10 Investment Mistakes You should Avoid in 2020
A successful investment plan requires knowledge, patience, research, and discipline. Many people who start investing in stock markets tend to have their savings wiped out within a few years because they make one or more of the common investment mistakes. Whether you are a beginner or an intermediate in managing your funds by yourself, you would not want to wash away your hard-earned rupees due to market uncertainties.
To ease your woes, sharing here a list of common investment mistakes to avoid in 2020:
1. Do not put all your eggs in one basket:
This is the basic of almost anything here you will face risk in your life. Diversify your investments. Do not ever put your eggs in one basket.
For example, if you are putting all of your money in stock markets, you are not diversifying your portfolio, but exposing yourself to unwanted risk. Similarly, if you only invest in secured instruments like bank FDs or NSCs, you will not be able to get the best returns on your investment.
To efficiently diversify your portfolio, you should put some money in high-risk, high return instruments, and a part into secure investment components offering low returns. This will keep you safe in case of any trouble.
2. Do not become impatient to invest:
Patience is the key to investment planning. Money making takes time and commitment. If you search for stories of people who have been duped in investment, you will invariably find that most of the people have acted in haste. No matter how much you trust a person who brings you the investment proposal, no matter how much sense of urgency they create, never act in haste. Never lose your patience. You would see many scams and money circulation schemes which promise very high returns but require immediate investment on your part. Any investment which asks for immediate action should start alarms bells.
3. Do not ignore investment research:
An investment can only succeed if you do adequate investment research. The more you learn about an investment, the more you study about it; the more you talk to people about it, the stronger will be your chance of success.
If you are about to invest in the stock market, start by taking market and trading courses online. If you are going to invest in the government of India savings plans like PPF, National Savings Certificates, etc. read all of the terms and conditions from relevant government websites. The more investment research you do, the better the investment decisions you will be able to make.
4. Do not stick to a company:
Many people who invest in a stock market tend to develop a kind of attachment to their companies. The problem with this is that your objective changes from making money by investing in actually trying to hold the company stock. This is not your job that you should fall in love with!
When you buy a company’s stock, do some research, and decide your purchase based upon some fundamental factors. If you feel at any point in time that any of those fundamental factors have changed, you should jump ship without any hesitation.
5. Do not move around your investments too much:
It is essential that your investments remain stable. Remember that investment is a long-term game. Just because you see a company’s stock going up for some time, you feel the urge to move your investments to that company. The simple fact is that you pay fees when you buy a stock. If you keep on moving around buying and selling, you will end up paying more fees than what you have actually got as a return on your investment.
6. Do not wait to get even:
If you buy a stock and it starts losing you money, you need to decide that you will have to jump ship quickly. Many people think that they should wait for some time after investing in a stock. Alternatively, if you have held a stock for some time but you see yourself losing money as a pattern, you would need to decide to get out of the stock before you end up losing more money. Do not wait for your investment to get even, learn when to cut your losses and take a step back. Stock markets are not meant to be safe, there is always a situation of you win some, you lose some.
7. Do not take out loans to invest:
A number of people get confused by seeing that stocks are giving impressive returns. They think that they should jump on the stock market bandwagon. There is no issue if you have the money to invest and can take the risk with it. The problem occurs when people think that they should start investing by taking loans. Personal loans are the common entry point for this fallacy. Imagine taking a 14% interest rate loan to invest in stock market and getting stuck with its EMI when return on your investment might come after some time or might not come at all.
8. Do not try to time the market:
Trying to time the market is not easy. The people who have done it successfully have only been able to do so because they had considerable market research and had access to some of the best stock market algorithms and predictive computer systems. This is not something an individual will be able to do on their own with their limited resources. So please do not bother with it.
9. Do not let your emotions get in the way:
Fear and greed are two instincts that have been responsible for more lost investment than anything else. Always keep the focus on your goals and do not let fear or greed get in the way.
10. Do not count your chickens before they hatch:
The saying is as old as time. Plan all you want, but do not start spending the returns on your investment unless you have your money in hand. This advance spending can be as simple as investing your expected returns or charging their credit card in anticipation that they will pay off the card when they get the money in hand. Wait till you have the money before you spend it.
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