Investing Mistakes: Investing In Assets You Dont Know About
Many people have the feeling that the more sophisticated and difficult an investing strategy is, the greater the probability of profitability. Quite simply, this isn’t true. I may not have my Series 7, but when my friend came to me with the complicated portfolio of investments his advisor proposed, I responded accordingly.
Firstly there are many very complicated and very sophisticated investments that, at best, will give a mediocre profitability.
Secondly and more importantly the less an investor knows about the investments that he makes, the greater his chances of making mistakes and losing money.
No matter what you hear or read about the benefits of an investment that you don’t know about, you should completely avoid it until you have acquired enough knowledge to determine if that investment is as good as they say or not.
Most people who lose money have invested in things whose functioning and characteristics they didn’t know.
Before investing in anything you need to make an estimate about the risks you are running and the benefit you can expect. It’s also necessary to be able to determine (without aiming to reach perfection) if that investment at current market prices is undervalued or overvalued. If you don’t know enough about the investment you’re going to make, you can’t estimate any of these issues, and you might as well be investing blindly. In short, I told my friend to find a new financial advisor.