We are often told about where we should invest, which financial vehicle produces good returns, the best time to buy stocks etc. However, it is also important to know the mistakes which we might commit while investing. Given below are top 5 common investment mistakes which every investor should keep away from:
1. Starting the investment process late
Don’t let financial planning take a backseat. Begin investing at an early age even if it means investing as little Rs.1000 every month in an SIP. You can gradually increase the amount. Long-term investing should be one of your key priorities if you wish to achieve your monetary aims. Moreover, the earlier you begin, the more you will benefit from the ‘Power of Compounding’, save more for retirement and lead to a smooth life without any financial hassles.
2. Investing without setting goals
The first step before you commence investing your money in various financial vehicles is to determine your long-term monetary objectives, understand your risk appetite and accordingly settle on the best investment options which will help you realize your goals. Don’t invest your hard-earned money in haste. Capitalizing in an ad hoc style will not yield the desired results and you might end up losing money in the wrong investments.
3. Not having a diversified portfolio
Once you start investing, don’t put all your money only in fixed deposits or equity. Take the help of a financial advisor and work out how your goals can be best achieved by diversifying your portfolio. Invest across various asset categories such as gold, mutual funds, real estate, bonds etc. and furthermore different asset classes so that you can manage risk efficiently.
4. Not keeping inflation in mind
Over the years, the prices of essential goods and services have only increased, a phenomena termed as inflation which everyone is aware of. However, we tend to ignore the fact that inflation can have a huge impact on our investments as well. Keep in mind the current inflation and accordingly take investment decisions otherwise your savings will be depleted before you know it.
5. Not re-evaluating your portfolio
Creating a suitable investment portfolio is not enough. You should also review it periodically to understand where each investment stands, whether is it generating negative or positive returns, and if you wish to stop an existing investment or begin a new one.