“Paise ki koi kami nahi hai unke paas…”
You might have heard this line while talking to your friends or family. A talk about someone wealthy is always interesting. Such conversations also make you wonder about your financial situation. It’s especially true if you’ve applied for a Bajaj Finserve personal loan and need to make an EMI payment soon.
When talking about wealth, one of the most important parts that many of you may be familiar with is investing. Some people invest wisely and, over time, accumulate good wealth. But there are also many who make errors and miss opportunities. What’s important is to become aware of those mistakes at the earliest so investing becomes lucrative.
Keep reading as we shed light on common mistakes and how you can correct them.
Pata Bhi Hai Ki Paisa Kaha Lagana Hai?
Investing is often regarded as synonymous with getting rich quickly. You may think, “Iss stock mei paisa lagaunga to jaldi returns milenge,’’ when, in fact, it doesn’t work this way.
Without a particular goal in mind and defined expectations, you cannot achieve your financial objectives. So, before investing, ask yourself what is it you want to get through it. Is it buying a home, getting your child educated, or planning for your retirement?
After that, find out your investment time horizon and then risk tolerance. Only then should you create an investment plan.
So, suppose your goal is retirement planning. A plan for this goal could be the desired amount of spending needed to support your post-retirement lifestyle. It will also include a specific amount of savings each year to achieve that goal.
Finally, you will allocate assets between stocks, bonds, and various other investments. This will help you invest wisely as opposed to throwing arrows in the dark.
Apne Saare Ande Ek Hi Tokri Mei Na Daale
Remember the phrase risk tolerance we mentioned above? It is directly related to this point. You need to understand that the investment world mei sab cheez ek jaisi hamesha nahi rehti. So, if you invest all your money in a single stock and it experiences a downturn, your investment will suffer.
But if you diversify your portfolio by investing in different asset classes and ETFs, you can eliminate risks easily. If one asset does not perform well, another one that is performing well will offset the loss.
Short-Term Focus Rakhoge to Long-Term Gains Kaise Milenge?
We know you are eyeing money and always thinking about strategies to make quick money. Although this is a good thing, focusing solely on short-term gains is a big mistake in the investment world.
This will be clear when you learn about a study by Bajaj Finance published in the Economic Times. According to it, over the last two decades, the returns from Indian equities have exceeded 10% over seven years. This has happened 83% of the time without any case of negative returns.
If you buy and sell stocks on a weekly basis, it won’t do you any good. Why?
You can never predict market movements because they are governed by factors beyond your control. So, an easy way to get yourself out of the vicious cycle of weekly investing is to focus on long-term gains. This will protect you from recurring fluctuations. Instead, you will benefit from the natural growth of the market.
Emotions ki Ganga Mei Mat Bahiye
The thing about emotions is that they screw logic completely. Jaise hi market girti hai, investment sell karna chaalu. But those who think logically and have a long-term investment plan don’t let market downturns trigger an impulsive reaction.
When something unexpected happens, we panic and become scared. It leads to taking wrong investing decisions. To combat it, keep a journal and record your decisions and thought processes behind them. You should also review your investment plan frequently. It will help you understand which assets are performing well and what your risk profile is.
Conclusion
The right investment approach secures your financial future. Unfortunately, the opposite is also true. But now you are well-armed with the solutions for common mistakes and can make sound decisions. Remember to have a goal in mind before investing and a long-term investment plan. These two things will protect you from making bad decisions throughout your journey.
FAQs
- How do you recover from a failed investment?
The first thing to do is forgive yourself. Making mistakes is common. But your focus should now not be on regretting your decision. Instead, study more about market fluctuations and investments that are stable. Learn how to manage portfolios and allocate assets. Also, seek advice from financial experts. Arm yourself with detailed information so you don’t repeat the mistake ahead.
- How should you research properly before investing?
You should study the company’s performance and its earnings in the previous five years. Analyze if its products and services are unique and relevant. This will give you an idea of whether the firm will survive amid competition. Never invest in the stocks of a company that you don’t think will survive in the long run.
- How should I find out if I am overtrading?
Check whether there is an increase in your trading frequency. A sudden increase from, for example, five to ten weekly trades to 20 – 30 trades is an important indicator. More trading also means more transaction costs. If you find the increased costs eating into your profits along with increased trading frequency, you are overtrading.
- What is meant by core and satellite portfolio in investing?
Core investments are long-term investments. These are stable investments, such as ETFs, stocks, and bonds. Satellite investments are short-term and carry high risk. These can be sector-specific ETFs and funds. A portfolio that combines both these investment types is a well-balanced one and helps in generating passive income.