Ten money mistakes that hurt your targets
Over the history 20 years I have dealt with the monetary markets. I have noticeably met all types of people brokers, bankers, owners of brokerage firm, life insurance salesmen, relationship managers, and of way the guy who pays all the bills -- the shareholder. Here is a review of errors I have seen shareholders make. Of way it isn't exhaustive, and shareholders find newer ways to lose money, but here it is anyway.
1. Trading and thinking this is investing
People purchase and sell Stocks, mutual funds, etc. at a frenzied pace -- it is an incredible approach to make money for own broker, not for yourself.
2. being too traditional with their money
Viewing that putting money in RBI bonds, PPF, own PF, bank fixed deposits is the top mania to do? Such people don't know increase threat, pre-payment threat, call threat, etc.
3. being too violent with their money
Contrary to (2) category is another category which has read anywhere 'over long term Stocks offer the top return' -- so they stay pumping money into direct Stock without kind portfolio construction, regression to the mean, etc. Such people don't know that to stop 1th, you have to 1th end!.
4. Bull headed
I recognize a friend who pounds the treadmill. At least ten trainers have told him to run softly, but he doesn't listen. I really pity his wife and colleagues- this guy is totally bull headed. There are some people who wouldn't make mid-way improvement. As a pattern I recognize this guy who had bought some Stocks of Patheja Forging, Shaan Interval and Silver line. He snubbed to sell - because he had read that 'stocks are for the long run' -- all the advertisers of these firms are absconding! Please remember to make money in Stocks you want to invest in a superior portfolio (like HDFC Top 200), decide a superior fund manager (like HDFC Mutual Fund, DSP Merrill Lynch), invest regular amounts (SIP) and hold for a long period (I like 10 years, if not more). That would make money for you.
5. Totally wrong asset allocation
Too much of debt for the long period or too much of Stock for the next quarter! Investing/dealing in equity/Stock funds so that money could be withdrawn to pay the next EMI! Both are BS!
6. Trying to time the market
I have no sign why smart, clever people think they could time the market. The causes that I could suppose of are the payoff is so high, that people forget the really low prospect of receiving it right. Would do a detailed article on this alone. Assure.
7. Portfolio construction nightmare
People select some Share anywhere because some aunt or uncle told them. Then they start thinking it is a portfolio. I also have a tough time compelling my very smart editor why a portfolio is just a dhobi list, and not a portfolio. Most times she agrees with me, though reluctantly.
8. Handing over to a lousy fund manager
Banks, mutual funds, self help sites, life insurance firms, portfolio management services -- call them by any name they are just a mafia out there to make money. Most retail shareholder should be happy with a key ETF, a savings bank account and period life insurance. However we spend hours, days, and years on analyzing history records to see how the market would work tomorrow. Sometimes when we get it right by chance, we set ourselves by calling it skill. Vow! The globe loves a victor.
When you strike a pair of home runs you tend to judge that you would maintain to strike home runs regularly. This is true for most of us -- we attribute our fresh victory as our formation and therefore we believe we could recur it -- this is reason by a huge portfolio destroyer -- overconfidence.
10. Excessive activity
Mistaking movement for 'sensible' movement is a general trend. The only beneficiary of this is the broker/dealer. To support this, brokers/advisor use TV channels, technical analysts, etc. If there is some software which ways the brokerage paid to own broker/dealer for dealing in Stocks you might be stunned at the amount you have paid.
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