Top 7 investment mistakes we make

It is advisable as not to take unnecessary risks and haphazard decisions when it comes to making investment plans

Investors and Holidaymakers, can you find any link?? I know I will have a unanimous ‘nay' as my answer. But, halt, they are a number of things that can make you wonder why investors should think like holidaymakers.
 
We are actually the same individual. We normally think about where we wish to reach, and at what time. Which is the mode of transport to use, and where will we stay? Of course, what's the total budget planned for the holiday? Is it not the same set of question you ponder over while making your investment plans?
 
1) Lack of a planned financial goal:

If we do not know where we wish to reach, we'll never know when we have. There are speed breakers on our journey, traffic lights and "dashing" pedestrians. We may be a bit delayed in reaching, with higher fuel consumption. Similarly in the field of investment investments there will hindrance like market fluctuations may not deliver the desired returns but we should never lose sight of the final destination. The only solution to this problem is having a planned and an intelligent financial goal.

 
2) Taking more risk than necessary:
It is imprudent to budget three hours to complete a 300 km road journey on Indian roads, where the maximum speed limit is 80 km/ hour. There is a possibility that you may reach faster: conversely, you may not reach at all. Similarly with your investment plans, market stability is a rarely heard word these days, under such circumstances it is always advisable as not to take unnecessary risks and haphazard decisions when it comes to making investment plans.

 
3) Targeting maximum returns on all investments at all times:
How often have you changed lanes to the "faster-moving" one in city driving only to realize that our original "investment" was better! It will be unwise to bet the savings that we need for a committed payment in the next three months in the equity market, irrespective of the euphoria prevailing. Equities are only meant for the long-term.
 
4) Aiming for maximum security:
We proceed albeit at a slower pace when the road is dotted with potholes; but we do not abandon driving altogether. For financial goals that are some distance away (three years or plus), we need to benchmark investments suitably, rather than comparing them on a weekly basis. Keep in mind your returns post-tax and net of inflation.

 
5) Relying on tips  and neighbours:
When one of my colleagues boasted of his conquests in trading, I was at first envious of him. Then I wanted to emulate him. As I grew wiser, I realized that he would only publicize his successes, and never his failures. Don't we get tips of what to buy and when, but never when to sell? And that's how dud stocks adorn our demat statements.
 
6) Do it yourself mania:    
Ever wondered where India would have been if the world did not seek outsourcing? Handing over what you can't do best to an expert is an accepted norm. But with the recent media explosion, we do feel that we have the ammunition to manage finances on our own.

My mantra is that three conditions need to co-exist before your become the master self finance planner
 
•    detailed understanding of finance,
•    (full) time at our disposal,
•    And ability to remove our emotions from our investment decisions .Once your possess them only then can we do without a qualified financial advisor.
 
7) Each one of us believes he is unique:
When we check if our lists of mistakes match in with that of our acquaintances then and there we commit the seventh mistake. So don't wait for the perfect time to discard this baggage and start afresh.

 



Source: InvestmentYogi is one of the leading personal finance websites in India