Question

Which are common mistakes people make when investing? Choose four answers. They put all of their money into one kind of investment at a time. They divide their funds between more risky and less risky options. They analyze their comfort level with the types of risk they will take. They invest more money than they can afford. They focus heavily on familiar investment opportunities. They hold onto investments longer than they should to recoup losses.

Answer 1

The common mistakes people make when investing are;

Option A, Option D, Option E and Option F

When investing, there are a couple of mistakes people could make but for the sake of this question, we will analyze the given options to know which ones are correct.

Option A; This statement is a common mistake because one of the major laws of investments is diversification. This is very important because in case some assets value drop, others will rise and you would not have to lose out completely compared to when it is only one type of investment.

Option B; This is not a common mistake. As a matter of fact it is advisable to diversify the funds into both risky and less risky options.

Option C; This is not a common mistake because analyzing comfort level could be helpful so that one does not go into unnecessary hardship due to unavailable funds.

Option D; This is a common mistake because it is not advisable to go into debt because of an investment especially as investments are basically taking of risks.

Option E; This is a common mistake because an investment being familiar now does not guarantee that it will be the most profitable next year. Thus, it is advisable to look beyond now when investing.

Option F; This is a common mistake because to be a smart investor, one needs to know when to count his losses and pull out his funds.

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