Posted On Monday, Jan 02, 2012
Every New Year brings with it a new start, a reason to begin again, a time when we promise ourselves to do something different. That’s why we make resolutions. Whether it is joining the gym, waking up earlier, or making some time each day for your loved ones, resolutions are meant to bring some discipline to your way of living.
This series of - 7 Investment Mistakes that you should say Bye to – was a step to get you started in this direction. We hope that the 5 mistakes that you have read about so far have helped you in getting a new perspective to your investments.
Adding to these mistakes, are those of ‘Teenage Temperament” and “Impatience” that you should say farewell to as well.
Investment Mistake #2: Bye, Bye Teenage Temperament
We are sure that you care about your money. After all you spend a significant portion of your life, and a considerable amount of your efforts and resources to earn it. But then why is it that you give in to a teenage temperament and practice “Speed Investing”? More often than not, the binary nature of market triggers this behaviour. The risk-on’ and ‘risk-off’ conditions may not be conducive for sound decision making. Nevertheless, if you want to handle your money carefully, then you have to slow down. Speeding may be good, but only on the racing circuit.
Entering and exiting the market with a short-term objective is not good for the health of your money. If you are a serious investor and don’t want to risk your hard earned money, then think of the long term.
Mutual funds are a good avenue for creating wealth. They diversify your invested money into stocks and shares of different companies and this kind of diversification spreads the risk. However, a mutual fund too gives returns when you stay invested for longer. It gives you the benefit of compounding. So, don’t succumb to the teenage temperament of losing foresight. Be patient with the invested money.
This New Year bid farewell to impatience.
Investment Mistake #1: Bye, Bye Impatience
“An investor’s worst enemy is not the stock market but his own emotions”.
Warren Buffet, the world’s most successful investor cited the behaviour of one of the world’s geniuses. This is what he had to say.
“Long ago, Sir Isaac Newton gave us three laws of motion. But Sir Isaac`s talents didn`t extend to investing: He lost a bundle in the South Sea Bubble, explaining later, `I can calculate the movement of the stars, but not the madness of men.` If he had not been traumatized by this loss, Sir Isaac might well have gone on to discover the Fourth Law of Motion: For investors as a whole, returns decrease as motion increases"
This simply means that you have to be patient with your invested money. Don’t try too hard. Don’t press the panic button in a fluctuating market condition. If you have invested your money thoughtfully in a reliable company, then there is no need to worry.
Mutual funds are a safe bet during volatile market situations. However, you have to be selective while choosing a fund house. Look at the investment philosophy of the fund house. It will give you an idea about their future prospect. Check if they are transparent in their operations and if they treat your money like their own. It is important to understand the investment strategies of a fund house, but it is more important to find out the intrinsic values of the company.
On the threshold of the New Year, we hope that the coming year brings you the needed discipline to a happy investing 2012. And we hope that by bidding these 7 investment mistakes of – Procrastination, Over-optimism, Ignorance, Emotional Investing, Chasing Performance, Teenage Temperament and Impatience – your year ahead starts off and carries through on a positive note.
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