5 Biggest Mistakes of investors
It is normal for people to make mistakes. We make mistakes all the time, be it in our professional life or personal life. These mistakes help us to make the right decisions.
We also make many financial mistakes. Here are the top five financial mistakes that you should avoid while investing.
1. Spending Before Investing
There is a popular belief that we should save the money that is left. The money we have left after taking out our expenses. But, if that were the case, most of us would not have enough money to save or invest. As a general investment rule, one should set aside at least 25% of one's income for savings or investment. If you are not able to invest 25% of your income, you can start with 5%. Once you are comfortable or you can invest more, you can gradually increase the allocation to 25% or 30%.
Automating your investments is a simple and easy way that will help you invest a fixed proportion every month. Investing in Mutual Funds through Systematic Investment Plan is one such way to automate your investments and create wealth over the long term.
2. Waiting for the Right Time to Invest
It is observed that most of the people believe that they do not earn enough money to start investing. They keep postponing their investments for a later date. Waiting for the right time to invest is another financial mistake.
There is no right time to start investing. When you invest in Mutual Funds through Systematic Investment Plan (SIP), it is the right time to start investing. Also, you don’t need a huge amount to invest through SIP. You can start SIP from as low as Rs.500 every month.
3. Not investing in financial goals
Goals motivate us and make us work hard to achieve it. Investing without financial goals is like a ship without a rudder. Without a sense of purpose or direction the ship would easily drift in the direction of the wind or sea currents. Investing is no different.
Financial goals could be early retirement, having a large corpus for retirement, buying a house or a car, etc. It varies from person to person. Financial goals will keep us focused. As a result, we are less likely to make wrong decisions based on short-term news.
4. Jumping constantly in the best performing funds
We all work hard to earn money. So, it is logical that we would look for the best funds to invest in and the top performing funds. However, choosing the right fund is more important than the best fund. It may not be easy for individual investors to understand the reason for its jump in performance.
Looking for the best performing fund to invest in is a common mistake that many people make. Shifting from one fund to another is also a costly affair, as exit loads and taxation may be applicable depending on the fund. Instead of focusing on one year or one month performance, focus on its long-term performance, consistency of how well the fund has performed against the benchmark and peers.
5. Redeem or stop your investments due to short term volatility
Redeeming or discontinuing SIPs due to short-term volatility are the most common mistakes that investors make. Market volatility is common in equity investing. Hence, you must take it as a part of your investment life. Sometimes it's best to do nothing. Instead of getting frustrated by short term ups and downs, only focus on your goals.
That’s all! These were the top five financial mistakes that people make while investing. Talk to a financial advisor if you have questions. You can visit:-
Best Financial Advisor in Lucknow
Health Insurance advisor in Lucknow
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