5 Common Investing Errors and How to Avoid Making Them

This is the time of year when people tend to start thinking about the things that they can do to make their new year better. If one of the items on your list is to invest some of your money (in hopes of making more of it), then you’ve come to the right article.

Before you decide to put some of your hard-earned income into an investing option, we want to share with you five common investing errors that many people tend to make so that you can avoid making them yourself.

Offshore investments. You may see people on television talking about it making offshore investments and doing quite well, but in the “real world” it’s something that you should be pretty cautious (if not downright leery) about. The main reason is because the United States has some pretty strict rules and laws when it comes to regulating investments done overseas. If you don’t do some thorough research beforehand, you could find yourself involved in something that might be profitable, but could also be fraudulent in the process.

Variable annuities. There are insurance companies that will attempt to market a variable annuity as being a really great deal for an investor. Here’s the catch, though: Although the money that you make from this kind of investment is tax-deferred, you will be taxed at your ordinary tax income rate once you make your withdrawal. Plus, if you make an early withdrawal (before the age of 59 ½), you could receive a 10 percent penalty too.

Hedge funds. OK, here’s the thing about a hedge fund. Although every investment requires a bit of risk in order to gain a reward, hedge funds are traditionally for people with lots of money who are not too much moved by the fact that the funds are illiquid. In other words, if matters regarding the fund goes south, it can actually hinder you from liquidating your funds for long periods of time. Another downside is that the fees are extremely high; traditionally two percent of the assets and 20 percent of the profits.

House funds. Brokerage firms came up with a way for them to get a high commission by having you invest into a house fund. Here’s the problem: There is an overwhelming amount of data to support that these kinds of investments tend to underperform. This means that while the brokerage company got money from you on the front end, you don’t receive much of an impressive payout on the back.

Individual stocks. If you’ve been doing research on investments such as binary options, you may have happened upon some articles that have warned you about making certain kinds of stock investments. One type of stock that should go on the very top of the list would be investing into the latest “trend” stock. There are a lot of people who have lost quite a bit of money by making this kind of mistake simply because it seemed “hot” at the time. There’s really no way around the fact that picking a stock on a “hunch” or an “instinct” is simply another form of gambling. Therefore, it is imperative that you get as much information as you possibly can on a stock before you put your money into it.

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