To err is human and investments are no exception. But, practice makes a man perfect. Stock market is a place where fear and greed have a huge effect on the investors, whether it’s an expert or a novice. While even the best investors are bound to make mistakes, one should study the market thoroughly to avoid commonly made errors in the past. If investors know where they can go wrong, they can at least minimise the impact of these mistakes, if not avoid them. Pehla Kadam Season 5 has listed down five most commonly made mistakes which can be easily avoided.
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Lack of Patience
Slow and steady wins the race. It could not be any more true when it comes to investment. Keeping our expectations realistic in regard to the length, time and growth that each stock will encounter is always the ideal thing to do.
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Failing to Diversify
A few professional investors are able to generate excess return over a benchmark by investing in a few concentrated positions, but new investors should avoid following this step as it comes with experience and after years of trading in the market. Stick to the principle of diversification for the long haul. As a general thumb rule, do not allocate more than 5% - 10% to any one investment.
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Letting Emotions Rule
When we are not careful, fear and greed may rule the market. Do not let strong emotions overpower your rational thinking and focus on the bigger picture. The best investment plan is one that’s undertaken without being overwhelmed by the feelings.
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Not having clear investment goals
For most people, the investment goal is to have a stable income even after retirement to supplement their social security. Where it changes its course is when people are looking to invest for reasons other than retirement. Having an exact goal clearly underlines the diversification required and how much risk you can tolerate along the way.
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Not reviewing investments regularly
If you’re actually diversified into several different investments, some of them will give better returns than others in a given period of time. The solution is to be updated about the performance of all the investments under your portfolio & adjust your contributions to keep things in the balance as per your desire.
Follow these steps and you’ll be able to dodge most of the common investment mistakes. The core idea is to learn about investing and its intricacies and act accordingly. For more such information, watch Pehla Kadam Season 5.