The stock market is fluctuating day after day due to a rise in the Fed interest rate, a shortage of material supplies, a crazy rise in house prices, a deformed omicron, the highest inflation in 30 years, and Russia’s invasion of Ukraine. But one thing is clear. The fact is that the stock market has grown at an average annual rate of 16% over the past 13 years.
Ordinary investors believe that investing in good stocks can make a lot of money. So, I want to get good stock information from my family and friends who have made money from investing, and I go a step further and invest a lot of time and devotion to not only focus on stock media but also Internet investment meetings.
People who say they made money from investing simply think that they have made money in a market that has risen by chance, but they are mistaken for choosing a good stock because they are smart. For this reason, both of you become stock experts in a rising stock market, but an investment made in anticipation of a stock jackpot becomes disturbed in a falling market. I can’t even sleep comfortably. Because the investment is like gambling in a casino, there is a very high probability that in the end I will lose my precious money as well as my body and mind.
The lessons I have learned from long experience in economic research institutes and helping individual investors are ‘It’s not because you can’t invest in a good place. Most of the time, it is an investment that should not be made. List the investment mistakes without explanation.
- No clear investment goal
- I do not know the risk of the investment item
- Failure to diversify or incorrect diversification
- Invest in Individual Company Stock
- Invest in stocks floating around people or social media
- Invest in sound and tempting financial products
*Investing in stocks without preparing an emergency fund
- Conceited thinking that you have the ability (?) to invest
- Invest in financial products that guarantee principal
- I gave up investing because I was afraid of the stock market.
- Invest when it is cheap and sell when it is high (Market Timing)
- The illusion that the Illustration diagram will be like that
- Vague thoughts and expectations that financial planners work for the interests of investors
- Invest the money you need within 5 years or pay off debt to invest
- Omit bond investment
- Real estate investment to receive rent and plan for retirement
- Invest according to the rate of return of past investments
- Predicting stock market movements and investing
- Investment decision based on emotion
- Invest in complex and incomprehensible financial products
- Not knowing the total cost of investing
It is a rate of return that doubled investment money with a 100% increase in just 3 years from 31.5% in 2019, 18.4% in 2020, and 28.7% in 2021. It’s no wonder the stock market hasn’t gone down in three years. In March 2020, it fell as much as 34%. Such amazing returns are not the result of investing in well-selected stocks. It is an investment that anyone can receive if they invest in the 500 largest companies in the United States.
After we plant a tree, we wait with time. Do not dig and check often to see if the roots are well established. Because we know that it is harmful to trees. Investing in stocks is similar. The past stock market clearly shows that portfolios formed by asset allocation and diversification are highly likely to lead to successful investments over time.
Myung-Duk Lee, Ph.D., Registered Investment Adviser (RIA)
Copyrighted, Dr. Myung-Duk Lee’s Financial Column All rights reserved.