When you’re investing money into something new, or even increasing an existing investment, there are some really important things that you need to be cautious of. It can be easy to get carried away with investments when something exciting is happening in the market, but it’s important to do your due diligence to protect yourself and your money. So, we’re here to cover 5 of them today to prepare them for your new investments.
Trends
First up, it’s important to try and avoid big trends in the investment market when you don’t have a thorough understanding of that area. Chasing trends is a common mistake, as seeing someone else do well in an area of course encourages you to do the same, particularly trends on things like social media, which are increasingly drawing less experienced investors into poor investments. For example, NFTs rose massively between 2017 and 2020, with many people jumping on the bandwagon and some NFTs being worth as much as $90 million dollars.
Moving into 2023, NFTs dropped off in value quite significantly, with some of the most popular retaining some value whilst others lost all of it. This is an example of how when you know what you’re doing you can make money, but if you miss the bandwagon even by a day, you could be seriously out of pocket. So, rather than jumping on trends, do your own thorough research and ensure you base your investments on clear data, rather than trends.
Scams
One of the most important things you need to look out for when investing is trading scams. There are very sophisticated and complex trading scams all over the investment space, so knowing how to identify them and avoid them is essential to stop you from losing your money. If anything ever seems slightly too good to be true, or you’re unsure of anything, just don’t commit to the investment and do your research.
You should never give payments or information to anyone you’ve only met online or anyone who calls you claiming to be an investor. Always get a second opinion from an experienced investor, financial advisor, trusted friend or family member. Also, you should never invest in markets or products that you don’t understand through and through. These scams can come in so many different forms, so just make sure you’re not drawn in by the promise of returns.
Market Volatility
You should never invest money that you can’t live without, in any circumstance, but this is particularly the case when it comes to investing in volatile markets. A volatile market is one where prices can move up or down very quickly. As a result, you can quickly lose quite a lot of money if you don’t know what you’re doing. Some experienced investors do well trading in more volatile markets, especially if they have money that they won’t require back quickly and can allow the markets to do their thing. However, if you’re not very experienced, and can’t afford to lose the money, then you should choose lower-risk investment opportunities.
Being Impatient
Something else you should be cautious of when investing is being impatient. Often you need to give your investments time to grow to maximise the profit, which is why you should never invest money that you need short term. Taking all of your money out of your investments because you didn’t get a return in a short period will likely lead to ongoing unsuccessful investments. Quick growth in terms of investment are high risk, and often require high levels of investment, which the majority of people aren’t willing to lose. So, do your research and have trust in your investment.
Putting Off Investing Completely
Many people are very scared of investing, so will put it off completely, however, this way you will likely never get into investing if you want to. Start saving a bit each month to invest with, then put it aside. This way, it’ll be money that you don’t need so it’s lower risk. Whether this is £10 a month, £100 or £1000, every bit counts when it comes to investing.
Even if you’re not experienced, you can invest through banks or other verified businesses to help you navigate this new space. It’s important to be careful when investing for sure, and you shouldn’t just invest in anything (especially if someone is trying to persuade you to invest), but starting out small and growing your investment portfolio is a positive thing to do, even if you are only interested in lower risk investments.
Final Thoughts
Investing can be fantastic, however, it’s so important that you’re cautious and know exactly what you’re doing! From being aware of scams and understanding volatile markets, take some time learning about the industry you’re investing in. Not only will this help to keep your money safe, but will also improve your chances of having a successful investment.