Every one wants to have a good start especially when it comes to making first time investment. For a new investor, making an error at the start of its investment journey could prove to be very fetal as it would led to disappoint and huge losses.
To start a investment journey on a positive note, following mistakes new investors must avoid
Take risk at early stage:
Early investors should explore risk in investments than resorting to conservative portfolios because it’s always wiser to begin early and eventually cover up for losses (if any) by generating higher income in future. Also, one should go for investments in equities in early stage rather than going for FDs primarily due to longer investment time horizon
Mistake insurance for investment:
Many people mistake insurance for investment, which result in mis-allocation of their savings in an insurance fund over investment. One should never go for a combined product such as ULIP as they are more expensive at the same time generate lower returns, since certain portion of investment goes towards insurance cost.
Buy toxic financial products:
Maximum financial mistakes are committed during tax season because most of us tend to buy tax saving products which are toxic. Additionally, to learn about investments, many new investors burn their pockets by buying financial products which are not suitable to them. These mistakes can be avoided by identifying the objectives behind invezsting in any particular financial product. Also, one need to do due diligence or research before investing while most of the people do research after investing. This result in unpleasant surprises
Under/over diversify portfolio:
Diversification of portfolio helps mitigate market risks. But having direct exposure towards equities or multiple unexampled investments may not fulfill one’s investment objectives. Besides that, keeping a track of returns on an over diversified portfolio may become a challenge for early investors. So, one must always carefully venture into diversifying one’s portfolio, and do so in consultation with a personal financial advisor.
Seeking guidance from friends and Kin:
Beginners have investment prefer consulting with kith and kin to certified financial advisors, mostly fearing wrong advice or lack of faith. But one should know that only an industry expert can give one pragmatic advice on making the right investment choices. For example, friend/family members will usually advise on investing in fixed deposits or real estate assets which are illiquid in nature and not flexible. In the contrary, an industry expert will focus on suggesting more flexible avenues with high ROI (returns of investment).
Above mistakes new investors must avoid will be very benefical for you, if you intend to buld a diversified portfolio to meet your financial goals. However, It takes years of experience and knowledge to be investment savvy. One need to own both losses and profits with similar intensity, if one needs to become a successful investor.
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