Get purge of Common Investment Pitfalls

Investors tend to make far more investment mistakes in Bull period as compared to normal times. It is sure that most of the investors make money when markets are going up but when the Bull Run gets over most of the inexperienced investors will have all stocks which they should not have bought.
So following points will make you to understand how to tackle such mistakes and make your portfolio defensive and to reap good returns.

Proper Planning and Goal in Mind
Generally it is observed that investments are not being done with proper planning and goal in mind. Instead the investments are made based on factors like year end tax saving, a broker/or friend tip, hot news, surplus of money at a given point of time and so on. Due to these factors, naturally, the investment will be done regardless of the true value of the investment instruments.
For example investor may end up investing in expensive stock pr end up in investing when stock market is on the way on correction and many more.
So the investment decision should be backed up with proper planning and guidance keep your goal in mind.

Choose Stocks Carefully
It is true that you have decided your investment horizon and kept your objective clear but it is also important that you choose your stocks carefully and do proper analysis before investing.
Basically investors opt for hot stocks of the moment but these stocks may not be beneficial for long term plans.
On the other note your stocks need not be at the top of the charts but they would have shown satisfactory revenues across all cycles of the financial year.

Avoid too many stocks in your portfolio
This is very common issue among many investors because they have read somewhere about the word called Diversification and then they become collector and keep adding stocks in there portfolios. But investor should remember that adding too many stocks in the portfolio would create complexity to manage and also becomes overhead to track the companies.

So how should be the Ideal Portfolio?
An ideal portfolio should have at least 5 to 8 stocks from at least 3 different sectors.
But there is not any rule to have such type of portfolio if you are capable to manage then you have even more number of stocks in your portfolio.
At the same time it will be helpful to reduce the risk if you keep your portfolio balanced. Balanced portfolio consists of some large cap stocks and some mid cap stocks and even you can have some small cap stocks. If possible you can even add some mutual funds. Again in mutual funds you can have equity related funds, balanced and debt funds.

Stick to your plans
Most of the time it has been observed that many investors change their portfolio especially in Bull Run by adding some hot stocks to there portfolio. The money that was finding its way into steady investments in a planned way suddenly changes direction towards some hot stocks thus exposing the portfolio to risk that was well on track for good returns.
If possible this should be avoided.

Take tax into consideration (mutual funds)
This is again one of the common pitfalls that often happen with most of the investors while selling the mutual funds units.
While selling the mutual fund units investor must consider tax implications. If investors do some analysis then he could have saved from his tax payments by just postponing his selling plan by just one month. A little planning here can help you to make extra bit.

Finally
Steps to fine tuning your portfolio
Gain appropriate knowledge of stock market, mutual funds etc and do right asset allocation yourself
Step 1 would help you to determine how much of your money should be in stocks, how much in mutual funds and again in mutual funds how many in diversified funds and how much in balanced and debt funds.
Once you decide financial instruments then decide your time horizon. The money which are you investing in stock market should be more then 5 years to get good returns while investment for shorter period should go for mutual funds like balanced and debt funds.

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Comments

Mon, 12 Oct 2009 at 8:56 AM, by sharetipsinfo
Hi,


The market is currently enjoying a good rally which has seen most stocks gain from competitive advantage and it would be advisable for all stock market enthusiasts to seize this opportunity and plan their investments in a safer yet conducive stock market. With NIFTY hovering around 4800-4900 +, it is expected to take hold of this currently rally and be realistically be closest to 5000 more so than before in what should be its new 52 week high.

Lot many untouched stocks are still there which are ready to blast any moment.



Regards
SHARETIPSINFO TEAM

Mon, 12 Oct 2009 at 9:05 AM, by sharetipsinfo
Hi,


The market is currently enjoying a good rally which has seen most stocks gain from competitive advantage and it would be advisable for all stock market enthusiasts to seize this opportunity and plan their investments in a safer yet conducive stock market. With NIFTY hovering around 4800-4900 +, it is expected to take hold of this currently rally and be realistically be closest to 5000 more so than before in what should be its new 52 week high.

Lot many untouched stocks are still there which are ready to blast any moment.



Regards
SHARETIPSINFO TEAM

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