With the uptick in do-it-yourself (DIY) investing, more people than ever are trying their hand at managing a portfolio. This can be risky, and individual investors find themselves attempting to manage several potential missteps.
Here are the 4 biggest missteps DIY investors often make:
1. Letting Their Ego Interfere: Ego can lead traders to overvalue their own ideas, abilities, and knowledge about the financial market. Ego can lead to poor decision-making, especially in pressure-filled situations.
2. Making Emotion-Based Decisions: Managing your emotions is one of the most challenging aspects of investing. DIY investors often look for a person to ask, “What do you think?”
3. Portfolio Concentration: DIY investors inadvertently find their portfolios concentrated in a few assets, which may not align with their goals, time horizon, and risk tolerance.
4. Failing to Use Portfolio Management Tools. Modern portfolio management tools can help guide the process of managing money. However, some DIY investors don't understand them or how to use them properly.
DIY investing works for some, but it can be challenging, and individuals may find themselves in complicated situations and searching for answers. A financial professional may be able to offer a second opinion.
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