Starting your investment journey feels like you have entered a new level of the adulting game. FOMO-led decisions, trusting IG “Finance Gurus” without question, are some of the very same mistakes new investors make that cost them time, peace of mind, and very big bucks.
Beginner investors usually feel that the only ingredient for their success is the vast valuation of money with which they would invest. While capital matters, the truth remains that most new investors do not fail because they are poor; they fail because of poor planning or lack of discipline.
Before you throw the money into the market, make sure you don’t make mistakes mentioned below:
Not Defining Clear Financial Goals / Investing without purpose.
Mistake: Most people invest because other people are doing it, without even knowing why they are embarking on this exercise or what they intend to achieve. People generally feel psychological pressure when making decisions, resulting in choosing the wrong set of products.
How to Avoid:
Set SMART Goals – Your goals should be:
- Specific (e.g., “Buy a car”)
- Measurable (e.g., “Cost: ₹3 lakh”)
- Achievable (considering income and expenses)
- Relevant (in line with your lifestyle)
- Time-bound (e.g., “In 5 years”)
For example:
“I want to invest ₹5,000/month for the next 5 years to buy a car worth ₹3 lakh.”
Once your goals are clear, you can align investments accordingly, such as short-term debt funds or FDs for 1-3 year goals, while equity is for 5+ years.
Attempting to Time the Market
Mistake: All you do is wait for the perfect moment to invest, or you keep jumping in and out based on headlines, trying to catch highs and lows. In this way, if you sit on cash for too long, you are missing out on opportunities, especially sudden ones when markets rise.
How to Avoid:
- Start a SIP in mutual funds or ETFs.
- Always focus on Time in the Market, Not Timing the Market.
For example:
Instead of waiting for the right time to invest ₹10,000, invest ₹2,000 every month over 5 months via SIP in a diversified equity mutual fund. This way:
- You avoid poor timing decisions
- You stay disciplined
- You participate in all market cycles
Investing in Micro-Cap Stocks Without Research
Mistake: Many investors enter into the micro-cap stocks with the thought that the low price should translate into good returns, but this turns out to be the real danger zone.
How to Avoid:
- If you cannot explain why the business will grow, stay away from owning it.
- Keep your micro-cap exposure to a very small percentage of your portfolio.
For example:
So never put ₹50,000 in a ₹12 microcap just because your buddy or a Telegram group said “it’s the next big thing.” Instead: Use ₹45,000 to invest in diversified equity funds backed with research. If you still want to go for it, put in ₹5,000, max, as a high-risk bet, which you can afford to lose.
Neglecting to Review & Rebalance Your Portfolio
Mistake: Many investors set up their portfolio and do not review or rebalance it regularly. Some investments grow faster than others with time, thus getting the asset allocations out of balance, thereby either making the portfolio riskier or less in line with the goals.
How to Avoid:
- Make sure to revisit and rebalance your portfolio at least once a year (or every 6 months).
- Check if your current asset allocation fits the profile you set down initially (e.g., 60% equity, 30% debt, 10% gold).
- If any asset class has significantly drifted (say equity grows to 75%), sell some of it and deploy the cash in an underweight area.
For example:
Let’s say your ideal portfolio is as follows:
- 50% equity
- 40% debt funds
- 10% gold
Equity grows beautifully to 65% after a strong bull phase. Once done rebalancing, by selling some equity and buying more debt/gold, you maintain your targets and hence keep risk and in check with the plan.
Investing does not simply describe putting money into stocks, mutual funds, or fixed deposits; it is having a strategy, setting realistic expectations, and traffic away from your way to the target in a disciplined manner. Without a set plan, an investor would mostly be led by gut impulses of fear and greed.
Disclaimer:
The information mentioned in this blog is for educational and informational purposes only. It is not intended to be offered as investment advice or suggestions for trading. All investments in the Stock Market are subjected to a degree of market risk, and being consistent in their performance in the present does not establish certainty of results in the future. Hence, readers should do their own due diligence and consult a certified financial advisor prior to any investments. The author and publisher shall not be held responsible for any losses or damages that may come out of the decisions taken on the basis of this content.
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