Common Investing Mistakes
The individual
investor often makes certain typical mistakes that will eventually cause him to
give up or to lose everything. If we just follow some discipline and avoid some
mistakes then investing is not much critical rocket science. In this article we
are sharing some common investing mistake and how to avoid those mistakes.
Any investment is not 100% safe:
Yes believe me, none
investment is 100% safe including your bank fix deposit. Every investment
implies a certain risk factor that is determined by a multitude of factors. So
if you are ignoring risk factor, it means you are fooling yourself.
Do homework on your investment before
investing :
Those investors who
neglect risks also have great expectations regarding the general profits. I
advise them do proper homework of the investment product. It is very important
to understand risk and return ratio very well before investing. If you don’t do
proper homework you may be lost the final investment also.
Diversify your portfolio:
Portfolio means, all the investment a certain person has made. Through diversification the investor attempt to cover losses through profits some companies that might register losses. Regarding the optimal rapport between winning and security, a portfolio will have a pyramidal distribution of the stock types. The biggest investment will be done in companies with minimum risk and maximum security like governmental bonds. Climbing the risk stair the number of investments will decrease. Investments in extremely risky companies will represent a low percentage of the portfolio.
Being greedy and/or being afraid:
Greed never pushes to
safe investment. Through greed you will only make investments that do not stand
a chance. Fear will determine a rather calm and secure behavior that won’t
bring you losses but will cause you to flip over great opportunities also.
Identify your need and risk tolerance:
An investment has to
be done accordingly to the needs and risk tolerance of every individual. These
two elements are unique for each person like fingerprints are always different.
The same way there can’t be two persons with identical needs and risk
tolerance. So, if an investment is an opportunity for the one, it does not mean
it is for you too.
Thinking you are the smartest:
Thinking that you are
the smartest investor it is a big mistake. Every investor bases his decisions
on information he knows at a certain moment. Not wanting to hear advice or to
hear new things, does not make you smarter, it brings you a great disadvantage
and you will only put on hazard with your investments. So be updated about
financial market and investment.
Regards,
Arvind Trivedi
Certified Financial Planner
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