Mistakes To Avoid As A New Investor3 min read
Are you a newbie investor? And all of a sudden your portfolio value swings wildly because of the volatility in the market? Well, markets have been volatile, are volatile now and will be in the future too.
Here are some of the common mistakes that new investors do and you should avoid when markets are volatile like the current conditions.
- Redeeming your investments
Lot of people get scared looking at the negative returns made by their investments and in fear of further losing money, just book losses and redeem entire investments. Don’t do this! Stick to your financial goal and the investment horizon that is necessary to achieve the goal. It is even more crucial to stay invested during market swings as the market fluctuates heavily in the short term. These swings get streamlined over the long run. Your investments could return at expected rate over the long term and help achieve your wealth creation goal.
- Stop SIPs
A lot of people, fearing the market volatility, would stop their monthly SIP investments. This is a very big mistake. SIPs help investors in multiple ways – Rupee cost averaging and discipline in investing. In times of a slowdown, an SIP investment would give you more units for the same amount that you plan to invest every month. By stopping or pausing your SIP you are missing out on accumulating more units at a low cost. Also your monthly investment discipline goes for a toss and you get off track on your wealth creation journey. You may not be able to achieve your financial goals like you earlier planned. So, continue your SIPs no matter how the market is behaving.
- All eggs in one basket
Equities as an asset class, although having a very high chance of giving superior returns, are more volatile in nature when compared to fixed income investments like Bank FDs. These tend to give low or negative returns in a short period of time. But over a period of long term Equities generally outperform other fixed income oriented investments. But it is never advisable to put all your money into equities only or a one or very few stocks. Diversify your portfolio always. Understand your risk profile and invest in diversified asset classes like stocks, debt instruments, gold/silver, and international equities.
So you need to stay calm during times like these. Behavioral moderation is very important in situations like these. Some people think that markets cannot go lower than the current level and adjust funds from different sources to invest more and some others fear the downfall and redeem their investments. Keep your fears or greed away from your financial goals. Both are not good for a portfolio and financial goal. Try to limit checking your portfolio multiple times as it could give you unwanted ideas. Always remember to link your investments and decisions to your financial goals and just stay focused on this during the volatile markets
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