When it comes to investing, we often tend to make mistakes. People are most likely to start investing in their 20s and due to various reasons, it doesn’t promise great returns. Here are 5 most common mistakes that people make while investing for their retirement.
1. Not saving enough
The first step is to figure out the amount that needs to be contributed and most of the people don’t end up contributing enough. The average contribution rate of the annual salary is 6% and goes up to 9%. The best solution is to start saving at a very early age (say early 20s) with a 6% contribution every month. Over the years, you can gradually increase the per month contribution
2. Aimlessly Investing
A lot of people often take a big risk by investing blindly in sectors which are going up. It is very risky to invest without proper planning and research. People tend to invest a large amount when the market is good without proper planning and when the market goes down, they aren’t able to get the money back. One has to have a proper plan and need to do research before investing. Once you know where you need to be, you can accordingly focus on the options that will help you achieve your aim.
3. Not knowing all the Options
Everyone plans to invest for their retirement but very few people are aware of all the options that one can invest in. Everyone blindly follows the trend of investing in stocks and not being aware of the other options present in market. One of the options is investing real estate, which can also yield great returns.
4. Not Diversifying
It is very important to diversify your investment and not to put all your money in one stock. People usually invest in four to five different sectors in order to lessen the risk. This helps in balancing the returns.
5. If in doubt, don’t invest
Understanding the best investing option isn’t difficult but one should be aware of the pros and cons of it. One needs to know the the companies they invest in really well before investing. If you can’t understand the trends, or which stocks to invest in, the best way to start is to invest in low risk products.