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And while it sounds simple, its actually very difficult to do.
Many invest with the best intentions, hoping their money will make money without them lifting a finger.
However, many end up losing money instead.
Consider this: Maybe you do research and find an outstanding stock.
You consider buying some shares, but because of the risk, you decide not to invest.
Orman says thebiggest investing mistakeyou can make is making decisions based on fear.
Investors who give in to fear suffer from whats known asmyopic loss aversion(MLA).
As Orman observed, MLA often leads to selling investments too soon and losing out on potential profits.
But to do this, investors must hold their investment through multiple dips.
One way to avoid giving in to fear is by reframing risk.
Try viewing risk as a potentially rewarding part of your journey instead of a potential loss.
Recognizing and transforming your fear can help you hold your investments and gain more profits in the long run.
Focusing on What You Had
When investing, its essential to focus the present.
Thinking too much about what you had before instead of what you have now can skew your perspective.
But on the other hand, you havent really lost $30 per share.
Youve still gained $10 per share.
Orman explains that investors should never look at the gains they once had and consider them losses.
You must compare your stock values to the price point you bought them at.
Making decisions based on your gains instead of your phantom losses will lead to more success.
Not Using Dollar-Cost Averaging
When you invest, the value doesnt always increase.
Many people think they need to invest all of the money theyve set aside right away.
According to Orman, this is a huge mistake.
Dollar cost averaging is her most important investment rule.
Fidelity showed how this works with $5,000.
This resulted in 253.4 shares due to dollar cost averaging as opposed to 250 shares from lump-sum investing.
you’re free to get more from your money if youre patient and willing to take your time.
Ultimately, waiting for the right opportunity tends to pay off.
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