This Blog will discuss in detail about 5 serious investing mistakes and how they can be avoided.
As rightly quoted-
Let’s Get Started!
Content
Mistake 1
Lack of Investment Goals
Mistake 2
Inadequate Diversification
Mistake 3
Fad Investing
Mistake 4
Attempting to Time the Market
Mistake 5
Not investing in Financial Education
Solution
Free Portfolio Review
“Investing is not nearly as difficult as it looks. Successful investing involves doing a few things right and avoiding serious mistakes”- John Bogle
INVESTING MISTAKES
Out of all the financial mistakes, greatest mistake you could make is not investing at all, since you lose out on the power of compounding interest and fail to make your future secure.
Investing can be a tricky game only if you are not careful enough.
Wrong investment choices can impact your portfolio negatively and are surely going to impact your future decisions.
On the other hand, investing can be extremely rewarding and fruitful if you are a wise decision-maker who believes in taking well-informed decisions.
In this Blog, we will identify ways in which you may avoid these investing mistakes and also how you can even turn them to your advantage.
Not having clear investment goals is the first big mistake investors make.
If you don’t know why you want to invest your money, then you are setting up yourself for a big investment failure.
Lack of investment goals shows lack of interest and lack of knowledge.
If you remind yourself everyday why you are investing your money, you will be inspired to save more and invest more wisely and accurately.
How to set Investment Goals?
Pen down your short-term and long-term investment plans.- Calculate the estimated risk and returns on them.
- Chart your major expenses like education, marriage, buying of home and car.
- Consider your retirement plan and source of income.
Putting all your financial eggs in one basket is a recipe for failure.
Relying on selected few stocks means your investment will fluctuate with the fluctuating stocks.
However, a diversified portfolio not only gives you greater return on investment but much needed financial stability and also a piece of mind.
Diversification ensures you make multiple investments across various industries.
How to ensure adequate Diversification?
- Invest your wealth across various sectors and classes.
- Have short-term and long-term investments.
- Keep a mix of high-risk and low-risk investments.
- Consider adding index funds or fixed-income funds to the mix.
- Keep an eye on your portfolio’s growth and take quick actions accordingly.
Adequate diversification of investment across various sectors and industries allows minimizing risk of loss. If one investment performs poorly for a certain period then the rest of the other investments may perform better over that same period and reduce your potential losses.
Fad investing means investing in popular stocks as per the latest market trends which enjoy only short-term benefits and many a times is proven dangerous.
Also most of the time we are tempted by the headlines talking about the performance of a stock going upwards or downwards.
Thereafter we allow our emotions to rule and we either divest or invest in that stock irrespective of proper research and analysis.
Such decisions often result in losses and can be extremely damaging to your financial future.
How to avoid fad investing?
It’s a universal truth that markets will go up and down. Do not give in the herd behavior and make well informed investment decisions.
- Do Proper Research and analysis before investing.
- Take advice from wealth managers.
- Investing is not a sprint but a marathon, hence try to stay invested for longer periods.
- Do not get affected by articles, emails, and T.V. personalities talking about stocks, unless you do complete research.
How to avoid fad investing?
As shown in the above illustration people started investing in Bitcoin and other crypto currency without proper research and analysis which showed quick return initially but started falling down after a certain point and such investors faced huge losses.
Gaining investment knowledge through friends, relatives, or the media is not sufficient when it comes to making investment choices.
This little knowledge can prove to be dangerous and lead to bad financial decisions and more grave mistakes.
Getting lucky once or twice does not mean you know it all and are a pro at making investment decisions.
Fact- 70 percent of wealthy families lose their fortunes by the second generation, and an astounding 90 percent by the third.
Let us understand better with the `“Family Wealth Paths” to explain how family wealth travels over time.
How to gain Financial Soundness?
- Understand the fundamentals of investing,
- Know how to assess a company and stock based on their financial statements.
- Know how to avoid debts?
- Learn how to build a strong portfolio,
- Learn how mutual funds make money and much more
- Taking expert advice from wealth managers.
Attempting to time the market means buying high and selling low.
The basic principle of investing is to buy low and sell high, but why do some investors would do it differently i.e. buy high and sell low?
These investments are tempted by greed to make quick money via short term returns.
This is extremely difficult and challenging and even the most learned investors fail to do so.
Such investment decisions turn out to be grave mistakes causing huge monetary losses to the investors.
What to do instead?
- Never focus on short-term goals.
- Don’t get lured by greed and quick money.
- Always research and study the financials of the company.
- Consider Investing as a Marathon and not a sprint.
Key Points to Remember
- Never focus on short-term goals.
- Don’t get lured by greed and quick money.
- Always research and study the financials of the company.
- Consider Investing as a Marathon and not a sprint.
To know more about financial planning and to get your personalized portfolio strategy, contact us at wealth@iventures.in
iVentures is a financial boutique firm that offers bespoke solutions in Asset Management, Credit Solutions, fixed income and Wealth Management.
Established in 2005, iVentures Capital has helped 2000+ families build their legacy.
And managing over 500cr of Investments for its clients.
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