5 Risky Moves for First-Time Investors

It seems like everyone is getting into the investment game these days, from your grandma to your little brother. And if you’re the last one to jump on the bandwagon, you’re missing out on the prospect of making your money work for you. But before you hand over your hard-earned money for someone to invest willy-nilly, you need to do at least a little homework to ensure that your funds are being invested wisely. After all, as a first-time investor you might be prone to taking risks that more experienced players are likely to avoid. Here are just a few risky investing moves that you might want to steer clear of, at least until you’re comfortable with the process.

  1. E-Trade. Just because you can open an account and start investing your money the same day doesn’t make you a stock broker. You might as well be dropping your dough at a roulette table in Vegas, except the odds there are better since you probably have a decent understanding of how roulette is played. In short, jumping into the deep end with your personal investments is probably not a great idea. You need to formulate a strategy, learn to play the market, and build a stable and diverse portfolio before you strike out alone. So think about starting off with a professional broker who can guide you through the tricky waters of the investment world.
  2. Putting all your eggs in one basket. You’ve probably heard about the benefits of a diverse portfolio, but that might not stop you from putting all your money into one “sure thing” if you believe it’s going to pay off big. However, this is a very dangerous way to invest. If you’re wrong, you stand to lose everything.
  3. Neglecting long-term investments. 401K plans, Roth IRAs, and even CDs may not seem very sexy when compared to playing the stock market, and these low-risk options certainly don’t deliver the immediate returns that higher-risk stocks can. But over time they can work as part of an overall investment strategy that ensures you have the money you need for future purchases or to retire in comfort.
  4. House flipping. In most cases, investing in real estate is a pretty smart move, and many people start out by purchasing a primary residence that they plan to keep for many years, increasing the value through repairs and upgrades for eventual resale at a much higher price. Some people even go so far as to buy rental properties, or even put their money into real estate investment trusts (REITs), a popular option of late. And flipping houses has become a rather popular investment strategy, especially for those that are handy around the house. However, it is fraught with risk for inexperienced investors. If you choose a property that has too many issues or you are unable to sell it quickly after renovations, you could find yourself with a financial monkey on your back that leads to loss of investment capital and even bankruptcy.
  5. Binary options. The simplicity of binary options, which feature an all-or-nothing outcome (i.e. you win or you lose, with no middle ground, hence the term “binary”) may appeal to new investors who find the stock market more than a little confusing. However, this type of investing is best left for those who are a little more experienced. Although you can definitely get help from professionals via sites like http://www.callandput.com/ , you might want to wait until you have a better grasp of investing as a whole before you take an all-or-nothing approach.

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