The 7 most common mistakes in financial management
Strategies Tips

The 7 most common mistakes in financial management


Making mistakes in managing your personal investments is more common than you might think. Many investors can be excellent players in managing their investments, but they can go bankrupt for not giving the necessary attention when they decide to opt for a new investment model, as in the Forex Market. 

It is also common for people not to have a real sense of what it is to manage their own finances and to believe false promises when it comes to making money through investments in Forex.

We understand that financial management comprises all personal administrative actions and procedures, which aim to maximize the financial and economic results of a company or its private life. Thus, it is more than fundamental that the management of your forex investments is taken extremely seriously! 

So that you know what the most common mistakes are made by simple mortals in the financial area and the forex trading market, and how to avoid this, we have prepared an article for you!  

Check it out right now! 

1- False diversification

 

forex trading

 

The most common mistake is to invest in different assets/currency pairs, but which have similar behavior. These are portfolios with a large number of assets, but which have a high correlation with each other. For example, having several different bank bonds, all of which are fixed income. In other cases, the investor invests more than 5% of the portfolio in a single or a few shares or several of the same sectors. 

A basic principle of risk management is not to focus resources on a single investment. The ideal is to distribute them in assets with different characteristics. 

 “Don’t put all your eggs in one basket. In finance, what the classic proverb tells us is to not allocate all investments in a single asset, or even more, in just one financial instrument. In practice that means you should diversify your investments, instead of investing solely in stocks, or just in forex, or just in real estate, and so on. This is also an investment strategy widely used by hedge funds and professional traders, which consists of distributing the capital across different instruments, and many times, different markets. But, how many “baskets” should I have then? Well, it depends on a variety of factors and there is no single answer. However, here are some questions that could be taken into account: What is your capital size? What is your expected return? What is your risk appetite? What is your availability of time to manage your investments? Finally, a good financial advisor would be the right person to assist you”, says our CEO, Lucas Vaz. 

2 – Take risks that are not worth it

 

 

Balancing risk and return are essential to make applications according to your profile. After all, if a safe investment offers the same return as a riskier one, there is no point in taking the risk, right?

The Sharpe Index is one of the indicators that help to find out what this balance point is. The higher the Sharpe, the better the performance of this investment about the risk it offers.

Another frequent problem is the false adaptation to the investor’s risk profile globally. For example, the investor who considers himself bold, but has 90% of the equity in fixed income. In the forex market, you do need to know yourself well to distribute your funds according to your investor profile and financial objectives. 

3 – Red alert: Fixed and Variable income

 

 

Fixed income is an investment modality that has a predictable return; Variable income has no type of definition about the rate of return, only market forecasts, that is, it “varies” over time. 

This is not necessarily a bad product, but its presence in the wallet raises a red alert. This is because most of the options offered in the market are expensive, have credit risk, and complex profitability. 

It is a product that, in the great majority of times, has very long terms, with very little possibility of early redemption and in which, if the conditions are not met, the investor may lose to the inflation of the period that was stuck in the investment. Moreover, in most institutions, it is a product that pays high commissions to the manager or advisor, enabling a high conflict of interest in recommending these assets. It does not exist in the Forex Market.

4 – High administration fees

 

 

The cost of administration can greatly impact the net profitability of your investments. This is yet another common problem for portfolios: fixed-income funds with low profitability, charging management fees above 0.3% per year – common in large banks around the world. 

 ”It is necessary to pay attention to management fees, since they can consume a good part of the return, especially in a scenario with lower interest rates”, alerts Vaz. 

5 – Invest only in your Home Country

 

 

Many investors have already discovered the stock market, but most still invest only in your home country stocks. When a crisis occurs, all assets (shares of national companies, private and public securities, goods, real estate, etc.) in the world economy are affected in some way, at the same time.

One measure to prevent this risk from impacting your investments is geographical diversification. 

Exposure to assets or currency pairs with no relation to your home country’s economic scenario allows greater protection and enables a greater return in the long run. Investing abroad is a good alternative to build a diversified portfolio and, therefore, more resistant to variations in the local market.  

6 – Inadequate liquidity

 

 

As important as deciding which application to invest in, it is critical to consider how long your money will take to redeem. Many people end up leaving money in savings due to the ease of being able to redeem at any time. The booklet is the first contact of many people with the investment world. 

However, the savings yield is much lower than that of other applications, including those that offer the same security and liquidity. For those who invest with a medium and long-term horizon, there are many more interesting alternatives. 

 ”Having a portfolio with balanced liquidity can improve the portfolio’s profitability”, guides Vaz.

7 – Bad private pension

 

 

Having a private pension can be a good alternative to guarantee a smooth financial future. However, it is important to be aware, the largest pension funds are concentrated in large banks and yield little because of the high fees charged by these institutions. 

Vaz points out that, “currently, there are several alternatives of better-quality pension funds – funds managed by independent houses with more sophisticated and cheaper strategies than what is historically offered in retail banks.” 

He also emphasizes that Wiseinvest’s Artificial Intelligence trading solution outperformed the financial market or even private pension plans.

“Our trading solution is the most efficient and simple way to invest in forex and reach for extra income.

Wiseinvest offers a free Learning Academy to help more people invest better. The service is available even for those who are not customers. But, before that, don’t forget to subscribe to our newsletter. 

How to invest with AI from home 💹

You can invest with AI in forex while performing your personal activities at home or wherever you are and save time. It is simple, safe, and free.

Check out the 3 steps to trade automated with Wiseinvest’s automated AI trading system.

 

By trading forex automated with AI, you will save time and improve your performance without monitoring the market and managing trading platforms.

With Automated AI trading you do not need MT4 / MT5 and other trading platforms to invest in forex. All forex trades are automatically placed into your broker account every time that our AI system identifies a new worthy trading opportunity. You can monitor the AI trading performance in real-time directly on our dashboard.

Benefits of Automated AI trading  🏆

  • Invest in forex from just $100.
  • It is automatic, time-saving, and safe.
  • An annualized average return of +42%* over the past 10 years.
  • Setup in 3 minutes.
  • Totally hands-free, from anywhere.
  • Integrated with the forex best brokers.
  • Your capital is protected by the brokers.
  • Test with a risk-free practice account.
  • Up to 60 trades per month.
  • Automatic trades on average every 12 hours.
  • You have full control of your broker account.
  • Fast execution of trades.
  • No commissions, no management fees.
  • Automatic risk-management with low trading exposure of your capital (0.10% up to 0.65% per trade).
  • No MT4/MT5 or other platforms required.
  • Portfolio with 40 different automatic strategies.
  • Trading results directly on our dashboard.
  • Optional free forex signals.
  • Trading alerts by email and Telegram.
  • We have a team of professionals to support you.

Don’t you have a broker account yet? Our AI is integrated to trade automated with the broker FXCMClick here to open an account with FXCM.

What does happen after linking a broker account with AI trading?

  • The AI will automatically invest on average every 12 hours in your account.
  • There will be up to 60 trades per month (Monday – Friday).
  • You can enable and disable AI whenever you want.
  • Check your trades on our dashboard or the brokerage.
  • You can link more than one broker at the same time.
  • You don’t need MT4 / MT5. It’s all on our dashboard.
  • Your capital is protected under the broker.
  • Your personal data is protected by us.

Would you like to try our automated AI trading for free in a risk-free demo account? Get started free here.

How much do I need to trade forex with AI?

You can start in forex trading with free AI forex signals or AI trading from just $100 through some of the best forex brokers. It is moreover possible to test using a risk-free demo account with our AI trading structure. Regardless, to do a capable peril, the board in authentic records, we suggest you start from at least $100.

What is the best forex broker to use AI trading?

To define which forex broker you should choose for using our automated AI trading, it is important to consider the following aspects.
  • Where are you from? FXCM accepts accounts from some countries, but does not accept forex trading accounts from the USA.
  • How much do you have?  FXCM is ideal if you start at least $100.
  • FXCM sometimes provides higher liquidity volume and lower spreads than other brokers, which are vital aspects of the success in forex trading. But it can also vary.
We are confident that FXCM is among the top 5 best forex brokers in the world and our AI trading works perfectly with them. Then, we suggest you take your final decision taking into account where you are and how much you have.
If you are considering trading with our manual AI forex signals, we would also like to suggest XTB, which is one of the best forex brokers in Europe.
If you are considering trading with our manual AI forex signals, we would also like to suggest XTB, which is one of the best forex brokers in Europe.

Why trust Wiseinvest instead of other trading platforms

These are the main reasons why forex traders at all levels trust us, rather than other trading solutions.

  • Our automated AI trading is efficient, simple, safe, and affordable. You do not need MT4 or other complicated platforms to trade forex.
  • We are a legitimate and reliable company with extensive experience in finance. We combine 19 years of trading experience and extensive academic research in the financial markets.
  • Our AI outperformed the investment market with an average annual return of 43% over the past 10 years (2011-2020).
  • The automated AI trading works with some of the best forex brokers.
  • When using our AI solutions, all your money is protected by brokerage firms.
  • We do not have access to withdrawals from our customers’ accounts.
  • All of your data is encrypted and will never be shared.
🎯 We are engaged in democratizing the retail forex trading market through AI solutions. We work hard to provide financial education, allow anyone in the world to invest easily with Automated AI trading and free AI forex signals. Our AI platform is integrated with AWS, IBM Watson, and Google AI.

Disclaimer: Forex and Contracts for Difference (CFDs) are complex instruments and come with a high risk of losing money due to leverage. Forex trading is not suitable for everyone. You should consider whether you understand how forex and CFDs work and whether you can afford to take the high risk of losing your money.

The forex brokerages displayed shall disclaim the overall performance of traders in their platforms. Oanda warns that 76.8% of retail forex traders lose money trading CFDs. XTB warns that 80% of retail forex traders lose money trading CFDs. FXCM warns that 74.74% of retail forex traders lose money trading CFDs.

The performances aforementioned are not related to Wiseinvest AI forex trading and AI forex signals system. You can check the performance of our AI forex system on our dashboard.