5 Investing Mistakes You Must Avoid in 2017
Mistakes are a part of learning. The experiences that we gain by making mistakes help us to enshrine over time. The investors often make various blunders while investing their money which leads to their investment failures. No one can be perfect, but knowing some of the common errors can help to deter you from going down. Here we have provided five most common mistakes an investor makes which must be avoided to get success in managing the finances.
- Using Too Much Debts:- This is the most common criterion for the newbie investors to buy a large number of securities using borrowed funds which are called the ‘Margin’. Although these margins can help in making more money, it can also exaggerate the losses. People use the free money to gain an advantage, but the moment their investment starts falling, their debt obligation is enhanced. Furthermore, the use of borrowed funds in buying the securities also requires a close watch. So if it isn’t possible for you to keep a close eye on your investments and you lack knowledge about the same, then you must not get indulged in the same.
- Buying On the Basis of Unfounded Tips:- It is a common experience for every investor that they find random tips for buying stocks and shares. One often hears people talking about different securities and their expected high yieldings in the future. Following such discussions and tips, investors park their money in such strategies in the hope of making high profits over time. But, this should certainly not happen. Even if the things and the predictions are true, it is not necessary that the stocks would be favourable for your portfolio. Thus, instead of following the unfounded tips, you must find the strategies that suit your requirements.
- Making Sale Decisions on Cost Basis:- Suppose you buy two securities A & B at Rs.10 each, and now their NAV is Rs.5 and Rs.20, respectively. So, the question arises as to which security out of the two should be sold? The investors often make the mistake of selling the securities with greater NAV as they compare the cost of the instruments while selling to make profits. But in the case of investments, the priority must be gaining the investment goals as per the horizon. So in this case, you must first ascertain which security can provide you better returns within the investment horizon. Accordingly, the one which is found unfavourable should be sold.
- Buying Stocks That Appear Cheap:- The investors find it agreeable to buy the stocks with low prices. There come instances when due to various internal and external factors the prices of shares fall and attract the investors to purchase more number of units at the diminished rates. But this is certainly inappropriate. The reduction in prices does not necessarily mean a better opportunity to buy stocks. The reasons for such reduction must be evaluated first as it might be possible that the fall in prices is due to ineffective management of the company that would further cause a reduction in the earnings. The opportunities that arise in the market must be grabbed after making a proper analysis, else it may cause a shortfall in the portfolio’s productivity.
- Dependence on Niche Funds:- This is often noticed by the experts that investors seek to accumulate niche funds to their portfolio in the hope of earning great yields from a specific sector. Although some sectors like telecommunication, infrastructure, construction, etc., offer maximum benefits to the investment values, they may cause a serious downfall as well if you let them. Hence, it is recommended to the investors to provide more exposure to their hard-earned money by investing them in diversified sectors and securities. This helps in reducing risks associated with the investments.
With the penchant of earning greater income, the investors get indulged into the irrational decision-making process and follow faulty advice. Rather they must have a set goal to be achieved for which they must opt for the most suitable investment strategies. Although one learns by doing mistakes, the mistakes involving loss of money cannot be tolerated much. Therefore, we have propounded some of the major investing mistakes that investor make while taking the investment decisions.
The experts of My SIP Online have evaluated the market very keenly, and they have come up with the best solutions for all the errors and discrepancies that occur in investments and are suffered by the investors. You can get associated with our team to get ready-made solutions for your queries and avail maximum benefits on your investments.
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