Last time, I talked about timing as a mistake people make in their financial planning. Here’s two more.
“Investing is easy,” a friend told me, beaming. “Really?” I responded. “Sure, buy low and sell high.” There was nothing I could say. She’d discovered the secret. But there was only one little problem. Most people do exactly the opposite because of emotion, in this case usually better know as fear or uncertainty. But you have to be bold when everyone else is fearful. On the other hand be cautious when everyone else is euphoric.
Another mistake is not spreading the risk. “I’m putting everything into… You can’t lose money in…” Fill in the blanks. In the ‘old days’, we used to invest 100% in a UK Balanced Fund. Nowadays, I’ve seen people go all in to dotcom stocks, gold, real estate, and now the latest – Bitcoins. And double their fun by leveraging. And I’ve seen many go broke. Diversifying the risk certainly isn’t nearly as exciting. But then going broke isn’t all that much fun either.