We’ve all heard the cliché that “history is written by the victors.” Well, the world of investing is no different. When it comes to the news, social media, or even conversations with friends, we only hear about the victories. We hear how this influencer sold a digital picture of a monkey for X or how a teenager made Y off a speculative digital currency.
We also hear of the greats, like the Buffett’s and the Munger’s of the world. Those who’ve conquered the financial world through various strategies. There are seemingly countless ways to win in the financial world. However, despite the availability of these winning strategies and approaches, many Americans have found themselves wanting. The gap between the rich and poor seems to be growing wider every day, and the real percentage growth of millionaires in America has not grown in over 20+ years. So, it appears the numbers are speaking loud and clear, people aren't being victorious, but they are actually failing.
So, where are the majority going wrong? From what I have witnessed, studied, and implemented, there are only a handful of reasons why most investors fail. What are these reasons and how can you avoid them? Keep reading to find out.
Reason 1: Bad behavior
When I say bad behavior, I’m not talking about people who stay up past their bedtime or swear too much. I’m referring to choices made out of emotion. As human beings, emotions dictate most of what we do - so it’s understandable why we all use our emotions as part of our decision-making process. However, when it comes to investing, emotions are what can leave many investors shaking their heads in disappointment.
Take the recent trends of NFTs and Cryptocurrencies. For a period, both of these entities were touted as the next big thing to make your fortune. Influencers showcase their purchases in necklaces, and anyone with a crypto wallet would show it to the world at the first sign of a profit. With all this noise, countless people threw their hard-earned money into something they didn’t understand, and although there were some winners, most were losers. As discussed in Episode 12 of my podcast, The Big Bo $how, the average purchase price for Bitcoin was $47,800, about 39% above the current price.
Bad behavior, including the fear of missing out (FOMO), is something that has got people into trouble throughout history and will most likely continue so in the future.
FOMO investing is nothing new, it just looks different every time it comes around. From "to the moon" investments recently, to housing in the mid 2000's, to technology stocks at the end of the 90's, even are far back as Tulip Mania in 1636, the list goes on and on. Fear of missing out is not a good reason to invest - especially if you don’t understand the thing that you’re putting your money into.
The same goes for taking your money out of something. When the market dips, which it typically always does, people get cold feet and withdraw their investments. I can’t tell you how many times clients have called me throughout the years in a panic.
As human beings, our emotions can lead us to make impulsive decisions that seem good now but will hurt us later down the line. The problem is, that when it's your own money, you’re often too close to see the bigger picture. With behavioral coaching and a friendly voice in your corner, you can stop getting in your way.
Reason 2: A lack of Time
Between our jobs, family, friends, pets, hobbies, and favorite TV shows, there are a lot of things we need to stay up to date on. With so many pressing things on our plates, things like our finances can fall by the wayside. How many times a day do you fail to get a task done that you set out to?
Although finances are essential for every person and their family, it’s an area of our lives that is often neglected. For some, it’s due to a lack of interest. For others, it comes down to a lack of knowledge. For almost everyone, it’s about time.
Between the many responsibilities people have, there simply aren’t enough hours in the day to do the research needed to make informed financial decisions that will contribute to a better future. This lack of time is by no means anyone's fault, but simply a reality of life. With the right person on your side, time should become irrelevant. This is because they will be able to oversee your finances as you focus on what you do best.
Furthermore, they will be able to seek to ensure that you are able to enjoy your time more thanks to better finances. You will be free from absorbing the fears of the future, and the pressure of finances on your own. Which should allow you to live your best financial life!
Reason 3: Not having a Plan
Attempting to invest successfully without a plan is like flying blind into a storm without any wings. Even if the first two reasons aren’t a problem, this can be what causes an investor to fall short of their goals.
A plan is important because not every form of investing is good for everyone. Some people have the ability to own more businesses, some don't and therefore this can lead to different decisions. Others, however, may be new to investing and need to get off to a strong and secure start. A good investment plan takes into account your personal circumstances and lays out a path for you to achieve your goals.
Without a good plan, however, you can fall into common traps that befall many investors. Furthermore, if you don’t have the right knowledge from the outset, can you really expect yourself to make the best plan? Think about it this way, if you’re worried about your heart, do you go to a cardiologist or do you do a quick Google search, then watch your favorite Tik Tok influencer explain?
When it comes to finances, many wannabe investors attempt to make their own way along a path they know very little about. A good wealth advisor, however, can construct an investment plan tailored to your needs and help you along the path to sustainable wealth.
How to try to avoid investment failure
The most common investment mistakes may be avoided with the right person on your side. At Julius Wealth Advisors, we’ve helped many entertainers, small business owners, and high earners just like you get on the right path to achieving their financial goals.
This path starts with a single step - the question is, are you ready to take it? If so, get in touch with us today.
This piece contains general information that is not suitable for everyone and was prepared for informational purposes only. Nothing contained herein should be construed as a solicitation to buy or sell any security or as an offer to provide investment advice. The information contained herein has been obtained from sources believed to be reliable, but the accuracy of the information cannot be guaranteed. Past performance does not guarantee any future results. For additional information about Julius Wealth Advisors, including its services and fees, contact us or visit adviserinfo.sec.gov.