10 COMMON ERRORS OF INVESTORS

10 COMMON ERRORS OF INVESTORS

1.- Not Investigate Enough

We should not confuse an investment with a speculation or a bet. In order to invest in something, we must do a thorough investigation; In the case of shares, it is best to know the business plans, know who holds the important positions, know their financial statements, etc.
In addition, we must be careful with the news: it is proven that the media sometimes exaggerate information about cases of success or failure, we must not believe everything we see.

2.- Not knowing how to measure risk

Remember that any investment is a risk ... and in the worst case you can lose everything. We must be clear about what percentage of our assets we can invest, for this we recommend using the "Risk Formula" to know how much you should risk according to your age.

We present you, the formula to live with risk. It's very simple, you just have to subtract your age from the amount of 100. Ready.

For example, if you are 25 years old, the formula would be like this: 100-25 = 75.
This means that 25% of your savings will go towards low risk investments (such as a promissory note) and 75% goes to high risk investments (such as a business, buying shares, foreign currencies, investment funds, etc.).

The logic of the formula is that the younger you are, the more tolerance you have for risk but you are looking for more profit, therefore a greater percentage of your savings will be for investments of this type. And the bigger you are, you'll invest more in low risk options ... protecting your assets.

But ... the one who does not risk, does not win. The more risk, the greater the gain.

3.- Investing without a clear time horizon

We must know our objectives in the short, medium and long term. If you do not have a clear investment strategy, it is easy to get confused and think that the investment is not going well. We must have investments for the following 5, 10 and 20 years.

4.- Believe in our emotions

Investment is not a matter of "hunches." Not because we like a company means that it will be a good business for you. We must be careful in times of euphoria, and not allow panic or greed to divert us from our plan.

5.- Stay looking at the rearview mirror

Remember that past returns do not guarantee future returns and that an investment decision is made looking forward and not backward.

6.- Do not bear the losses

We must be clear that in the world of investments, it is not always going to win. Know that losses hurt more than profits; "When an investor loses 10% of the value invested, he experiences a stronger psychological effect than when he earns 10%."

Beware of falling into the error of "I do not sell if I am losing, then I will recover". It is recommended to establish exit rules that help us coldly determine when to continue or not with an investment.

7.- Confusing value and cost

It is common to think that an investment is good because the cost of entry is low, but that does not necessarily mean good value or good business. We must seek to invest in quality things, not something that is cheap or fashionable.

8.- Excess confidence

When an investment goes well, we tend to increase the risk to increase our profit, but the markets are variable and it does not always work that way. Respect the risk rules of each of your investments.

9.- Do not diversify

It is a common mistake to have our investment in only one or two assets, or to invest only in Mexican companies for thinking that "we know them better". Here applies the famous phrase "do not put all the eggs in one basket". According to El Economista: For a moderate risk profile, the recommendation is to have 30% in stocks, 45% in bonds, 10% in gold and 15% in cash.

10.- Forget taxes

It is a common mistake not to consider taxes and charges for each financial movement. It is recommended to consult with accountants and experts to avoid paying more than necessary.

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