No one is perfect, no aspect of life is mistake free, just as we make mistakes in our daily endeavors, investment decision is not an exception. There is no computer application that can predict the outcome of an investment with 100% certainty. However, there are investment decisions that over years have proven to be bad investment decisions. I will like to discuss some of this mistakes I have noticed myself, the are as follows;
1. MAKING EMOTIONAL INVESTMENT DECISION
Many scholars have emphasized that investment decision is a combo of science and art. Therefore, a good investment decision should be a mixture of science and art. Investment decision should not be based on fear and greed. Investment decisions base on ordinary emotions can cause catastrophic loss of finance.
Investment decision requires a whole lot of patience. Conversely, making hasty decisions, can be disastrous. Many of us have been trained by society to expect “quick reward.” The fact is that, life and the investment world doesn’t operate on the quick reward principles, the investing world demands some degree of patience.For instance, statistics have shown remarkable cases where an investment severely delayed for several years before it turned around and became a top performer. This is not unusual. Thus, if you have chosen an investment that your analysis believes is a good project, you need to exercise some patience and hold it through a complete cycle to allow the manager’s strategy to play itself out.
3. NOT WITHDRAWING WINNINGS
Many investors have lost their life savings to greed, always withdraw you winning, don’t continue to compound your earnings forever, remember the saying
“Nothing last forever”
This highly applicable to investments. When you have a position which has risen and has earned you a reasonable reward, it is usually best to collect some of this rewards. Don’t be greedy take your earnings while you can. For example, I invested my money in a certain platform in the year 2016 , and made a profit of over $1000, but I didn’t harvest it, I decided to compound it, after some months the platform started having issues and later crashed. I lost all my capital and earnings just like that. always withdraw the earnings while you can.
4. INVESTING IN A PROJECT YOU DO NOT UNDERSTAND
Many investors today drift towards fancy–sounding industry. Which the know little or completely nothing about the particular business the company which the want to invest in is carrying on.able to grasp the business of a company, you will have a default built-in advantage over other investors. whenever you can have an unfair advantage over other investors, you should utilize that opportunity to make profit. For instance, it will be a wise investment decision for a lawyer to invest in projects that generate their revenue by means of litigation.
5 INVESTING MORE THAN YOU CAN AFFORD TO LOSE
Investment is full of risk, never invest more than you can afford to lose. investing more than you can afford to lose will not only cripple you financially, it will also damage you psychologically, Don’t ever put yourself in a tight corner of investing money which you need for other reasons. The fact is that, when you invest with money that you can afford to lose, you will be able to see beyond fear of losing your money, hence, allowing to make relaxed and calculative trading decisions. success can be achieved because your decisions are not driven by negative emotions or fear.