7 mistakes people make while investing and how to avoid them?

7 mistakes people make while investing and how to avoid them?
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`It is a must for every person to take some bad decisions at times and such decisions are mistakes. Mistakes have the power to turn a person into something better than before. A mistake is a learning for the individual to grow better. Let us discuss SEVEN such learning from others’ mistakes common in investments.

  1. Planning:

As the saying goes, “A goal without a plan is a wish”, an investment without planning is waste. Every investor should have a personal plan or policy to invest. One should set up the goals and objectives, analyze the risks, set the appropriate benchmarks, allocate the assets safely and diversify them securely.

Always be wary and spend some time to research and plan the investments without coming to any conclusion of investing in the unsafe assets.

For example, instead of keeping multiple accounts, if one read about the various offerings out there in the investment sector, they would be aware of the demat account which is a combination of accounts to attain maximum financial benefit. Knowledge is power and the investments wisely.

  1. Time the Markets:

The fundamental learning of any investment is not to establish the best time to buy and sell the shares and funds. It is advised by any investor for a beginner to develop the habit of investing regardless of the market conditions to set up a monthly savings plan. Inculcating the habit of buying fewer shares when the prices are high and buying more when the prices are low will provide the opportunity to pick up the good investment strategies.

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The day-to-day variability of the stock market makes it hard to guess the peaks and lows rather it absorbs much of your time to analyze such unnecessary things.

  1. Decision Making – Emotional:

Until you understand that it is science involved in investing the funds, you can’t make the decisions in buying and selling the stocks. Emotional connect towards the trading strategies affect the results disastrously.

The behavioral finance effects the portfolio. Also, reacting to various media on the investments is not suggested as the prime motto of many media is to hype the things as it is popularly said to hit the panic button hard.

  1. Impatience:

There are hundreds of ways to get rich. But every way needs the investor to be patient until the expected returns are achieved. The instant gratification might lead to huge losses. However, it is advised to cut your losses. Still, being patient always helps in the long term to maintain the confidence that the decision is not a bad one.

  1. Failing to Diversify:
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The fundamental lesson to be learned from the previous experiences of others is Diversification in investments. It doesn’t simply mean that spending money across a lot of different things.

This means that spreading the investment across various types of assets – cash, bonds, stocks, real estate etc. Justifying that, it is to be understood that if one of those assets drops value that doesn’t mean that the others will. So, if you spread across multiple of those things, you won’t suffer if, say, the stock market takes a down.

  1. High Commissions:

Payment of commissions on a higher rate does affect your expenses. Every broker differs in charging the commission for buying and selling of the investments. You would stand far better off when you try to figure out the investment opportunities with little or no transaction fees.

As there is any profession, we can see good and bad financial advisers. One should be careful in choosing. A simple trick is if the adviser is not asking many questions, leave him and find out a new!

  1. Not reviewing:
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Every penny invested is hard earned. If the funds are diversified as suggested in the article, this should be noted that the many of them have better returns than others in a given period of time. But, if you are not concentrating on the contributions made by you, the end of the day there is no much surprise if you would see huge losses in your portfolio.

Say, if you have made an investment of 40/60 split in two investments in your portfolio. At the start of the year, you have invested 100,000 rupees and the first investment gained you 10% and the second stayed steady. Now, you have 55,000 in the first investment and 50,000 in second. And, if you haven’t noticed the journey of your investment, you might way off track to achieve the goals you set for which you diversified the assets.

Being perfect is almost impossible. Learn from these common mistakes and avoid them to stay away from the path of losses. If carefully followed the above pieces, you might dodge most common mistakes in investment by expecting higher returns in the long haul.

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