High-risk investment – One thing for sure from an investment is a risk, so if you make an investment must be prepared to face the risk of loss. What if you invested in stocks and mutual funds, investment instruments have up and down occasionally occurred quickly and are not predictable. The turbulence happening, often trigger the fear of investors who make them make mistakes. Here are the 6 mistakes that often done according to investor Warren Buffett:
6 High-risk Investment Mistakes according to Warren Buffett
1. Save cash in the long run
Many people are frightened by the fluctuations in the stock market so choose to save cash in the long run. Buffet admitted that “deposit funds in the form of equity for one day or one week or one year more at risk (both in nominal and purchasing power) than keeping it in the form of cash, ” but he argues that it is much different in the long run. “Because in the long run, the value for money you will experience erosion due to inflation, it was more devastating than the short-term fluctuations that occur in the stock market, ” so light Buffet.
Because of inflation, the value of money will be reduced about 15 to 25 percent in ten years, it is much larger than the fall of stock values in the same time period. Compare if you invested in a period 10 years ago on a classy company shares as in the S&P 500, you will receive more than double since dividends invested during that period, though the stock market had experienced a crisis in the year 2008.
Suggestions: match the investment with the length of time you have. Any money you need in 5 years into the future, keep in reserve cash. But if it is not needed and also invested in stocks bonds to quell the turmoil going on.
2. High-risk investment With Not diversifying
Another mistake that is often made is investing too much in one stock, especially concerned with the place of their work. There are many reasons why people do this, and it still is not a wise decision. If you are only investing in one stock or one type of stock, you can lose all of your investment. Because sometimes the one and the other because a stock could not rise again.
Suggestions: make sure you have at least 30 to 50 stocks individually (with not more than 15% each of its shares) from a variety of industries or survive in mutual funds that diversify the stock with your money.
3. High-risk investment With Wait ” is the right
This is a common reason given when investors are delaying investment, they look forward to when the market is down to buy the stock. It is true that the market will definitely go down, but no one knows when it happened. Buffet explains it this way, “anything could happen in the market. No economist or Advisor, commentator, and TV-and certainly not the Charlie Munger or I can let you know when the chaos would occur. Market observers can fill your ears but can’t fill your purse. ”
But how can you know when to invest? Too early then you will lose, but if you are late you will lose the moment and have to wait again when the market is down.
Suggestions: From on waiting for the market down (never done even by classmates investor Warren Buffet), the time you go into a market that’s what’s important.
“In the 20th century, the United States experienced two world wars and military conflicts which are traumatic and expensive; Depression; a dozen or so recessions and financial panics; the fall of oil prices; swine flu and the resignation of a disgraced President. But the Dow rose from 66 to 11.497. “(Dow Jones Industrial Average was recently down the price closed rated 18.203).
4. High-risk investment With Trading was active
Many people tried his luck with active trading to profit from the fluctuations that occur in the stock market. But if a professional investment manager a lot comes from a well-known business school with access to the latest research results and an intelligent analyst team can’t beat the market consistently, what makes you think you can do it? Then try to conquer the stock market, limit the selling on a portfolio that matches Your timeframe and risk can be tolerated or switching of shares with a high cost to low-cost shares.
5. High-risk investment With Pay the costs too high for managers and investment advisors
Many people do not pay attention to costs and selling for mutual funds or stocks. Some types of stock with the price the cost is quite high, even up to 5-6% of our investment money and it goes into the pockets of brokers who sell stocks. But in the long term, this cost could be lower. As for the cost of the investment advisor usually reaches 1%.
Suggestion: you can minimize the costs while simplifying investment and diversify into mutual funds.
6. Do investment with borrowed money
Just a little investing with borrowed money, because it realized it is very risky. If you borrow to the bank to make investments, it could be your investment and if they succeed, a benefit can only be to cover interest on the loan.
Advice: don’t make investments with borrowed money and don’t make an investment if you still have the debt.
So instead of worrying about the fluctuations in the stock market, the focus to avoid committing 6 errors at the top. If you successfully perform a long-term investment as did Warren Buffet, hopefully, the result will be the same as those he received.