What are the Common Mistakes Made By Investors

It's unfortunate that the new investors over the years have been committing the same mistakes from the time the modern stock markets have come into existence. Since these mistakes are ingrained in the basic way of human thinking, it's likely these would continue in the coming years. It's not that difficult to increase your chances of success in the investment world. All you have to do is be aware of these basic mistakes and avoid them whenever you get the urge to commit them. Following are the most common mistakes investors make:

You Don't Have a Plan

Make sure you have an investment plan in place. You may be trying to achieve a goal of $100,000 for your kid's college education or may want $2 million for your retirement. These are all valid goals, but beating the market is not a justified goal at all. That way, you'll also know volatility is not an issue if you are 30 something and you have invested for your retirement (but inflation is). You may need to know what means success for you, as it may differ for different investors. The portfolio should have assets in different classes such as equities, global stocks, bonds, and high yield bonds among others. You need diversification of funds even in each of the asset classes.

Trying to Time the Market

The guidelines you have set for yourself will make sure that you stick to a long term policy even when the market is volatile and is scaring away other investors. It's correct that outsmarting the market is more exciting, but is more risky as well. If you are investing for the kid's college education who is a junion right now, it means the time horizon you are investing for is short and the portfolio will definitely reflect that. Most of the investors are usually focused on the short term gains.

Not Making Your Own Decisions

The financial news channels are good for education purpose but they need to be turned off when you are deciding where and how much to invest. If they really had some great tips through which you could earn millions, they would simply go quiet and make that much money. The fact that they are making a living through a news channel suggests you should make your own decisions.

Not Rebalancing Portfolio

Often rebalancing the portfolio is difficult for the people because they need to sell the well performing stocks and increase the poor performing asset classes. The rebalancing act is profitable when it performs extraordinarily. If you are drifting with the market, its a sure shot recipe for poor performance.

Chasing Star Fund Managers

Don't be overconfident about your managers' performance. There are very few managers in the market who can time the market consistently over a long term. Look at the Forbes 400 list, you'll find no market timers in the list.

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