It is generally said that 95% of the money management is based on the behavior of the company, while knowledge, stock & fund selection, etc. only accounts for the rest 5%. So, let’s discuss what are the 7 investment behaviors which an investor should avoid during an investment journey. So, let's get started!
7 Investment Behaviors to Avoid:
1) No Financial Plan or No Financial Goals:
- Generally, people believe or pretend that they do not have any proper financial goals, which is wrong behavior that one should avoid.
- Talking minimalistic, a person may have some financial goals like retirement planning, marriage, child education, etc.
- One should not believe that financial planning is not only for the rich, but it is for all classes of people. It manages the income and expenditure thing of an individual.
2) Not enough Health and Life Insurance Cover:
- Even before starting the investment journey, one should have proper health/life insurance coverage as well as an emergency fund.
- One should not perceive that all is ok with him/her and that he/she doesn’t need any kind of cover.
- Since life is an uncertain event, and hence to handle the situation pretty well or to give financial support to the dependent ones, an individual should have adequate health and life insurance coverage.
3) Failing to Diversify:
- As Warren Buffett says, Diversification is for Losers. This principle is largely suitable for those individuals who have an abundance of knowledge and who follow a concentrated approach to investing.
- For investors who are not full of knowledge and those who want to follow practicality and rationality in their investment journey, one should have proper diversification of assets.
- Also, one should not have a high allocation towards real estate and commodities, rather one should have the approach of proper diversification across financial instruments among other investment avenues.
4) Delaying Investments:
- Human behavior of procrastination in the investment may prove to be disastrous for the individual and hence one should their investment journey when and whenever possible. It is never too late to kick off your investment journey.
5) Chasing Performances and Following the Herd:
- One should not invest based on the past performance of the stocks and especially in the case of the mutual fund.
- Rather one should track the consistent performance of the mutual fund or any other financial instruments, business fundamentals, industry prospects, etc. in the case of stock.
6) Mixing Insurance and Investment Goals:
- The biggest mistake an individual can make during their investment journey is mixing their insurance and investment goals.
- One should understand that insurance is for risk management and investment is for returns or wealth generation. Mixing both factors may prove disastrous for the individual.
7) Tax Saving to be the prime objective of Investment:
What Should Investors Do?
- Early earners with the prime purpose of saving taxes start their investment journey which to ends up with selecting the wrong investment avenues/financial instruments which are not meant for them at the early stages of their lives.
All the above factors are some of the investment behaviors which investors should keep in mind while doing their financial planning or starting their investment journey. Follow due diligence before making investment decisions.