To make money, one must make put scarce resources in a strategic way so as to achieve the best outcomes from your hustle. When deciding on investments, we must however answer fundamental questions on what requirements should be set aside to start the journey. One must also focus on the end goal and above all, opt for the best investment alternative for a particular period in time.

These considerations are meant to help investors understand financial goals and in most cases help us identify our options. When investing, it is always important to be aware of some of the potential pitfalls so that we can be able to navigate around them. But what are these challenges?

Investment knowledge

Firstly, the biggest challenge is the lack of investment knowledge: An investment in knowledge pays the best interest. One can not benefit from what they do not understand and that is why as people start the investment journey, they must start by gathering knowledge. The beauty of this is that the internet is available and at the clip of a button, one can understand various investment options. One can also join the various training available to learn.

Many people love following the crowd while investing, and some of them, unfortunately, end up losing a lot of money from that. Note that we are all unique and our needs vary, it is for this reason that one cannot take someone’s investments and copy-paste it successfully. The alternative is to surround themselves with people with knowledge and experience so that they can learn from them, but in the end, one should aim to make their very own decisions. 

Step-by-step process

Like everything else in life, investment is a step-by-step process and we should try as much as possible not to rush the process. One should take time to understand the investment risks of the various asset classes before jumping into them.

Many at times after we learn a new way of making money, we get excited and rush to implement it. It is always good to pause for perspective and start investing in less risky assets as you learn. You can’t sign up for a marathon before you have done enough practice. When some rush the process, the probability of making a wrong decision is high, and that will derail the rest of the investment journey.

Our goals

Procrastination, starting late and not being consistent with our goals. It is said that “you may delay, but time will not.” Many times, we have very good reasons why we are not ready to start moving. But one thing is key, to start anything is first a sure sign of commitment to the process and it creates discipline. When one starts early, therefore, there is always a powerful thrust in the time factor and the portfolio benefits from the power of compounding.

We all have made mistakes in the past the challenge, and sometimes we are always trying to get different results while doing the same thing. We should therefore aim to learn from previous mistakes and make the right session. AT times we may get it wrong, but one thing we should never forget are the lessons from the mistakes.

For example, if you invested in a stock and it did not perform well, going back to identify the process of the stock selection is important so that in future one is able to navigate the said challenge.

Borrowing to invest in risky assets, may make one lose money. But at times we get excited about the potential returns from various ventures that we are undertaking and forget to look at the risk side. The best approach is to have some ground rules. For example, do not borrow to start a business. Debt is good for business expansions once one has validated the business and it has gained traction.

The right people

Investment relationships that one selects also play a key role in success. It is good to therefore do the homework and select wisely as investments are a people’s game. Having the right people to walk the investment journey is important. It is difficult to walk the whole journey alone, so getting the right advice is great and one should ensure they identify who they seek advice from, what assets, and also the investment partner/partners.

The bottom line is, that to grow wealth one must invest, the investments could either be passive like the capital markets investing. This includes shares, unit trusts, bonds among others, or the investments could be active, like running a business or investing in people’s businesses.

Note that irrespective of the path taken, the mistakes cut across, and it is good to be aware of these challenges and plan well in advance.

“It is hard to be defensive toward a danger which you have never imagined existed.”