What To Invest Your Money In And 4 Other Pieces Of Financial Advice

Q&A site Quora. Photo: Quora

This question originally appeared on Quora. Answer by Tom Brown.

Remember one fact that “The more you risk the more you can earn”. And one more advice for you, you should try to avoid the great mistakes (how to avoid them I will write below). You know, everyone can make a mistake and a lot of traders or investors had made them. As for my mistakes, the can be the same with people, who had answered this question. Of course, one of my mistakes is a fear to invest because of my youth and poor experience. But mostly my mistakes are deal with the situations that I’ll try to describe below.

The main thing for us is to reach the goal, overcoming mistakes and using financial literacy. Don’t be afraid of mistakes and risks. On error you should learn, and try to control the risk. From my point of view there are a lot of wide-spread mistakes that investors make. Below you can see a list of mistakes which I recommend NOT TO MAKE (because I have made them and know the results):

1. Investment in “fashionable” assets.

At the beginning of the XVII century the fashion for tulips was in the Netherlands. Bulbs of rare varieties in great demand, and its price has risen steadily. The booming market of tulips captured all: florist, businessmen, civil servants, small shopkeepers and even footmen. All bulbs are bought for resale. In 1636, the price of a tulip reaches the value of a home. But when supply exceeds demand, prices have dropped on tulips many times, which led to the ruin of many hapless speculators. The situation where an excessive demand for some assets with a view to its sale results in the rapid growth of prices, called bubble. And any bubble is known to eventually bursts. The Dutch experience has taught investors anything, and since then the speculative bubble inflated and burst several times in different countries.

2. The sale of shares after the bad news.

When the stock price falls, many investors feel akin to terror. And what if…

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