Pitfalls to avoid when investing

If you are new to investing there may be some things you should be aware of before you simply choose (or not choose) the first investment that comes along. Knowing what to avoid can help you make smart investing decisions and most importantly help you make the most of your investment money.Here are some pitfalls to avoid when investing-

• Being so overwhelmed you do not nothing at all-It is important to keep in mind that while there is no guarantee that the market will go up the first day, month, or even year that you invest in it, there is one guarantee: Doing nothing at all will not make you money, help you provide for a comfortable retirement or achieve the other financial goals you want to.
• Investing before you pay off (or at least down) your credit card debt- Financial experts advise that if you have money in your savings account and you have revolving debt on your credit card you should pay it off. This is especially true if your credit cards have an annual interest rate of 15% or more. The bottom line is that there is not an investment that will help you beat the interest you are paying. Pay the debt off first, and then think about investing.
• Investing only for the short term-One of the basic principles of investing is knowing you are in it for the long term. You should only invest money for the short term that you are actually going to need in the short term. Financial experts advise that you should only invest money in the stock market that you will not need for at least three years, and preferably five years or longer. Keep in mind that if you will need your cash next year for a down payment on a house or for the family Caribbean cruise, you should use one of the shorter term and safer havens for your cash, such as money market funds or CDs.
• Starting to invest late-While beginning to invest is better then doing nothing at all you should understand how much potential money you have lost by coming to the party later. The bottom line is the earlier you start the better off you will be.
• Turning down free money-While you would never turn down a dollar if it was offered with no strings attached keep in mind that is what you are doing if your company offers a 401(k) or similar retirement savings plan with an employer match and you are not participating. Every investor should take advantage of all tax-advantaged, employer-matched savings programs.
• Playing it to safe-Keep in mind that if you are young most of your investing dollars should be in the stock market. This is because you have enough time to weather any dips in the market and to reap the rewards of long-term gains. Although you may want to transition into bonds later in life as you depend on your investments for income, stocks should still make up a large portion of the portfolio of every investor.
• Playing it to wild-It is important to realize that not every investment is for everyone however even if you are a daredevil, you should not pour all of your money into something that could end up going down the drain. The bottom line is never invest money that you really cannot afford to lose.
• Trading in and out of the market-Financial experts universally agree that the best approach to investing is the long-term one. If you pick your investments well you will reap greater rewards over the long term than you had ever dreamed possible. If you continue to trade in and out of the market you will be saddled with fees that chip away at your returns, and you will potentially miss out on gains that long-term investors enjoy with much less effort.