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Investment Strategies to Avoid

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Investing is not a straight forward way of making money. This is a very flexible endeavor wherein you can make use of different strategies to try and make money. Ask 10 different investors and you might get 10 different answers on what the best strategy is for them. It all depends on your personal preferences, your goals, and your capabilities.

 

Truth be told, you do not have to follow any investment strategy step by step. As a matter of fact, you can create your own based on an existing idea. This is what veterans and experts in the field do. In the search for the best strategy however, you will encounter a couple that you should avoid. Before you jump into investing, I highly recommend that you’ll read some brokerage reviews as the optionsxpress review as http://bestratesin.com/optionsxpress/774/ or the trademonster review like http://bestratesin.com/trademonster/888/ so you’ll have a better understanding of what these investing platforms are capable of. These are some of the worst that you can do due to several reasons.

 

Buy and Hold

The first investment technique that you should be aware of avoiding is buy and hold. This is where you purchase certain amounts of stock and simply hold on to it. This seems very tempting due to the fact that the risk is greatly minimized. You purchase stocks and earn through dividends. But, the risk is low because the reward is almost non-existent.

 

Usually, people who make use of this strategy are “investors” who see this as an alternative to putting their cash in the bank. These are the people who know that they should also invest their money in something but have no idea how exactly to do it so they simply buy a well-known stock and keep it till the end.

 

When the stock price soars up, they do not sell. It then melts away and they still keep the stock because they feel that it is a long term investment. So, in using this strategy, not only do you lose money because of a missed opportunity, but you lose money because of decreased value on your investment which is why this is one of the worst investment strategies that you can make use of.

 

Gold Rush

A lot of investors went after gold in 2011 which pushed the price to record levels, peaking at $1,920 an ounce. However, after peaking the price suddenly fell to around $1,600 an ounce in less than three weeks.

 

The sudden drop was caused by investors looking to make a profit and started selling. Once the price started to go down, more investors got spooked and started selling as well.

 

The price has since went up and down since then but there is no telling how long this will keep up or when and where it will stabilize.

 

Typically, gold has done really well especially in times that the market is volatile. However, because of what happened in 2011 investors have sold their gold and even their stocks to hold onto cash which decreased the reliability of gold in diversifying your portfolio.

 

To this day, most experts and advisors say that it is best to keep gold in your portfolio to a minimum. They recommend that you do not exceed 10% for this. It is still good to have this on your investment portfolio but keep it to a minimum. Simply put, it is very difficult to rely on gold which is why it’s best to keep it low to avoid huge losses.

 

Get Rich Quick!

The biggest pitfall for any aspiring investor is believing the things said in get rich quick books, e-books, conferences, seminars, etc. Before even considering to listen to such strategies, ask yourself this, if what they say is true then why are they sharing their secrets? This means that they do not make use of their own strategies to “get rich quick”. If they do have a lot of money it’s because they are good at sweet talking people into believing their ideas and techniques which are actually bogus.

 

Gambling Problem

It is true that there are risks in investing, but the difference between gambling and investing is that you can basically manage the risk in the latter.

 

You should never, ever create a strategy based on the idea that you are gambling your money. This is not the place to do that. You are looking for a casino if that’s your mind set. Instead, when formulating your strategy you should do your research well and be informed. In this way, you can manage the risk you will be taking and not just keep shooting in the dark.

 

There are a lot of strategies, techniques, and tips that you can pick up from the internet and other people. When all is said and done, you now know what you should avoid and why you should avoid these things. Remember, the most important part about making an investment is keeping yourself educated and up-to-date with the latest trends. There are no shortcuts and no easy way out in the world of financial investment.

 

 

Posted Nov 11, 2012 at 6:17am

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