Often simple hacks help in life & investing. Few rules are so simple and straight that you do not need to think twice. Yet we fail to understand them. Here are 5 most important real life investment mistakes, that you need to understand to be a successful investor. I have provided some real life example too. Let’s see if you can correlate with your life.
Real Life rules in investing help you connect your life & investments that you do. The investment mistakes are common and keep happening around us.
We hear many time people complaining about luck, de-glorifying themselves & claiming that they are not suited for investments. This is more of an excuse.
There are reasons for whatever is happening in your investing world, you just need to identify and work around these reasons. Let’s check the 5 most important real life investment mistakes.
When I purchase an MF or a Share, it always goes down
Do you know why this happens to you? Because of 2 reasons.
One, you purchase them at peak (relatively). Chances are you do not have information about them and just learning that X MF is number 1, you wait. Then it goes ahead further, you just move ahead and invest. Now If you invest in something when valuations are high and it is going through an upward cycle, the law of gravity demands that it will correct. But you say you are jinxed.
The second reason is that you are standing and pointing from a wrong spot. You invested in a consumption fund, and just after a month you say- the fund is not doing good. Are you right in pointing wrong an investment of 5-10 years just after a week or a year?
Markets go through at least one big pullback every year, and one massive pullback every decade. Get used to it. It’s just what they do.
Your friend is not “that” genius
You friends or peers often bang tables narrating tales how they made killing in Avenue Supermart IPO or Bitcoin Mania. But this does not mean they can be ideals in investing.
There is virtually no accountability in the financial pundit arena. People who have been wrong about everything for years still draw crowds.
Just observe them carefully, do they ever tell how they lost in Reliance Power? Do they tell about the amount they invest in speculations? If they would have invested convincingly why would they invest just a few thousands, why not more? They are just bragging their luck, and luck is 1% in investments. Rest is research, effort & behavior.
There are tens of thousands of professional money managers. Statistically, a handful of them have been successful by pure chance. Rest do the hard work and succeed.
Investment Mistakes in differentiating between Waiting & Patience
You decide to buy Y stock. It’s trading between Rs 44.50 and 45. You wait to see if it drops to Rs 44 to buy it. You turn away for some work and when you look back, it is now Rs 46. Oops! You but is in a wink.
On the other hand, you want to sell Z. It’s trading between Rs 21.50 and 21.75. Your idea is to see if you can get Rs 22. You decide to wait and you see it dropped to Rs 19. You sell it thinking everyone selling for a reason!
If you look at prices you will always confuse waiting & patience. Instead, you should focus on value & goals. If a goal & value is achieved, move out. If still underachieved wait. Simple, isn’t it?
Embrace Boring Atmosphere
Investing is based on research and information. Researching information and drawing a meaning is a time taking activity. Its reading pages, surfing dull websites & talking to financial planners etc. Then you invest, wait for years to see results. The thrill is in the pudding and not in rice or sugar.
The most boring companies like – toothpaste, food, oil – can make some of the best long-term investments.
Investments is a game of mind, trust & patience. All these 3 pillars make a foundation of a good portfolio. You may have dull moments but these are for good. Thrill is fatal in investments.
The market will always beat us in Short Term
Because we do not know the vastness and size of information that makes Mr. Market.
No matter how knowledgeable you are, how much effort you have put into research or how lucky you are, you cannot know it all. Mr. Market loves to make you regret your mistakes.
Not a single person in the world knows what the market will do in the short run. End of the story.
The best you can do is – your homework. If you are investing in shares directly, then you need to know your securities inside and out—know their numbers, competitors, fundamentals and technicals, risks & growth areas. Have a strategy for every scenario.
Hope you had Deja Vu moments when you read these 5 most important real life investment mistakes. If you work on these, I am sure you will have good results in long-term investing.
Share your views on the article in the comments section below.
