Hey there! It’s Baku again, here to talk about a very important investing mistake that hopefully you are NOT making.
Mistakes are normal, whoever you are. However, you should always do your best to make sure to avoid errors as much as possible. And of course, the bigger the potential mistake, the more cautious you should be in avoiding it.
There are a LOT of possible mistakes that an investor can make (and we’ll make a blog about those soon). But there is the #1 mistake that I notice that so many of the investors, and especially new investors, that I talk with make over and over again: The mistake of not learning enough about investing… but they still invest their money!
Learning in this era is easy, as everything is already in the internet (and sometimes even for free). And with just a few hand gestures, you can start reading or watching guides and lectures on any topic! So it’s kind of uncanny that people still make the mistake of not learning about investing.
The Dangers Of Investing Without Proper Knowledge
This should be obvious, but investing without learning will cost you money.
- Not understanding basic concepts like balancing risk and return will result to investments with bad or mediocre profits, or perhaps even HUGE losses.
- Not understanding the importance of an emergency fund in relation to investments will force you to sell your investments at a loss when you need cash right away.
- Not understanding how to choose between your investing options might result in you choosing the worst one, and losing money on it! (Not all stocks are good investments, and not all properties are good real estate investments. You have to LEARN to choose the correct stocks and properties to make good profit and avoid losses!)
- You might get scammed easily, since you don’t even know the basics of spotting which investing statements are true, and which are false.
- And so many other dangers of being too unaware about investing basics!
Why Do Many Investors Skip Learning?
There is no quiz or license that you need to start investing. If you have the money to buy stocks, real properties, or any other investment, then you can start investing.
In other words, learning about investments is technically not necessary to start being an investor. (But of course, you need to learn if you want to be a GOOD investor!)
Since money is really the only main requirement, a lot of investors rush towards investing without even learning the basics, which of course, is a HUGE mistake! This is essentially gambling, not investing.
Also, even when a person understands that they need to educate themselves first, they might not know what topics to learn about, and also where to find learning materials.
If you relate to those statements above, don’t worry! Below we present the topics you have to learn before you start to invest. We also write about where you can learn more.
What Topics Should Investors Learn About?
So, let’s say you are that investor that doesn’t really have enough knowledge yet, what should you learn about?
Here is a quick list of things to learn. There are other topics that you can learn about, but these are definitely the most crucial.
#1 What To Do Before You Start Investing
Yes, as it turns out there are things you need to do before you start to even think about investing.
These are usually:
- Determining how much you can invest currently and how much you can add in the future
- Setting up goals for your investment
- Setting up an emergency fund (and why it’s important to always have it)
I know some of you are like, “Set up investing goals? That’s too cheesy! It’s like an elementary homework”, and I can understand that sort of mentality since I used to think like that too.
But without doing so, you will not be able to choose the right investment for you. You also won’t know when to sell your investments and start using the money for your goals.
If you want to learn more about stuff to do before investing, checkout this blog about 7 Easy Steps for Financial Freedom and Wealth. Investing is in the middle step!
#2 Basic Investing Concepts And What They’re For
Risk, returns, inflation and time. These are super basic concepts that investors need to understand. Even beginners should be able to answer the usual questions regarding these concepts.
For example, if an investment can give you profits of about 5%, should you take that investment? (In other words: is 5% returns too low, too high, or just enough?)
Or, how much is the average return for stock market investments? What about real estate? Average returns on bonds?
There are also lessons on what is the best investment for your situation and temperament.
If you can’t answer those, then you’re definitely not ready to invest!
Don’t worry though, we got you covered! We made a blog post about Risk, Returns, and Time so you can start there for this topic.
#3 Basics Of The Investments You Choose
You’re going to have to study the type of investment you want to put your money in.
For example, do you want to invest in stocks? You need to know stuff like what dividends are, what PE ratio is and how to use it, how to pick the right stocks, and some basic investing strategies like cost-averaging (and a few other things).
Do you want to invest in real estate? You need to know how to pick the proper locations and property type, what the “rule of 1%/2%” is, and how much you should pay for the property you purchase or build (and a few other things).
In any type of investments, you’ll need to know the usual profit rate for that investment, how the investment earns profits, how risky it is and what kind of risks you should expect, and a few other things.
If you want to be successful, you have to learn these things. Because investing without knowing these lessons is equivalent to gambling!
IF you think these seems complex, I can assure you that they are NOT! You can probably learn the basics of your chosen investment in a few days of learning.
We have a couple of basic investing guides on the stock market already, if you want to check that out. Click here to start learning about the basics!
We’ll also cover real estate investing in the future, so make sure to like us on Facebook to get updated when we do have new guides.
Where Can You Start Learning?
So, now that you get the general idea that there are a lot of things you need to learn, you’d probably want to know where you can learn them. There are some books that you can read, but you’re probably more interested in blogs and YouTube videos, so I’ll give you a few recommendations.
So, first up, is of course this blog, www.bakufinance.com! We post guides regarding personal finance and responsible investing, so check out our blog from time to time. If you’re a beginner, you can start here.
If you like entertaining and informative videos, you can check out the Two Cents YouTube channel. They teach basically the same things about personal finance and investing.
You can also checkout The Plain Bagel. The channel is more on investing, but they do have some personal finance as well.
The Financial Diet is also a great resource to a LOT of things money-related.
And don’t forget, if there is a word or term or method you don’t understand, you can just quickly google it! Trustworthy websites like www.forbes.com and www.investopedia.com will most likely show up. So just google terms like dividends, bear/bull market, due diligence, escrow, and other terms specific to your investment type that you don’t know about.
What about other channels and blogs? There are so many great ones and we definitely can’t name them all. Besides, too many suggestions might confuse you as to where to start!
However, just be careful to make sure they are legit if you learn from other sources not mentioned above. There are a lot of fake and irresponsible sources out there, so make sure to be vigilant where you get your knowledge from!
Learning Tips To Make Sure You Succeed
- Take your time and don’t rush! Learning from 1 video or 1 blog a day is acceptable especially if you are busy
- Re-read/re-watch important lessons. You’ll be surprised how much you learn the more you repeat the lesson. Also, remember that you don’t have to re-read/re-watch immediately!
- Take notes of important stuff so you can look at it later.
- Talk to someone with the same interests. This helps you remember things, and you might teach or learn something from the other person as well!
There are investors out there that don’t really learn first but still succeeded in investing, and you can do that too! But that seems like gambling and definitely just plain… wrong. Wouldn’t you be more confident if you actually knew what you were doing?
And we know that starting investing can be very fun and exciting, but you have to make sure you know what you’re doing to make sure you don’t lose money on your investments!
We mentioned a couple of resources above, especially YouTube channels that can be informative and fun! We also gave you tips on how you can succeed in learning, so make sure to take note of that!
So, are you ready to learn more? What other information resource do you learn from? Let us know in the comments below!
Good luck and we hope you learned something!
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