It is too easy to make costly mistakes with business investments, especially when you are not armed with the right information and knowledge to guide you. Here are 5 costly mistakes people make with business investments.
Investing Money They’ll Need Soon
Avoid these kinds of investments that are just based on speculation and market timing. If you are setting money aside for a goal, the money shouldn’t be considered or used for sudden and unplanned investments, especially those that are likely to keep your money on lockdown for a long period of time. You can easily end up regretting it when important and time-sensitive expenses come up.
Not Doing Their Homework
Before investing in any business, it is extremely important to do your homework and research to know the ‘ins and outs of the underlying business’. It is important to understand how the business grows, makes profits and basically, the rubrics of the business. Before engaging in any business investment, you should always remember Peter Lynch’s investment maxim, which states clearly that you should ‘Invest in what you know’.
Neglecting Legal Counsel
Neglecting legal counsel on business investments is a highly risky, and it can result in damaging consequences. A lot of first-time investors believe that lawyers are just out to get their money, and while that might be partly true, the legal counsel from these lawyers are also very valuable and vital in protecting your interests and resources in any business investment, especially if things unexpectedly go wrong. For example, consider the case of a designer that unknowingly signed a contract that gave her handbag company the trademark to her name. When investors eventually came in, her company name belonged to them, and she was pained by the fact that she could no longer use her own company name. She wished she had gotten a lawyer to give her proper legal counsel. Therefore, it is very necessary to get the right attorney who understands your business goals and can protect your interests well.
Being Emotional With Investments
Mixing emotions with business or money can be very costly, you need to remain as focused, logical and rational as possible. Don’t be an investor that invests without tangible information or evidence, and don’t be an investor that invests based on a hope or desire that things will pull through or get better. Think well and be logical and rational about investments. The two most important emotions you should guard against in making business investments is fear and false hope. According to Aol Finance, basic signs of an emotional investor include: holding on to a failing stock thinking it will come back at some point; selling a stock at the first sign of a loss; and being glued to the financial news cycle.
Try to avoid not investing early enough because all it really results in is losing good opportunities to grow your money. Stop with the excuses that make you postpone investments, and just do it.[Read: There are now nearly 40 colleges in the US where a 4-year degree costs more than $250,000]