3 Biggest Investing Mistakes to Avoid

By Lifestyle and BudgetFOXBusiness

Getting started with investing can be daunting given the seemingly endless amount of options and information available. The good news is that a military background can help prepare you to successfully navigate the markets.

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Some of the same skills needed to succeed in the market are ones used by military personnel every day. Discipline, attention to detail and calmness under pressure are applicable in all facets of life, but are especially necessary when trying to avoid the pitfalls of the investing world.

Beginners and professionals alike have to deal with the volatility and unpredictability of an ever-changing landscape. Here are three of the biggest investing mistakes to avoid along the way.

Doing Nothing

One of the biggest mistakes people make is doing nothing, according to Jean Wilczynski, who served seven years in the Coast Guard and is now a financial advisor at Exencial Wealth Advisors. Many times, out of fear of making the wrong decision, potential investors put things off and don’t do anything; wasting precious time.

What is the best way to get past this fear and get started? Take charge, make time and make a decision. Before that decision, though, you need a plan.

“Not having a plan for your future and letting it flow is not smart. Even small plans are better than none,” says Wilczynski.

Step one of planning is to take a look at what you’re doing today: expenses, income, where you currently have your money, and then think through the next few years and where you want to be.

You’ll also need to envision your time horizon: thinking about when you’ll actually have to access your money, says T. Michelle Jones, vice president at Bryn Mawr Trust. Planning out a timeline is important to ensure that you’ll have cash available and accessible when you need it.

Investing for something specific like college tuition has more of a clear time horizon, since you know you have X amount of years before you’ll need the money. When investing for retirement though, investors need to factor in retirement age and life expectancy (or how long you will be living off your investments).

It is essential to have -- and stick to -- a plan that is specific to your goals and objectives.

Trying to Time the Market

So you’ve decided to act, and devised a plan you’re going to stick to, but when is the right time to dive in? Investors often make the mistake of trying to time the market. In reality, there may never be a “perfect time” to get in, so don’t get too fancy with this; sticking to your plan and objectives is more important than timing.

“It’s a mistake to think you, or an expert, can outsmart the market,” Wilczynski says.

You have to keep in mind that when investing for the long term, the period of time you’ve invested often has more of an impact than the exact moment you start, making it more important to get in the game than worry about timing.

With all the fluctuations the markets undergo, you don’t want to spend your time watching on the sidelines waiting for a downturn in the market. If it never comes, you could end up wasting months or years. When your plan is ready, go for it.

Letting Emotion Take Over

Another common mistake made by investors is letting their emotions take over.

All markets experience fluctuation and volatility; it’s natural and to be expected. Not getting too high or too low as your investments rise or fall is essential.

There is no shortage of information or opinions out there, so it’s important to remove your emotions from the equation and not overreact to one thing, always keeping the big picture and end goal in mind. Jones says that letting emotions take over “causes people to buy when stocks are high, and sell when stocks are low, when you should be doing the opposite.”

It’s important to stay even-keeled and take a more long-term view. Panicking or getting overly excited will cloud your judgment and throw a wrench into your plan, so as hard as it is, try to stay rational. Even the best strategies can be undermined by poor execution, so stay disciplined.

Like a mission or an operation, there are many factors that contribute to success in investing. You need to take charge of the situation, have a plan of attack and then execute correctly. The right plan, clear objectives and some patience can help set you up to succeed in the investing world.

However, just because something works today or has worked in the past doesn’t guarantee future success, so reevaluating as you go is essential.

A wise investor can’t be afraid to say, “This isn’t working,” and shouldn’t be ashamed to seek out help or guidance along the way, Wilczynski says. There’s no foolproof plan, but putting those military skills to use can help get you ahead of the game.

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