Before explaining how to avoid bad mistakes let’s first focus on what is a bad investment?
An investment that is not aligned with your investment profile, risk tolerance, and expected returns is considered a bad investment. For example, investing in equities for short-term, or debt funds in the long term are some of the common mistakes done by people.
With bad experience in the market people tend to lose interest in the market and go for more secured options as FD, real estate, gold, etc. thus missing out on some good investment opportunities. To study the market, you can always start with small investments and then eventually go for big ones.
To gain maximum and lose less from your investment consider the following points –
Don’t hesitate in taking professional help –
Not having knowledge and time of investment is no big deal there are professionals ready to help you with your investment and advise you with the best options that will maximize your profit on investment.
Don’t make your investment decisions based on recent past performances –
People get excited and invest in stocks and funds seeing their past performances. A company that gave 20-25% profit last year doesn’t guarantee you the same margin this year. You should opt for the funds with consistent performance and look at their performance in the past 3-4 years. The fund with consistent performance somehow gives you assurance of good performance.
Don’t put all your money in one place, do ‘Diversify’ –
Must have heard of the famous saying “Don’t put all your eggs in one basket” if the basket falls you lose all your eggs similarly with the investment you must diversify your investment so that in case one goes down the other investments keep you floated. Also, diversification reduces the risk of investing. The risk of losing all your money becomes higher when you don’t diversify when your money is spread out this minimizes the risk factor.
Be regular with your investment disregarding of the market condition –
Warren Buffet said – “We don’t have to be smarter than the rest, we have to be more disciplined than the rest”. Make it a routine to invest no matter how small it is and don’t get affected by the market condition. Also, review the market regularly and thus keep on investing.
To avoid bad investment, one should judge on these four parameters – risk, return, liquidity, and tax benefits. If you don’t have an answer, then don’t go for investing.
(Mutual Fund investments are subject to market risk Illustrations are for example only, there is no guarantee of returns. Past performance is not an indicator/guarantee to future returns).