We all take care for every small detail while investing but mistakes do happen. Investing mistakes , on the other hand, can be costly to both your wallet and your future. You got me right, this blog post we will discuss investing mistakes to avoid to get better returns from investments.
If we can avoid these mistakes one can increase their investment value by millions or a few multi millions
Let’s Begin and understand the common mistakes and myths about investments:
Table of Contents
Top 12 investing mistakes to Avoid
1.Trying to time the market.
Many waits for ‘Big News’ to come. In this waiting period, people do not invest anywhere and keep the money in saving account only.
This approach not only eats the returns but the time also. Don’t believe me. Let’s understand with calculations
| Investment Vehicle | Interest Rate | Output after 5 years |
| Saving bank account | 1000000 – 3.5% | 11,87,680 |
| Mutual Funds | 1000000 – 12% | 17,62,340 |
| The difference is of 5.74 lac. Which is a huge difference |
2.Too conservative and too risk takers
People either invest the entire amount in too much risky product or the other set of people invest in too conservative way. Both kind of behaviors is not good.
3.Diversification
Do not keep all your eggs in one basket is an old idiom. This is true for investments also. People usually invest in one asset class too heavily.
Some who are fond of real estate, go all real estate only while others are keen of insurance policy will purchase multiple insurance policy only.
One should diversify investments in different asset classes to minimize the risk and better-balanced returns.
4 Panic selling
People who are prefer to invest in stock market or equity mutual funds usually sell stocks in panic at each market fall.
This is not right because at that time you may lose a lot of money. These losses are notional losses (losses on paper) but if one sells the security the losses become real.
5.Emotional Decision/ sticking to the investments
People get emotional with their investments and investment companies. Oh! Come on, you are not married to your investments. One should definitely get rid of low performing investments.
I know doing this takes a lot of effort and time. But it’s worth it. Even if you can increase your money appreciation by Rs 5000, then it can be your 1 day, week or month salary.
Even if not that much, at least it can fetch you some amount of grocery to your house, pocket money to your child, a small dinner outing or maybe a visit to amusement park.
If you do not know which one is not good for you, can go for Financial Planning itself.
6. Expenses First attitude
Human mind either is too satisfied or not satisfied. If we keep money by our side expenses are bound to happen.
Maybe a another round for shopping, buying a gadget and some other utility.
One can play a mind trick by investing a fixed sum may be in form of Mutual Fund SIP or starting a PPF investment or opening a RD and investing at the beginning of the month itself.
This makes mind think and take in our subconscious mind that we have a limited amount ONLY. This way one can become crorepati too. Try this trick and if you find it good give us your valuable feedback
7.Delay investment
People procrastinate investments and delay investment for couple of years. Here, the loss may not be limited to few thousand but it might be in millions too.
8. Do not take Inflation and taxation into account
While making investments people do not consider post tax return from their investment and this is where they fail. Meagre return of 5-6% is not a profit making avenue but it is a loss making avenue as inflation ( good price increase rate) is almost more than 6%-7%. Thus, one might be booking a loss with each passing year.
9. Do not set Goals
People make random investments without understanding when they will require money, what amount will be required and how much they should invest to accumulate the right amount for a particular financial life goal.
This is just because people do not set their goals in short, mid- and long-term requirements. If one sets up a goal, then only he/she can know how distant the goal is and how much amount they will be requiring for the goal.
10.Mixing time horizons of investments
Some people invest for short term only, while the other invest for long term only. There is no clear cut demarcation of goals and investment with the goal duration.
How people think in day to day life : I want 100% liquidity, good return and after completion of 3-5 year, I will think where to invest this money and till my next investment I will keep the money in saving account. What can be consequence of such type of attitude/behavior – interest rate loss. While the others are keen to invest for the long term only.
What will happen if money required after a shorter duration, either one has to borrow or compromise on interest rate, pay penalty and withdraw the investment or sheer compromise
11.Fail to review investments
People usually fail to review their investments either due to lack of time, inclination or expertise. Even if they review they fail to match it with
their financial goals and thus cannot gauge of adequacy of money at a particular goal.
12.Do consult a Financial Practitioner and try to self-medicate
We all are DIY investors. Very few people tend to take professional advice. People think that taking advice is for wealthy people who have crores of assets. In fact, it is for everyone. It is for those who want to ensure smooth financial journey with best of safe and steady returns and who want to preserve their wealth without eroding it.
It’s not all about the mistakes, The mistakes can be many more such as mixing life insurance with investments, not keeping the adequate emergency cushion for unforeseen events, choosing wrong investment product, buying utilities on loans, personal loans, making random investments without a thought, Do not invest as per the Financial Plan.
13. No Emergency Fund
The worst mistake is to not having any emergency corpus. People have investments for short or long duration but either they invest in time bound investments which cause them interest loss or penalty.
Read more about Emergency Fund
Final Thoughts
We all know that our life is dynamic in nature and so are our investments. We need to constantly look after and review our investments, so to take best out of our money.
We take help of a CA to reduce tax liability but we try to save the cost of right money advice from a planner. Right planning can save you from making a wrong decision for your finances.
To take Investment guidance from a CERTIFIED FINANCIAL PLANNER, contact us info@bestinvestindia.com
