Avoid These 10 Common Investing Mistakes | Learn With ETMONEY

There are only two parts to minimizing investment

mistakes

: the first is the expensive path where you can make those

mistakes

yourself, call it experience, and come out of it a little or a lot poorer, and the second, smarter way is to

learn

from the mistakes of others in this In the video we examine 10 of the most

common

mistakes everyday investors make and how you can

avoid

them. Think of this video as a checklist where you can take a hard look at your own

investing

practices. List the mistakes you have been making and then change them. To improve your behavior and investment practices, we often talk about saving money for critical short-term goals and issues, such as paying off a loan, a child's school fees, or simply establishing an emergency fund.

These are important elements of personal finance and should not be invested in. of this money, especially in the stock markets, but perhaps a more lethal financial crime would be to invest money that you do not own, for example, a personal loan is money that you do not own, after all, a loan does not It is an asset to you and since you do not own the loan, it is not advisable to invest that money in the stock market, it is something that most financial planners and even big investors like Warren Buffett would not want you to do.

In the same thread, one must be careful when

investing

. futures and options, since there too a large part of your investment is leveraged and time and again we see fortunes lost due to unnecessary greed, as happened recently with Bill Huang of Argios Capital, who lost more than 20 billion dollars in a matter of 10 days. be smart with your money and

avoid

leverage for personal investments for someone who is considered the best investor in the world, it seems strange when Warren Buffett endorses investing through a low-cost index fund, perhaps he does it more to discourage people from chasing the latest industry fad or trend that time and time again has made a few people rich and many people poor.

When someone like Buffett, venture capitalists or fund managers invest, they put in hours and hours of research and often reject dozens of companies for every one they invest in of this type. Due diligence is the minimum expected of any investor to ensure that your investments are worthwhile and have the opportunity to make a healthy profit for you, the more due diligence you perform, the better your investment results will be, but if you can't If you spend this time then it is better to invest in professionally managed funds or index funds based on systems that are better equipped than to invest yourself in an ad hoc and ill-prepared way.

Here's a question: If timing the market was such an important skill, why? not recognized by any of the top hundred investors in the world, let me tell you why you don't recognize market timing as a skill because it probably doesn't exist and yet most of the investors in India and around the world continue to pursue this imaginary. line assuming they know when the market peaks and when it bottoms. Our studies here at et money show that more than timing the market, what has the greatest influence on your investment income and investment wealth is the time you spend in the market.

A couple of months ago I put together a wonderful data-rich video about this, and if you haven't seen it yet, we recommend that in that video we explain a scenario where if you were the worst investor in the world and you had only invested in those months. when the nifty 50 was at its all-time high, even in 21 years it would have earned a reasonable annualized return of 12.3 percent, so watch that video and if you are a long-term investor, try not to Develop a Trader or Speculators Mindset Many studies have concluded that asset allocation has a huge influence on portfolio returns and yet most investors blatantly ignore this simple task.

In fact, we do this in many of our videos, we have emphasized the importance of asset allocation and even have a popular video. In this we establish with real data that a balanced investor who invests part of his money in debt, gold and stocks can earn as many returns as someone who does not allocate assets but puts one hundred percent of his money in a single asset class, of course The interesting thing here was that this breakeven investor achieved the same returns as a Nifty 50 investor but consumed much less portfolio risk in the process, so remember a lot about how important it is to get your team composition right with attackers, midfielders and advocates, the correct composition of asset classes will also go a long way to ensuring that you achieve the most optimal risk-adjusted returns.

Diversification occurs when you add an asset to your portfolio, but the most important thing is that this asset you add must have a different risk profile than the one the portfolio currently has, for example. It has a portfolio that consists primarily of large-cap stocks, so blue-chip stocks and large-cap mutual funds. Now, to diversify this portfolio, you may want to introduce unrelated asset classes such as gold, real estate bonds, commodities, etc., which exhibit low or inverse correlation with the majors. tops, however, many investors end up diversifying their portfolio by adding more assets with a similar risk profile, for example they might add mid-cap funds to a large-cap portfolio, which doesn't really solve anything as the performance of the funds Midcap is not very different from that.

In fact, in the case of large caps, one could end up aggravating the problem further by unbalancing the risk profile of your portfolio, so it is a mistake you should avoid making. Impatience is often considered the most costly emotion in investing and comes from having unrealistic timelines, for example, stocks. nothing more than a representation of a company and each company needs adequate time to develop strategies, start production, establish distribution systems, collect revenue and much more, all of which takes from a few months to a few years, however, the Investors expect the stock they recently bought to move in the expected direction almost immediately, which almost never happens and it is this expectation mismatch that pushes these short-term investors to sell before reaping the benefits of business growth;

In fact, patience has been a

common

trait among most of the world's top investors. who have kept their stocks undervalued for many years and have been rewarded many times over for their patience, so remember that a consistent and calculative approach with a realistic time frame will give you higher returns in the long term. A common practice among everyday investors is to chase historical performance by investing in mutual funds that have performed well over the past one or two years; However, time and again we have seen that funds ranked in the top quartile find it very difficult to replicate performance in the following year, but that said millions of investors still opt for the best performers of the past, which in turn most ends up as a mistake;

In fact, this concept also extends to the average, for example, the Nifty 50 Tri has generated an average of 13.9 returns over the last 20 years, so you could say you know what. I will invest my money in the nifty 50 and I will probably get between 12 and 16 every year but what the data shows is that in only four of the last 20 years the returns were between this 12 and 16 mark and in all the other years there were massive swings with the performance of the nifty 50 ranging between plus 79 per cent and minus 50 per cent, he simply said that past returns are not a barometer for future performance expectations and that it would be in an investor's interest to give very little importance to that part of the In history there is a very old saying: a rising tide lifts all boats, in that context a bull market always pushes up some stocks that do not deserve it and that is simply because these lucky stocks are in the right place at the right time, some of these freeloaders might be in a lot of debt they would probably have negative growth they might have pending litigation bad management but they still just got lucky and if you were lucky to have had them too that doesn't make you a brilliant recruiter of stocks, so there are actually two real measures of one's investment. skills one, value-added performance, that is, how much better your portfolio performed compared to a benchmark.

This means that just because your portfolio gained fifty percent doesn't make you a stock guru when the overall stock market has gained 70 percent and point two is what were your investment results over an entire cycle? of the stock market? Now this phrase stock market cycle can mean different things to different people, but internally we think it means a period of time spanning two bull markets and a beer market; In other words, this is a fairly long period. 10 to 15 year cycle and not a small period of 1 to 2 years here is an important rule: everyone has a conflict of interest with their wealth except you, after all banks manage your money so they can charge fees, the Financial advisors earn a commission, stockbrokers. make a profit on every trade you make and the so-called stock market experts want you to buy their subscription packages and while it is true that there are some honest and well-intentioned people who try their best in this field, it still does not justify you put up your blinds.

Trust them because for every good piece of information that may be beneficial to you, there are likely to be dozens of bad pieces of advice that will likely hurt you financially, so the next time you expose yourself to expert information, stay curious but also stay alert. . Be skeptical enough to research everything you receive yourself, including this YouTube video. Remember that no one is more responsible for your financial well-being than you. The goal of investing is to maximize returns for any level of risk, and taxes are just one component. equation, but a mistake often made is being very inflexible about the tax implications, for example, many investors never sell their investments because they don't feel like paying taxes or prefer to pay lower taxes, so they will continue to keep the values.

Long after those stocks or mutual funds have served their purpose and achieved adequate net returns, consider taxes as one of many factors when analyzing a transaction and not the only factor, of course, the opposite is also true, that is That is, don't ignore it completely. the tax consequences on their investments and with this we conclude the 10 most common investment mistakes made by investors. I think it was Albert Einstein who once said that insanity is doing the same thing over and over again and expecting a different result. Mistakes are part of investing. The process and knowing what they are when you make them and how to avoid them will help you succeed as an investor.

The 10 investing mistakes listed in this video are not the only ones, so if you remember any others you have made, add them. to the comment box below, if you like this presentation, please subscribe to eaty money youtube channel and help us spread the good word by sharing it via whatsapp, facebook and twitter with your friends and contacts. Thank you for your time and we look forward to seeing you. See you next week with another revealing video. Until then, investments in mutual funds are subject to market risks. Please read all plan-related documents carefully.