When you enter the world of investing for the very first time, everything looks like a potential opportunity, and everyone online will be telling you something different. Look one direction you’ll see someone promoting CFD trading, another way they’ll be spruiking stocks and turn around to find another IPO for the next big thing! I get it, I really do, everyone’s got something to sell or a point to get across, and maybe it really did work for them, but investing is already confusing enough without all these distractions.

But that’s what they are, distractions, and you don’t want to waste years of opportunity and your hard-earned money chasing the next big thing. Investing can actually be quite simple if you can look past all the distractions and get rich quick schemes. Remember all that glitters is not gold – sadly I didn’t come up with that one myself!

To save you some time, I’ve put together 10 ways you can lose money when investing. Obviously, this is not an exhaustive list, but it’s a few things to be mindful of when you are navigating the minefield that is Google.

1. The Great Aussie BBQ Tip

Typically handed out at a social gathering around a BBQ with a drink in hand, these tips often come in the form of a penny stock or recent trend. Usually handed out with good intentions, beware the herd mentality of the BBQ tip which usually ends unfavourably.

2. Online Forums & Stock Pumpers

It can be hard to avoid these beehives of misinformation when starting out, as the internet draws you towards the crowd, but beware, there are many individuals who are paid/compensated to promote a particular stock or investment product.

3. Not questioning a Free Lunch/Investment Seminar/Portfolio Review

You’ve all heard that there’s no such thing as a free lunch, but beware giving away your time and data to aggressive sales sharks. If some rep in corporate attire gets a whiff of your vulnerability or greed towards money, you’ll never get them off your back until you’ve wiped out your savings and gone into debt.

4. Trends (e.g lithium, drones, marijuana, crypto, silver)

This one will catch you out every time, and I’ve personally jumped on this bandwagon myself in the past (surprisingly not bitcoin but drones haha). They come, they go and sometimes they last, but one thing is for sure, they’ll keep you on your toes.

5. IPOs & Crowdfunding

You’ve probably seen some notable IPOs in the news, more recently the US has seen Uber and Beyond Meat. No doubt you can do very well investing in the right IPO, but they’re often extremely hyped-up and overvalued, so make sure you do your research.

6. Your investments are in someone else’s name

This is a can be a risk if you’re letting someone else purchase your shares – make sure to ask for the CHESS statements or check your brokerage account to ensure that you are the full legal owner of the assets.

7. The returns promised are out of this world

Like most things in life, there’s usually no free lunch when it comes to investing. It’s worth using common sense to establish whether something seems way too good to be true. If they’re promising to double your money in a year I’d definitely be giving them some distance. Remember that nothing in investing is guaranteed and you need to keep your wits about you!

8. You send your money off to the Cayman Islands in efforts to evade tax

Okay okay, I’m generalising here, but often these tax schemes offered to lower or eliminate your tax aren’t legit in the eyes of the ATO. It’s worth giving the ATO a call, having a good look at their website or talking to a qualified accountant before making any significant tax-related financial decisions.

9. Deciding you’re the next big day trader

Now I may have once thought that would have been a good idea (I won’t deny it) but then I realised it takes a lot more skill, knowledge and dedication than the internet would lead you to believe. Don’t get caught up in a whirlwind of complicated financial products when you’re getting started and waste money trading in and out of stocks – for most people investing isn’t a day job!

10. Having no idea what you just invested in

Whether it’s a stock, managed fund or property make sure you do your research before making an investment. Ensure you understand the costs, risks, management and read the appropriate documents before committing your hard earned cash. Check out this ASIC MoneySmart Guide for more information on making informed investment decisions.

Kate — HTM Editor & Host

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