6 common mistakes that people commit when investing their money in the bag and how to avoid them |The Economist

Con la pandemia y los confinamientos se desató un boom de inversionistas jóvenes que por primera vez entraron a operar en los mercados de valores.

Many young people who had savings - especially in developed countries - dared to negotiate in the stock market.

One of the engines of this fever has been the rapid expansion of online brokers, or online bag runners, which through an application on the mobile phone opened the doors to the inexperienced adventurers with the collection of very low commissions (oreven no commission) for the service.

But just as online intermediaries have grown, the failures of the inexperiences have also increased that, after reading a little, believe they can launch into the water following the advice of friends or influencers on social networks.

In parallel to online operators, the traditional investment banks or stockbrokers who offer analysis and recommendations in exchange for a payment for their services that, in some cases, can become quite high.

Whatever you choose, if you want to invest in the stock market you have to have an intermediary to connect your funds with the stock market;That is, execute your purchase and sale orders.

And that broker must be registered in the face of the regulatory authority of each country to be able to carry out the transaction.

Draw for that step, you will have to analyze whether you want to invest in variable income instruments (such as actions or funds) or in fixed income instruments (such as bonds).

It all depends on how much you are willing to risk.At greater risk, greater possibility of earning more money.And at a lower risk, the profitability you can achieve with your investment will be reduced.

"It is key to know your risk profile," Hugo Osorio, Deputy Manager of Investment Strategies of the Financier Services Falcom Asset Manager tells BBC.

These are some of the main mistakes made by rookie investors when they decide to put their money in stock markets.

1. Look in the short term

One of the most common mistakes among those who begin to invest is to look for short -term profits."The minimum is to put on a three -year horizon," explains Osorio.

Those who dedicate themselves to investing professionally usually thinking about getting long -term profits, precisely to avoid bags of the bags.

With that in mind, the greater the amount of money invested, the greater the yields that you will win over time.

As money adds interest, the reinvestment will also grow.This is called the compound interest;That is, earn more money with your own money.

2. Do not diversify

This is a basic rule for any investor, beyond having little money.

You cannot put all the funds in the same place.That is why experts talk about having a diversified portfolio, with a part of your resources invested in variable income instruments and another part for fixed income.

In countries such as the United States, the idea of investing 60% of funds for variable income and the other 40% for fixed income is common, but that formula is not usually recommended for investors that are just being initiated in stock markets, Osorio warns.

The most advisable thing is to start investing in a cautious way, building a portfolio (investment portfolio) with different types of financial assets and with different levels of risk exposure.

Like when you go to the supermarket and put different products in the basket.You can combine, for example, actions, funds, bonds.And if you have more resources, you can add coins, raw materials and other more specialized products to the basket.

In the last time the ETF (Exchange Trade Fund, for its acronym in English), which in Spanish are known as funds quoted in the stock market: a product that mixes the world of investment funds and the world of actions.

In any way you decide to invest, just make sure the combination is diversified and adequate for your risk tolerance and your investment objectives.

3. Scare and sell

In stock markets, not all decisions are made with cold mind and, although expectations are based on technical analysis, there are always irrational or unconscious elements that come into play.

If you manage to resist a strong stock market drop without selling your actions, it is possible that when the rebound comes they win a lot of money.The problem is that when panic is spread, the domino effect can cloud the trial and take you to make hasty decisions.

A close example is what happened last year with the Covid-19 Pandemia.The following graph shows the impact of market volatility for 2020.

If your gaze is put in the long term, theoretically a strong fall should not drive yourself to sell in the middle of the storm.

4. Invest without considering your risk profile (or having an investment plan)

We all have a different risk profile.

A good analysis of the limits of your financial conditions and the objectives you pursue is essential to know what suits you most.

Some of the essential questions are: how much money you can invest, how much you are willing to lose, in what time you expect to achieve profitability, what is the objective of the investment.Do you want to earn fast money in less than a year to finance your studies or want to invest to have a good retirement?

For those who are just beginning on this trip, the recommendation of experts is to seek advice.And to the extent that you study and know how markets work, you will have more tools to risk walking alone.

5. Do not pay attention to commissions and other associated costs

For those who prefer to invest following the recommendations of a specialized advisor, we must compare the commissions that these experts for their service charge.

But not only that.It must also be considered that there are other costs associated with stock transactions that can affect the return you were waiting for.

In fact, if the amount to invest is very low and the final cost of making the transaction is very high, it may not be worth entering the stock market.

Even if you decide to enter the market using an online platform that charges a minimal commission (or none), there are a series of costs that are implicit in all investments.

For example, there are charges for selling and buying assets (sale commission), custody, securities account maintenance or inactivity charges, payments when withdrawing dividends or, for example, costs for changingYour products from one broker to another.

On the other hand, if you work with a foreign intermediary, whose headquarters are in another country, we will have to look if that broker is authorized to perform transactions.

6. Bread to invest

This error can be really serious.If you are starting to invest, it is not advisable to contract debt to make transactions.

There are financial advisors who can press you to invest greater sums of money through loans.

Or even online brokers can harass you with messages to the cell phone so you don't lose "great opportunities."Not surprisingly, there is an expression in English English (Fear of Missing Out, which is something like the fear of losing something), which can take you to invest when you have no money, simply for the fear of losing the moment.

Sometimes these situations occur, for example, when a person has had a good streak and falls into the temptation to borrow to win more.

Like when the players go to the casino or the horse races to bet money and are trapped by the obsession.

Investing can also become addictive.

And, when it comes to values markets, we usually see only one face of the currency: that of the winners.It is common for the media to be full of stories of multimillionaires of humble origin who invested and triumphed.

But studies show that, in practice, in the stock market there are more individual investors who lose money than those who earn.

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