1. Using Money You Cannot Afford to Lose
When it comes to investing for the long-term, consistently investing money every month into the stock market is important. Something also important is making sure you are still able to afford all your necessary monthly bills comfortably. You may hit a hard time, so understanding that you should reduce your monthly investment amount for a few months so that you can afford all your necessities is important to understand.
There is no guarantee that you will make money when it comes to investing. That is why your necessities, such as housing and food, should be something you should cover every month before investing. You should not be investing and then realize you will need to sell investments because you did not properly allocate your budget or had enough money set-up in your emergency fund. Investing for the long-term is important, but your necessities should come first to make sure you are only investing money that you know you are okay with losing.
2. Being Impatient
Investing in the long-term requires patience. Patience is an important aspect of life, but for some reason, people like to rush things that truly cannot be rushed. When you purchase shares of that company you have done a good amount of research on, you must realize that you are purchasing those shares to hold on to them for at least 5 years.
Being impatient can lead to you selling shares you bought when there is a downturn in the market, which will be something you will likely regret when that company stock starts to uptrend. Strong companies like Apple and Microsoft will face temporary periods of downturns. In those periods, you should be looking to double down and buy more shares at low prices. Even though there is no guarantee when it comes to investing, I can confidently promise you that Apple and Microsoft shares 5 years from now will be higher in price than they are today.
3. Not Understanding a Company
Research and due diligence are key aspects of investing. If you have not taken the time to read the 3 financial statements of a company, read research done by experienced analysts, and conduct your own fundamental and technical analysis, you cannot say that you understand a company. Taking 1 to 2 hours out of your day to understand a company you will be investing in for the long-term is an important task. You do not have to become an expert, but if you cannot clearly define a few advantages, areas of growth, and areas of risk for a company, you should truly question why you are invested or want to invest in that company.
4. Over-Listening to the Crowd
Listening to the news is great. I enjoy listening to Bloomberg, CNBC, and Yahoo Finance to stay updated about the markets. Do not allow the news to motivate you into investing in something that you have not researched. Yes, there are up and coming industries and companies that you should start to familiarize yourself with. That does not mean you should be deploying your capital into something unless you have done your research and due diligence and have determined that you are willing to take a risk and be an early investor.