to every fluctuation in the financial markets, you should also not turn a blind eye to what’s happening. Regardless of whether you’re paying someone to manage your portfolio or doing it yourself through a self-administered online service, knowledge is power.

The more active you are in learning about your portfolio, the better decisions you’ll make, and the better your performance will be.

If You Experience Losses, Panic

Bad Advice:

The minute your investments start losing money, cut your losses and sell.

Why That’s Wrong:

All investments carry the risk of losses. But any prudent investor is in it for the long haul, where the trend is always positive. Look at growth over a period of 10 to 20 years, instead of 10 to 20 days. Individual investments can fluctuate over a short timeline. Stocks go up and stocks go down. If you react to every bad day by selling, you turn potential losses into actual ones.

But if you’re patient, choose a balanced portfolio and think about the long-term growth potential, you can easily weather the ups and downs and volatility of the markets and grow your money over time.

Be patient, do your homework, keep an eye on your money and invest over the long term, and you should be just fine.

Ready to get started? We’ve got you covered. Take a look at these helpful Zing Blog guides before you head to Wall Street:

Investing: Should I Do It?

Four Simple Steps to Start Investing

Stock Market 101: Understanding the Basics

 

Related Posts

Leave a Reply

Your email address will not be published. Required fields are marked *