Bull, Bear or a Pig? How do you really invest?

Bulls make money, bears make money but pigs get slaughtered, the statement has always turned out to be true. But you would argue that you are either a bear or a bull but not pig for sure. Think again, you have lost money when you behaved like one. 

Why Do Investors Lose Money?

Every investment is made with an aim to achieve profit, no one invests to lose but still investors suffer losses. Many investors lose money because they tend to overlook some common investing mistakes. I hope you are smart enough to learn about them and avoid them.

Most of the investors are quiet aware of mistakes but ironically keep on repeating them. Here are some reasons why investors make wrong investments decision:-

 

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Don’t let momentum pull you into gambling

 

Most of investors, especially in bull market forget about their basic goal while investing. Temptation for short term investment gain is definitely lucrative but that’s where mistakes happen. In a bull market it’s wiser to let your portfolio grow rather than trying to gamble in stocks flying on the back of momentum.   

 

Know the risk you can afford to take

 

Bullish times are always great until the winds change, but it’s not until bears bring mayhem in stocks, that the investors recall their risk taking capacity. Its better be cautious than be sorry, always evaluate your risk bearing capacity before investing, even in sure shot return promise.

 

When the stocks are moving up most investors prefer to flow with the current, this is why a little crash creates so much panic in the market. As an investor one must learn to book profit at the previous set target. Remember the old saying, curiosity killed the cat.

 

Rebalancing and Diversification

 

Usually, investors avoid taking the hassle to rebalance their portfolio. The ups and downs in the market usually unbalance one’s portfolio. Before making an investment you should ascertain that your portfolio is well diversified in the proportion that meets your money expectations and risk bearing capacities.

 

Why Short Term Panic is dangerous for your portfolio

 

Long term investors should not panic in the short term market corrections. Long term investments are usually secure and fetch something worthwhile, although it is important to re-balance the portfolio but re-balancing it in panic times is definitely the worst idea that could strike you.

 

Stock Tips and You

 

Stock tips are real important but for thinking, not investing. Many stock tips come from speculations of people who have a little more wisdom in financial market than you. But these tips need to be evaluated in compliance with your portfolio requirements. Pigs are the ones who usually invest on such tips. No one can assess your requirements better than you.

So do not rely on any of the market tips but do listen to them.

 

Mutual Fund Manager and your Trust

 

If the Mutual Fund managers were so capable they would either have been managing their own portfolio alone or would have been sharing your profits instead of collecting monthly salary from the company and the company would also have been working with you on the profit sharing basis. Although mutual funds are good investment option but no one can manage your money better than you.

 

Changing Investment Plan

 

The problem arises when investors start chasing some recent high yielding funds. This is when the stocks are overvalued and become more vulnerable to crash with a little blow of wind. The time to invest in that particular stock was before its growth, now only stupid money is assisting the stock to grow.

Don’t be greedy, stick to your financial plan and diversify it accordingly to your future goals.

Changing a long term financial plan to book a short term profit is quiet the biggest mistake that investors make.

 

What do you get? : Conclusion

 

The above mentioned criteria sound like basic tutorial, but basics are the one thing that most investors forget. In the market flowing with the current strategy doesn’t work for all. Investors need to stand strong across the market turmoil, these basic will help one to do so and will help you reap the good nectar of profits.

 

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