When considering an investment such as stocks, bonds or other financial instruments and investment products; there are some mistakes you would prefer not to make. Here are some of them and how to avoid them:

1. Borrowing money to invest. No matter how good the investment opportunity or how sure you
are that stock is going to take off, do not take a loan in order to invest. The cost of borrowing money exerts pressure on the expected return and you still have to beat inflation. Not to mention the risk of a negative return or the loss of your capital, while still having to repay the loan.

2. Do not invest for the sake of investing. Have a clear goal in mind when investing. Know
exactly why, for how long and what return you can expect.

3. Don't overestimate the return. You will be tempted to expect hitting the jackpot, but be
conservative. You would rather that your investment over delivers than disappoint.

4. Not determining your appetite for risk upfront. Take into account your age, earning
potential, marital status, current ratio of assets to liabilities etc. More importantly, consider what would happen if the intended investment did not deliver as expected, or worse you lost your capital. Could you recover from such an eventuality? Don't be tempted to ignore any concerns you might have, deal with them.

5. Not doing your homework. When deciding on an investment, don't be lazy. Do some research,
ask questions, study the material or documentation and gather as much knowledge as you can. Some time invested now could save you pain later.

6. Not recognizing that the higher the possible return, the higher the risk. You cannot achieve above average returns without corresponding risk.

7. Not taking into account the cost of the investment. Determine the fees associated with your investment and how this is to be paid; i.e. upfront, monthly or annually or out of the performance. How does it compare to similar products?.

8. Choosing to manage your investment yourself. Unless you are a seasoned and knowledgeable investor, this is not a good idea.

9. Not allowing your investment the necessary time to grow. Investing is like farming. No farmer continually digs up his seed to see if it is growing, neither should you.

10. Husbands that ignore the advice and input of their wives. If your wife is against it or uncertain, be careful. Respect her input and don't ignore her instincts, she might spot some details you've missed.

11. Miss-timing the market. If the train has left the station, you have missed it. Avoid buying high and selling low. You want to anticipate the market, not follow it.

12. Ignoring market trends in favor of a specific investment(s). Invest in the market, not only the product. Study the trends and where the market is heading and pick the product or investment vehicle that best positions you.

There are more mistakes you could possibly make, but these are in my opinion the most common and the most costly ones. Avoid them and you could be a lot happier with the returns on your investments.

Then again, it all depends on whether you picked the right horse to hitch your buggy to...

Learn more about this author, Stephanus Van Schalkwyk.
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