We’re always in pursuit of the perfect investment tips in order to ensure that our money is safe, secure and earns us returns that are above average. While this is desired by every investor, not all manage to make a perfect investment. There are a number who have made one or more mistakes in their investment that they ought to have avoided. Actually, investors have been making these same errors since the dawn of modern markets, and we will likely be repeating them in the coming future. You can significantly boost your chances of success in your investment by becoming aware of these typical faults and taking precautionary steps to prevent them.
Common Investment Pitfalls
1. Not having a Plan
As the old saying goes, if you have no idea of where you are going, any road will take you there. You should have a personal investment policy or plan that addresses:
· Goals and objectives – Find out what you are trying to accomplish.
· Risks – What risks are relevant to your portfolio? If you’re 30 years old and saving for retirement, volatility is not a meaningful risk. Conversely, inflation – which eats away any long term portfolio, is a significant risk.
· Asset allocation – What proportion of your overall portfolio will you assign to entities, high yield bonds, international stocks, etc. Your asset allocation ought to achieve your goals as it addresses relevant risk.
· Diversification – Many investors fail to allocate to different asset classes. You should diversify within each asset class.
2. Failure to Monitor Portfolio
Another common mistake that investors make is stopping to monitor their portfolio after making their investment. It’s very crucial to keep reviewing your portfolio at regular intervals to determine whether funds or portfolios are underperforming and whether there’s a need to modify asset allocation. Corrective measures should be taken occasionally by weeding out bad performers from time to time. Never misjudge the power of regular portfolio review. It can really help you grow your funds faster.
3. Not Having an Exit Strategy
A growing market elevates all ships, but eventually it’ll come down. If you do not have an exit strategy, the market is likely to take all your gains when it falls. If you want to achieve a financial peace of mind, you’ve to be ready with a strategy that will protect you from bear markets.
The concept of discipline as a major aspect of a fruitful investment is really important. While most people claim to be disciplined when building their investment plan, when hard times arises they usually abandon their started plan and decide, rather, to seek other options whether they’re alternate asset classes, different input amounts, diverse securities or a completely diverse plan altogether. Nevertheless, as evident here, discipline can have a great impact on the long term strength of your portfolio.
This is how an investor can stay disciplined in their investment plan.
1. Stay Invested
Amid times of market instability, investors should take a similar approach used by professional cash managers: they always stay invested, even when the markets portray no sign of remorse recovery. This is essential for the reason that our guts recommends that we need to “cut our losses” and sell while we can. Since it’s impossible to properly do market timing, stay invested, adhering to the initial investment program and investing consistently really helps investors to exploit such market open-doors.
2. Invest Methodically
Making your investment plan a logical one ought to help attain a number of things, least of which is a good modification in accordance with your expense base when things seem awful. By transforming your investment process into an automated behavior, you’ll as well be better equipped to budget your cash flow. Since it’s an automated methodology, the scheme itself will help you separate emotion from your investment portfolio.
3. Remain Objective
Remaining objective in your plan helps you maintain the discipline required to guarantee that your portfolio stays on track. Objectivity, despite the fact that it’s virtually incomprehensible when you watch your personal savings and investments drop to notable lows, will help you evaluate your situation logically rather than emotionally, which leads to making adjustments in the 2 disciplines above.
Be disciplined and you’ll survive in the market; after all it’s your own money you’re playing with.