Your cash doesn’t do much when it sits in a bank account. You earn a little bit of interest, and that’s about it. The problem is that inflation outpaces the interest you earn, meaning you lose money over time.

That’s why investing is essential. You need to put your cash into assets that grow over time and help you retain your wealth. That’s why 38% of all households have investment accounts.

If you want to become the best investor you can be, you can’t afford to make common investing mistakes. Keep reading to learn how you can avoid the common mistakes people make.

Not Understanding your Investments

You may not need to understand much of your investment if you’re buying something like an index fund. You’re investing in all the top companies, so your net worth goes up and down with the market.

However, things change when you buy individual stocks. Not every company on the stock market does well. If you make the wrong choice, your investment may significantly decline.

Understand the companies and assets you invest in to avoid making bad choices. Research what the companies offer, their plans for the future and if there is any extra benefit of investing.

Another option is looking for companies that pay dividends to stockholders and use stock buybacks to increase the value of the stock and dividends.

Being Impatient

Investing is a long-term game. You have to sit on most investments for years or decades before fully realizing your investment gains. Unfortunately, many people don’t have that kind of patience.

Some people make short-term investments in the hopes of quick gains. They try to pick up-and-coming companies and assets that they believe will increase significantly in the short term. When things don’t go their way, they panic and sell because an investment is not doing well.

That leads to many of those people losing money. Stay patient with your investments and keep a long-term outlook to avoid making this mistake.

Trying to Time the Market

Many investors miss opportunities because they wait too long to invest. They see an asset rising in value over time and expect it to crash down eventually. The problem is that this doesn’t always happen.

While there are fluctuations in market value, trying to time those fluctuations is a mistake. You, as an individual, probably won’t be able to spot those trends. In most cases, you’ll miss out on potential gains when investments rise in value more.

Dollar-cost averaging is a much better choice for most people. Set aside money every month to put into your investment of choice. Doing this will give you exposure at several price points and likely lead to a better return over time.

Not Diversifying

Sometimes an investment opportunity looks too good to be true. The company or asset looks like it will take off in the future, so it’s tempting to put everything you have into that investment.

The problem is that it’s rare for things to work out that way.

Even if something does work out, you never know how long it will take for things to take off. In the meantime, you have all your assets tied up in one investment. That means you can’t take advantage of other opportunities.

Spread your risk in different investments to avoid this problem. Hedging your bets means you won’t get wiped out if something does work out, and you have the capital to take advantage of new investments.

Ignoring the News

It’s hard to make informed investment decisions when you aren’t aware of what’s happening in the world. Companies don’t operate in a vacuum, so world events and other things can greatly impact something’s value.

You can’t correctly invest if you aren’t aware of these things. For instance, take a recession. There are signs of these coming, so it’s not always wise to make big financial moves in that environment.

Stay on top of your favorite news sources to keep informed about what’s happening. It can help stop you from making bad financial decisions or give you insight that helps you make investments you wouldn’t know about otherwise.

Ignoring Fees

Do you plan to buy and sell on the market and attempt to make a profit? If so, you’ll have to learn a lot to learn how to read charts and make intelligent decisions. However, that’s possible for anyone to do with some dedication.

But you’ll have more to look out for, depending on your trading strategy. That’s especially true for people who make short-term trades.

You have trading fees on trading platforms you have to consider. You may appear to profit on a short trade, but once you take out buying and selling fees, you end up losing money.

Ensure you understand the fee structure on trading websites to avoid losing trades.

Panicking on Volatility

Things don’t always work as intended with investments. Something can appear to do well for a long time and then crash and burn when you least expect it. While some of those situations are hard to recover from, many companies do fine and eventually recover.

The problem comes when people panic when this happens. They sell their investment for a loss and cement their losses.

It’s important to remember that these things happen occasionally. In most situations, the market will recover, and you’ll recoup your losses. If you panic and sell, you won’t get your money back.

Don’t Fall Victim to Simple Investing Mistakes

While you aren’t likely to lose much money when you make safe investing decisions, there’s always the chance that something will go wrong. You may invest in the wrong asset, invest too much money, or make bad decisions on stocks.

That’s why you need to inform yourself as much as possible to become a smart investor. Avoid the common investing mistakes above to ensure you make the right choices and grow your net worth.

Check out the blog to learn more about the different types of investments and how you can best put your money to work.