Each and every individual wishes to make profit from minimum investment. Novice keep themselves away from the stock market saying risky and we ‘ll loose out on the money. It is certainly not true even the most experienced ones also loses out in the market.
After we loose , we blame market saying this market is not meant for us. Or we say, this market never earns only loose money. But is it the fact?? Certainly, NO. Because remember, when your are loosing, someone else is making money. When we are investing, we only ask about profit and return, we hardly discuss anything about risk or any particular word of caution, thus the biggest contributor to our loss story.
We must avoid these key mistakes, if we want to learn and earn money.
1. Don’t just invest because you have idle cash lying with you.
It is very important to have a well laid plan before investing. It means you must know, Why you are investing, when you wish to invest? Your investment must be based on your financial goals. So, it’s very important to set your realistic financial goal. You must know your risk appetite, for how long you wish to invest in? After analyzing all of this you should make your investment strategy. In case you are not setting your financial goal, in that case, investor will tend to follow trend and be a part of flock and thus creating an investment strategy that doesn’t suit you.
2. Always do your homework, before investing
After analyzing personal profile, your financial planners makes an investment strategy. Good enough, you trust your advisor as he is a professional. But always remember it is your money and your fortune, which is at stake thus you must understand the strategy made by your financial adviser. You must question, him/ her, why and how about the investment strategy. Never just blindly follow what the advisory is saying. You must ask why has he included a particular asset class and why has ignore some other asset class , which you may prefer to keep in your portfolio.
3. Listen to yourself
Never just follow what your friend and family is talking about any particular scrip or investment class of asset. Always do your own research. Verify the fact, approach your financial advisor before trusting what your peers say.
4. Don’t get swayed away from cheap prices.
Never invest in shares which appears cheap. People buy thinking fall in share price is making the scrip attractive, but this is not always true. It is always important to reason out the fall in the prices. Reason could be anything like, change in market condition, change in leadership. It might also happen fall in stock prices have been artificially triggered to lure investor, thus it not be a nice bet. As an investor one must go for value stock with solid base and history of the firm.
5. Diversification is the key to success
Never put all your eggs in one basket. Diversification one important strategy being used by almost all investors/financial planners. It is advisable to invest in different asset classes with different risk profiles, then only the diversification strategy works the best.
6. Margin is silent killer
Margin is basically the amount borrowed to invest in securities. Margin definitely increases the profit other side of margin, it also raises the losses. Thus if you have taken margin and your investment plan didn’t work the way it should have, in that case, you will end up with massive burden of debt. Thus if you don not have enough time to closely monitor your portfolio, then you must avoid margin.
In nutshell, an investor must align his investment strategy with financial goal, as there are no set rules. Further he/ She must also consider the risk appetite, time period, skills and values before investing and making the profit. Like each individual is unique, in the same way, his/her investment style will also be different to attain financial goal.
Note: All information & data provided in this article is for the educational purpose as well as to give general information on the finance & economy, not to provide any professional advice or service. Views & opinions are not biased against the company and do not affect any official policy or any other agency, an organization within the content.