In the medieval times, the early explorers had an extremely difficult time navigating the dangerous seas. The reason is that they were the first ones to do so. But once they identified sea routes and created maps, it became a lot easier for the people who followed. Every investor who starts out in the stock market is an explorer of sorts. He wants to find the best way to make money for himself and his family. But what if he was handed a map to make his life easier? He could avoid some of the common mistakes of his predecessors.
In this article, let’s find out some of the common mistakes you should avoid when you invest money in the stock market.
1) Assuming that investing is a gateway to quick money
Investing in the stock market is a great way to create wealth. However, it is not an easy quick-fix solution to short term money problems. Don’t speculate or try to time the market; especially if you are a novice investor. One wrong decision and you could end up losing a substantial sum of your hard earned money. You need to take your time and make a good investment decision before you put your money in a stock. Have a long term investment approach and invest carefully.
2) Following unsolicited tips
Your friend tells you that the latest summer movie is amazing. He recommends that you should watch it. Would you take his unsolicited tip and watch the movie? Sure. Why not; it is quite a harmless suggestion. But what if he told you that he knew an amazing stock that could triple your investment in one year! Should you heed his advice? Absolutely not! At least not until you have done your own research. A lot of investors pay heed to unsolicited investment tips and end up with poor returns. You should always check out if a stock is worth buying or not. Research is a very important step when it comes to investments in the stock market.
3) Depending too much on past performance
A stock has been giving amazing returns for the past four years. As a result, everyone you know wants to buy it. They expect a great performance this year too. What could go wrong?
Well, it is possible that the stock fails due to some other external factors that have nothing to do with past performance.
When it comes to stocks, past performance is a good way to analyse a stock’s history. However, it should not be your only indicator. You need to consider the future potential of the stock too. Fundamental analysis can be a great help to identify whether there is value in choosing a particular stock.
4) Not diversifying your portfolio
Alright, you have done your analysis and you found that the Information Technology (IT) sector has a lot of potential. You decide to invest all your money in stocks of this sector alone hoping that your returns rise quickly. But in case of a market crash that affects this sector severely, you could end up losing all your money.
Never put all your eggs in one basket. Diversification is the key to minimize your risks. Create an investment portfolio that includes stocks from different sectors. This way, you can limit your exposure to market volatility and avoid total loss in case there is extreme price movement in any single sector.
5) Ignoring risk vs. return
When it comes to stocks, the single most important formula you need to remember is: buy low, sell high. The second most important one is: higher the return, higher the risk. You may be interested in very high returns. But are you prepared to bear the high risk that comes with the investment? As an investor, it is extremely important to balance your personal equation of risk vs. return. Identify your risk appetite and invest accordingly. Ideally, you shouldn’t try to invest any more than you can afford to lose.
To sum up
The stock market offers immense potential for an investor. There are many interesting ways to increase your wealth. The more you learn, the greater your experience. But that said, it is still possible to make mistakes once in a while. But by being aware of the above common mistakes, you can avoid them in your investment journey.
Disclaimer: Investment in securities market / Mutual Funds are subject to market risks, read all the related documents carefully before investing.
Mistakes to avoid while investing in real estate
It is a truth universally acknowledged that a person in possession of a small fortune must be interested in real estate investing. Jane Austen may or may not have uttered these words but in this current day and age, it is very true. Buying a house is one of the most important milestones in a person’s life. With the boom in population and rise in prices, everyone wants to buy a property. It doesn’t matter whether you wish to rent it out or sell it at a later date. Investment in real estate offers great opportunities for high growth. However, there is a chance of committing a few mistakes when you set out in this field.Here is a list of mistakes you should avoid when you start investing in real estate and some real estate investment tips.1) Choosing the wrong locationReal estate is all about location, location, location. Sometimes, even being on the wrong side of the road can spell the difference between profits and losses. In the future, whether you wish to rent out the place or even sell it, remember that prospective buyers have a high regard for the right location. One such real estate investment options is to search for a property with the right location that fits within your budget and real estate goals. 2) Ignoring paperworkAlright, paperwork sounds boring but the truth is: it is extremely important (especially in real estate). You want to ensure that all the documents are perfectly in place. There have been many instances in the past where real estate investors were cheated because they were duped with fake documents. Read the contracts thoroughly and make sure everything is in order before you buy the property. You could also use the services of a lawyer to ensure that there is nothing wrong with the paperwork. 3) Buying the first property you seeMany real estate investors are struck with the symptom of “loving the first property they see”. This can be due to the fact that the investor is a novice or he is simply lazy. A single investment in real estate can cost lakhs (or even crores) of rupees. You don’t want to make that investment decision without looking at other options. Always check out a few properties so that you have the choice to make the best financial decision in the end. 4) Waiting too longBuying the first property is not good. But at the same time, waiting too long is not good either. When they start researching, a few investors get bogged down by the feeling that a better property or a better deal is around the corner. As a result, they wait and wait without making the investment decision. This can be harmful too. When you find a property that meets all your requirements, it is time to sign the dotted line. 5) Not saving enough for repair and maintenanceThis is a common mistake committed by rookie investors. By the time they finish the deal, they exhaust all their financial resources. As a result, they don’t have enough money for maintenance or renovations. Buying a property is one thing but if you wish to put your mark and sell it in the market, you need to factor in additional expenses. Things like furnishing the property, roofing and refitting appliances can cost a big buck and you need to be prepared to finance these expenses.ConclusionReal estate offers great investment potential but it is not a get-rich-quick scheme. In order to see profits in the market, you could pay heed to the above-mentioned mistakes to avoid while investing in real estate. You may also want to put in hard work and identify the best properties that fit in your budget. Alternately, you could also seek the advice of a real estate investment advisor. Don’t let emotions drive your decision making or you may end up paying too much for a property. Remember, you always have the power to walk away from the negotiating table if the price is too much. Disclaimer: Investment in securities market / Mutual Funds are subject to market risks, read all the related documents carefully before investing.
Selecting the right real estate investment
Scientists and innovators are looking at possible solutions to colonize our neighbouring planet: Mars. But until that becomes a reality, a plot of land here will remain valuable and be a great opportunity for people to invest.It isn’t that simple though. You can’t simply buy land that you lay your eyes on. Not all plots of land appreciate equally. For instance, a property in Dehradun is likely to appreciate more than a plot of land in a hamlet situated 200 kilometres from Delhi -- at least not yet. A good real estate investment depends on a lot of factors. They all have to come in place for the investment to reap you benefits.So, here are some tips to help you make the right real estate investment.1) Do your homeworkYou need to ask yourself what type of property you wish to buy? Do you want to purchase a building and rent it out or do you want to develop the property and sell it again (flipping for profit)? The answers to these questions can help you make your investment decision easier. Also, it is very important to talk to people. Speak to different real estate agents and locals so that you can get different options to consider. You can also do a bit of online research regarding property prices and rents in a particular area to gain a better understanding. 2) Location, location, locationIn one way, real estate investment is quite similar to watching a cricket match. It is all about getting the best seats possible. Any expert in this field cannot stress enough about the importance of location when it comes to real estate investment.As the investor, you need to find the best possible location for your budget. For instance, if you are investing in a residential property, it should be in an area that is close to all basic amenities like schools, hospitals and transportation. 3) Personally inspect the propertyA real estate investment requires you to be a hands-on investor. Since you are going to put down a considerable amount of money, you need to ensure that you are getting a good product. Personally go and inspect the property at the location. Check if the property has any flaws in the design or the structure. You don’t want to end up with unnecessary costs once you buy the property. 4) Understand the marketWarren Buffett says: Buy low, sell high. He may be talking to investments in the stock market but he could as well be referring to real estate investments. Investing in real estate is a bit like investing in the stock market. The best way to maximize your returns is to identify properties at attractive prices. Don’t chase the market when it is performing extremely well. Instead, it is better to pick winners when the real estate market is at lower levels. 5) Find out all the expensesThere can be a lot of expenses when you get down to the actual process of buying a property. This includes: registration fees, utility fees, maintenance deposit and so on. All these charges can get pretty expensive when the numbers add up. That’s why you need to make sure that you include all these different factors into your budget before investing. You don’t want to come to a realisation later on that you cannot afford the property. ConclusionReal estate offers investors an exciting opportunity to invest in properties and increase their wealth over time. However, not all investments may be profitable. By following the above guidelines, it is possible to select a property that offers you good returns over a period of time. Disclaimer: Investment in securities market / Mutual Funds are subject to market risks, read all the related documents carefully before investing.
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