There are many reasons why investors make wrong investment decisions; these are mostly because of their actions and not necessarily because of the market. Most times, investors focus just only on investing money for gains and not on minimizing losses when an investment starts to fail.
Factors responsible for wrong investment decisions made by investors include:
1. Lack of adequate information to make smart investment decisions
Many times, investors make wrong decisions because they lack adequate knowledge to help them make good investment choices. Investors often fail to ask necessary questions, or seek professional advice in order to make smart investment decisions.
2. Lack of diversity of investment
Many investors put all their eggs in one basket. When you diversify your investment, it will help you to always make money no matter what the market brings, and you will not lose as much if a particular market fails.
Procrastination is a mistake that can easily be avoided. Sometimes, after getting all the necessary information, investors seek to wait for a right moment to invest. Although, it is good to exercise patience, but many times, investors wait for too long on the sidelines while the investment opportunity pass them by.
It is difficult to make smart investment decisions when investors are emotional. Sometimes, investor’s affection for a particular investment or fear of being wrong hinders many investors from making smart investment decisions.
5. Lack of regular and proper monitoring of investment
Many investors fail to regularly monitor and review how their investments are doing. They sometimes do not realise it when their investment starts to underperform. Regular and proper monitoring of investment will help investors to know when to cut their losses.
Zubair Ghias graduated from the University of Chicago with a degree in Economics. He is the president of Acanthus Capital, LLC – A company that invests in and manages commercial and residential real estate, private equity investments, and aerospace and aviation industries.