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28 Aug 2013

How To Avoid Common Investment Mistakes

Investing your money in shares and funds of your choice is often risky, especially for people who lack extensive experience in the field. Here are some of the most common investment pitfalls and how to avoid getting trapped.

According to the Daily Telegraph, one of the biggest mistakes investors make is to buy funds or shares that are not suitable for them. For example, investing far too much money in one region of the world, or selecting an asset class that is too risky for you time-wise. Instead, younger investors should focus on shares in fast growing areas of the world, as long-term returns are likely to be better.

Another potential problem may arise from choosing funds at the top of the market. Basing your decisions on past performances may not reveal the full picture and the fund can plummet soon after you have invested in it. Investing in top performing funds can bring rewards, but make sure you can rely on advice from a good fund manager in an appropriate sector.

Another thing investors should keep in mind is asset allocation. Any financial adviser would tell their clients not to put all their eggs in one basket; if anything went wrong, you would be in a very complicated situation. This is why a balanced investment portfolio is very important, the Telegraph noted. The best way to mitigate risks is to diversify as much as possible, investing in assets such as bonds, equities, property and cash, alternating between bigger and smaller companies.

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