The 5 mistakes of Investing we must avoid.

Today we reveal you the secret to avoid the biggest mistakes investors make. We explore the common blunders the investors make and complicate their lives. We present to you the ingredients to investing success.

Lazy investing, blind investing; Do your own research: 

When was the last time you bought a car or a television set? I am sure, you must have test drove the car before finalizing your purchase? Also, before zeroing your television set purchase, you must have checked various models of several brands.

Well, then why get lousy when it comes to investing your hard-earned money? In fact, the due diligence that should go into stock market investments should be even more rigorous. Avoid acting upon the loose information floating around; do your own research. Avoid the biggest mistake of completely relying on another person to take your investment decisions.

Remember as a shareholder, every share you own in the company makes you the owner of that company to that extent. Therefore, it becomes essential to buy solid businesses. Do your own research by understanding the business, the company background, the management pedigree/quality and the company financials before you decide to part away with your savings and invest.

Cut the excess, get selective: 

Do you tend to read through every email that hits your inbox on daily basis? Do you go by the big bucks promises made by the financial media men on television sets? Do you blindly abide by the recommendations put forth in newsletters?

If the answer is yes, then more often than not you must have landed in a soup. The fact that every investor is exposed to tonnes of information itself becomes his biggest undoing.

Remember there is nothing like easy money or quick bucks. There is no secret formula to get rich. No randomly made stock tips can help you generate wealth! Hence, turn off your television set. Delete mails from your box that adds no value to your investment decisions. Turn off your ears and eyes to the misleading information. These news reports only stand alluring.

Hear only what you should hear. Get selective, and cut the crap! Get your facts clear and build your own investment plan.

Timing the market; avoid speculation: 

Is it the time to buy now? Or should I wait for a better price as the market corrects? Confused?

Well, regardless of the market movements, it is essential to focus our energies on understanding the quality of the business and buy the stock at the fair price. Many-a-times investors tend to buy higher, sell lower. Such mistakes can be avoided if we do our own homework. Pay attention to details! Pick up the annual report of the company. Check few databases. Avoid speculation. Do your own research, I repeat.

Remember it’s hard to time the market and its costly to trade frequently. Moreover, it’s not all about timing when it comes to investing. It is a futile exercise to time the markets. For nobody can predict market movements. Keep an arm’s length from those who claim to do so.

Holding on; believe in the value of compounding:

Remember speculation can make you rich; if you get lucky. But value investing can make you wealthy. Hence, buy the stock with an intention to hold it for a longer time frame. And enjoy the fruits of compounding. What is compounding? The longer you hold on your investments the more money you make. That is, while your original investments will pay you interest, you will also generate money on accumulated interest, dividends, and capital gains. In this way your money can grow faster. Compounding magnifies the growth of your money. It amplifies the possibility of the healthy earnings your investments can themselves generate.

Concentration of portfolio, diversification is the key:

Equity investments are super. But avoid the mistake of putting all your eggs in one basket. It’s important to spread your money around.

Remember diversification guards your money from adverse market conditions. Choose the right mix of investments across various diverse asset classes such as bonds, equities, real estate and commodities into your portfolio. While cash as an asset can bring in sense of security and stability to your portfolio, investments such as real estate and gold can help you in times of adversity. Cherry-picking right kind of investments can help you limit your losses. Hence, spread your risks!

Build a balanced investment portfolio in commensurate with your investing goals.

Well, investing is fun. It can be educative, enlightening and remunerative. Only if you avoid the 5 mistakes (aforesaid) and make your life simpler! Stay tuned, for there’s more to come, catch you next time with another interesting reportage on Mistakes committed by stalwarts and the learning. Till then Happy Investing!

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