3 Big Mistakes Investor Make In Their Life
Whether it is panic selling, hiding out in cash, or trading frantically during volatile markets, investors tend to make several mistakes that can hurt them long-term. So, let’s get to see the 3 Big Mistakes Investor Make In Their Life and how one should overcome them !
3 Big Mistakes Investor Make In Their Life
Failing to Diversify
The major mistake seen among investors is putting all the eggs in one basket. This leads to heavy concentration risks of the investment portfolio. Although, Diversification does not guarantee against loss, it is the most important component of reaching long-range financial goals while minimizing risk. The idea is that if one investment loses money, the other investments will make up for those losses. One can invest in various asset classes, such as equity, debt, commodities, real estate, gold, etc. And the weightage of each class can be decided based on the risk-return profile.
Generally, the bond and equity markets move in opposite directions. So if your portfolio is diversified across both areas, unpleasant movements in one will likely be offset by positive results in another. You can reduce risk associated with diversified individual stocks, but general market risks affect nearly every stock, so it is also important to diversify among different asset classes.
Over investing in Fixed Deposits
The biggest problem with Fixed Deposits is that your investments do not beat and outgrow inflation over long term. You get a feeling that your investments are increasing, but your purchasing power does not increase. Its goes hand in hand with inflation. Also FDs are taxable, which further reduces the net amount you earn.
Compared with equity mutual funds, long-term returns are taxed at 10% for holding period more than 1 year, only if your gains are more than INR 1 lakh. FD interest is taxable at your current tax slab. The higher your income, the lower your FD return will be. In short, you are effectively losing money every year you invest your money in a FD. When you overdo fixed deposits instruments all your life, and refrain from equity asset class, you are accepting that you will take the safe and secure path which has no growth element in it. You are ready to retire the middle class itself !
Missing out on Research
Most investors do not conduct enough research & analysis prior to making any investments. When we can spend our valuable time in doing research while buying mobile phones, cars etc, then why do we miss out on research before making our investment decisions? Most investors invest their money in over-hyped stocks and funds. It is crucial to research the market, industry, peer’s performances, growth potential.
Among the long list of mutual funds, stocks and investment instruments , you just have to choose the right ones that have the potential to grow your money. Start by understanding your risk tolerance, and then move onto understanding what the publicly traded companies do, what products they offer, how they make money and how they’ve performed in the past. You don’t have to be an expert to start buying stocks. But the more you know going in, the better off your investing journey will be.
Final Takeaway | 3 Big Mistakes Investor Make In Their Life
Even the world’s most successful investors, including Warren Buffett, have blundered on occasion. Although mistakes are inevitable, they don’t have to torpedo your portfolio. It takes a long time to build real wealth! you just need to believe in your investment decisions and wait patiently for them to show the returns. Through the above points of 3 Big Mistakes Investor Make In Their Life , you can avoid similar pitfalls and improve your portfolio’s performance.
Happy Investing!
Read also : Direct Stocks vs Mutual Fund : Which is Better Investment ( https://thebrightdelights.com/direct-stocks-vs-mutual-fund-which-is-better-investment/ )
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