When investing, learning from other people’s mistakes can be far cheaper than learning from your own, so we’ve tapped our advisers to see what common pitfalls they’ve seen over their investing journey.
The Echo Chamber of Unfounded Advice
Dylan Stoner: Listening to investment tips from ‘a mate’ often leads to misguided decisions. While there are exceptions, many lack genuine market insight, leading investors astray with overly optimistic predictions about the ‘next big thing.’
Similarly, online forums like Hot Copper are rife with anonymous ‘experts’ whose advice on speculative stocks can be misleading. Recent crackdowns on misinformation highlight the dangers of trusting these unverified sources, where personal agendas often taint the advice given.
Gavin Hanlon: The gap between making a mistake and realising it can be costly. The hype, whether from a pub tip or an online forum, often comes wrapped in language that makes loss seem impossible. However, the reality is starkly different. The key to avoiding such pitfalls is due diligence. Asking pointed questions about a company’s financial health, like inquiring about the balance sheet, can unearth insights that could prevent a regrettable investment decision.
Ignorance & Timing
Georgia Harrison: Venturing into unknown territories without a map is a recipe for disaster, a principle that holds true in investing. Warren Buffet’s advice to steer clear of investing in businesses one doesn’t understand is timeless. Furthermore, the attempt to ‘time the market’ is a folly pursued by many but mastered by none. The market’s top and bottom are elusive, often resulting in missed opportunities during recoveries for those who exit in panic. The adage that ‘time in the market beats timing the market’ serves as a prudent reminder to investors.
Short-Termism & The Looming Crash
Zac Brabin: Fixating on short-term gains or losses can cloud an investor’s long-term vision, leading to reactive decisions and lower returns over time. Creating a process before making decisions, documenting your investment goals or discussing them with your broker can serve as a safeguard against impulsive decisions driven by the euphoria of good news or fear of negative news.
Plenty of pundits build their reputations on predictions of impending crashes, speculative bubbles, and manipulations in the gold and silver markets. On occasion, they will be right, but for how long? The opportunity cost of sitting on the sidelines often outweighs the actual downside of the market correction.
We hope the insights from our trading desk can help you on your investing journey.
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