“Diligence is the mother of good fortune”.
Doesn’t this saying fit well for your investment strategy? When you deal with your investments you should be diligent enough in not making the same mistakes again and again. You should learn from your mistakes and hence doesn’t become a loser. Whether you are a novice who is testing waters in investment or an expert who knows the market well you cannot expect to make sound decisions every time; more so because the market of investment is ever-changing.
Don’t take your hard-earned money for granted
Your hard-earned money should give you the best ROI and you should be well cognizant of what to do with this money. Now let’s see some common mistakes that investors should not fall for:
1. Acting without a well-etched plan
Have you ever thought about the importance of planning?
A work without a proper plan is like sailing in the boat without any proper direction. It is always important not only to plan your investment but also to work out your plan. This is a sure way of coming out in flying colors. A keen eye for detail which comprises the blueprint is very essential. This blueprint enables you to have a fair idea of how you are going to proceed with your stocks, bonds etc.
When we say plan, a bird’s eye view is not sufficient. You have to be clear in your goals and should have a thorough understanding of your goals. When you are saving for retirement purposes well in advance you should have a well-defined objective.. The key lies in being at a comfort level with how you are going to deal with your investment.
By now you would be thinking about the importance of a clear investment strategy. You should clearly make out what type of assets you are going to proceed with investment and which objective complements your plan. You should understand the nature of your investments to a great extent.
It’s always suggested to chalk down a written plan, say an outline, at the outset so that you know how you are faring with your goals.
2. Not keeping your emotions at bay
There is an ongoing debate as to how relying only on emotions will don’t do much help to you. There should be a shade of prudence and rationalization, especially in terms of investments. You may purchase a specific investment because you have a great temptation to do so. But you should ensure that you carry out comprehensive research before diving into this important activity.
We all have this idiosyncrasy of relying on our gut feelings to a great extent. But unfortunately, this hunch will not be impactful several times. Moreover, with regard to emotions, they are somewhat a paradox. They will sometimes lead you in the wrong direction.
We always pamper our ego and think that we have made the right decision. But investment strategies are not a cakewalk that always complements with our gut feelings.
3. Ignoring your portfolio
Always ensure that you have a firm control of your portfolio. Don’t wrongly interpret that you should be glued to your investments round the clock. However, checking it on a frequent basis would surely go a long way in assessing how you are performing.
4. Doing what everyone does mentality
Here we have to be clear in one aspect. Each investor’s outcomes are different. For example, you would be deeply impacted by the actions of your friends, colleagues etc. You can very well consult your friends, family etc. But you should perform comprehensive research to be sure that it fits your needs.
5. Not understanding that perseverance pays
When we are investing, impatience is one of the prominent emotions that cloud our feelings. We should remember that in the case of stocks and shares, these businesses function in a slow manner than our expectations. It’s better to build a long-term strategy and follow it.
Moreover, it’s not a wise thing to frequently shift your assets so that you get better returns. You have to wait and see how your investments actually perform.
Don’t be just carried away by the recent performance of your investment. Assess the whole history and arrive at a well thought out conclusion.
Knowing where you may stumble will create the much-needed difference in how well your investment approach will bear fruits.
The author is Ramalingam K, an MBA (Finance) and Certified Financial Planner. He is the Director and Chief Financial Planner of Holistic Investment Planners (www.holisticinvestment.in) a firm that offers Financial Planning and Wealth Management. holisticinvestment.in, is a leading financial planning and wealth management company.