Knowing what not to do when investing is as important as knowing what to do. If you don’t know what to avoid, you risk repeating the same mistakes throughout your lifetime. Those mistakes will add up and can tank your investment portfolio.
Fortunately, you can avoid these mistakes and build a strong portfolio that safeguards your financial future. Once you learn the common investing mistakes, you’ll be ready to dive in and begin building your portfolio.
1. Choosing Any Investing Platform
Don’t: Choose the wrong investing platform.
Certain investment platforms are geared toward specific types of investments. For instance, there are platforms for advanced traders, professional day traders, ETFs, futures, and more. When you don’t understand the investing platform, you’re more likely to make risky financial decisions that can lead to massive losses.
Do: Choose a fully managed platform with low fees and educational tools to keep you on track.
MoneyLion’s investment account allows you to automate your investments, so you can reach your goals quicker. This fully managed investment tool has zero asset-based management fees and no minimum balance so you can begin immediately. It costs only $1 a month, and that includes full investment services, rebalancing, and trading on your behalf. MoneyLion also offers thematic investing, allowing you to invest based on your personal preferences, such as artificial intelligence or clean energy.
The process is simple. Choose an amount you want to invest, determine your investing comfort zone, pick your goals, and then let MoneyLion create a personalized portfolio for you. Your portfolio can include a mix of bond ETFs and stocks. You can then adjust your portfolio, so it’s more or less aggressive, depending on your interests. Set up recurring deposits to build your balance and let MoneyLion Auto Invest on your behalf.
An investment of as little as $20 a week can turn into $1,000 a year! This platform is ideal for beginners who want to make money but aren’t sure how to choose the right investments.
2. Withdrawing Your Money Often
Don’t: Pull your money out every time you see gains, or you will never build up your nest egg.
When you withdraw money from your investment accounts, the funds can’t produce compounded returns. Allowing your investments to grow means you can enjoy the benefits later, such as when you’re ready to put down a down payment on a house or enjoy an early retirement.
Do: Invest for the future.
Even if you only have a little bit of money to invest, now is the ideal time to start. The first year is generally the most difficult to stick with, but after five to 10 years of building your portfolio, you will feel more financially secure.
3. Not Scheduling Deposits
Don’t: Hold an account without scheduling deposits.
You cannot grow your portfolio if you don’t contribute money to it. Opening an account and not scheduling consistent deposits means you are not taking advantage of compounding interest or consistent growth of your investment. Remember, investing is a long term plan and the sooner you start the greater your gains can be over time.
Do: Set up Auto Invest.
Whether you want to automatically invest $20 or $200 a month, it’s important to get on a schedule. Auto Investing your money teaches you how to budget for automatic withdrawals. This is critical for staying consistent and building your investment account.
4. Not Diversifying Investments
Don’t: Put all your eggs in one basket.
New investors often make the mistake of putting all their money in one or two stocks instead of spreading it out. That can cause people to lose money quickly. For example, assume you invest $100 in a single stock, and that stock drops 50 percent. Then, instead of having $100, you only have $50. Diversifying your portfolio is a common practice of savvy investors. When you diversify your investments, you are dividing your investment into multiple funds, which can help your portfolio remain healthy during market highs and lows.
Do: Choose an option to diversify your investments easily.
If you’re new to investing, it can be challenging to choose the right diversification strategy. MoneyLion will handle this for you. After answering a few questions, we will suggest a profile that includes a variety of low-cost ETFs to help you you grow your investments slowly and steadily.
5. Timing the Market
Don’t: Move your money just because the market is going down.
When the market downturn of 2008-2009 occurred, many people panicked and pulled their investments out of the market. They were happy with themselves as the market continued to drop. However, many failed to get back in, so they didn’t benefit when the market rebounded. See why it literally pays to stay calm and stay invested here.
Do: Stay the course, even if the market is dipping.
The financial markets are subject to volatility; however, with a diversified profile, your investments are likely to rebound if you wait it out. Many people who held funds in the stock market in 2020 experienced major dips, but those who kept their composure and stayed invested saw their portfolio crawl back to as the months went on.
Check out our Lessons Learned from the COVID-19 Crisis article.
6. Not Getting Started
Don’t: Wait to start your investment account.
The longer you wait, the less time you will earn compounded interest on your investments. Compounding means interest builds on interest, allowing your investment to grow.
Do: Open an account early and make consistent deposits.
MoneyLion makes it easy to open a Managed Investment Account. You can open your investment account for just $1 a month and make contributions from an external account or link to your RoarMoney account.
Take These Steps to Start Investing Today
Avoiding these common investing mistakes will put you on the right track to building a nice nest egg. MoneyLion makes it easy to avoid mistakes and stay on track. Download the MoneyLion app, create your account, and sign up for an investment account.
Once you create your account, turn on Auto Invest and start working toward financial freedom.