With the way the markets have been this year, I can’t help but be reminded of some of the most common mistakes investors make that end up having a significant impact on their finances over the long term. I have compiled a list of the most common ones we see from working in the financial planning industry.
Some times you have all the information accessible, but still don’t know what to look for. In most cases, people ignore what they can’t understand rather than trying to understand a concept. The same goes for investing, when people try to look for opportunities in the market, they usually don’t know where to look and what are they looking for. When people are overloaded with information that they find difficult to put meaning to, they look for trends. Investors fear buying in when the market might go down soon after, or when it has been going down in the recent past. When in reality we know markets go up more than they go down, over the long run. What happens tomorrow won’t have a major impact on your success 20 years from now.
People generally think when they are buying a business, that it’s a good business. Otherwise, why would you buy it? In many cases that might even be true. But the real question is, “Are you buying a good business at a good price?” That’s where the intrinsic value of the business comes to play. Imagine buying a Toyota Camry for $100,000. Is it a good car? Most would agree that it is. Would people pay $100,000 for a Camry? I think it’s safe to say not too many people would pay that much for it. In this example, intrinsic value (approximately $30,000) is not the same as market value ($100,000). The same goes with businesses as well, you don’t want to buy a good business at a bad price, because that would still make it a bad investment.
Buying or selling stocks whenever you get the urge is dangerous. This is especially prevalent in market conditions like the one we’re currently in. Let’s take an analogy, say you bought a house 5 months ago for $500,000. In the last 5 months, nothing major has happened to your financial condition, and neither has anything happened to the condition of the house. Today, if someone came to your door step and offered you $400,000 for your house, what would you say? In most cases, you would not sell the house. Then why do the same with your investment portfolio?
Investing can be tricky, and a small mistake could cost you years’ worth of returns. Don’t hesitate to contact us for a free consultation.
- Jai Gandhi, Licensed Assistant
Jai Gandhi is a Licensed Assistant at Endeavour Wealth Management with iA Private Wealth, an award-winning office as recognized by the Carson Group. Endeavour Wealth Management provides comprehensive wealth management planning for business owners, professionals and individual families.
This information has been prepared by Jai Gandhi who is a Licensed Assistant for iA Private Wealth and does not necessarily reflect the opinion of iA Private Wealth. The information contained in this newsletter comes from sources we believe reliable, but we cannot guarantee its accuracy or reliability. The opinions expressed are based on ananalys is and interpretation dating from the date of publication and are subject to change without notice. Furthermore, they do not constitute an offeror solicitation to buy or sell any of the securities mentioned. The information contained here in may not apply to all types of investors. The Investment Advisor can open accounts only in the provinces in which they are registered.
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