It is essential to have a better idea about the Do’s and Don’ts of investing. It is seen that an average investor makes the following mistakes. Learning from these mistakes may help you make wiser choices while you choose your channel of investing.
Not understanding the Risk Profile
Taking risks without a thought makes one doom down. It is alwaysbeneficial to play safe understanding your risk profile. It is seen that theinvestors are aware and concerned about the risks in the mutual fund schemes.However, it is also important is to find your risk aversion. A simple step likepersonal audit would help finding your risk profile. Check whether your risktolerance matches with the SEBI’s product labeling.
Not diversifying a portfolio
While making a choice of a scheme, make your portfolio diversified across the sectors. It is beneficial to invest with a good understanding of the entry and exit point. While making a portfolio, diversify it to various sectors for a safer side. However, a portfolio diversified in too many sectors is difficult to manage and may not be focused. Hence diversifying the portfolio is good but it should be easier to optimize and should be beneficial in returns. Choose the right funds.
Making sentimental investment decisions
When it’s about investments, never attach sentiments. Brands dohave a sentimental value that makes you shape your choices about purchasingtheir product but in the stock market the value of stocks is more importantthan the sentimental values. The financial position of the stocks is important.
Holding on to consistently loss making investments
In case the company you have invested in is not holding a good position in the market and is consistently making a considerable loss, it does not make sense to stick on to it for long. To avoid loss in your expected returns, it is better to make a wiser decision and invest in the value driven funds which would reap benefits.
Making investments with insufficient knowledge
Knowledge brings the best! Investing your money without a sound knowledge of market and its functions may lead you to lose money. Learning the market rather would be profitable. Keep an eye on the ticker tape. Learn the trends in the market, part in the discussions with good investors, read about the stocks you invest in. An appropriate approach to knowledge would open a lot of possibilities.