We all know Indian Markets are moving from cyclical downturn to structural Upturn. Valuations have changed Big time in the past 6 months. This is the time when most mistakes or Sins are Committed by a Retail Investor. I have listed down 5 most prominent ones:
Some products that look attractive in the Bull Run will amplify your profits but also at the same time increase your losses. One such example is Futures and Options(F&Os).
Warren Buffet calls the F&Os segment weapons of Mass Financial Destruction. If you do not have enough knowledge and outlook, stay away from any such speculation. These are not meant to build wealth for you.
Investing Big amounts at one go:
Investing Big amounts at one go thinking that the same valuations will never come back is another Big mistake. Invest wisely in a systematic way without Timing the Market.
Having short term view of the market:
You must have seen a significant increase in calls from brokers enticing you to buy some stocks which have outperformed in the last 6 months. Also, many experts predicting sensex levels to 30000-32000. Their prediction may be right but don’t Bank upon it as there is equal probability of upturn and downturn.
Holding Non performing stocks/ Funds:
If you are still holding the non performing assets thinking that with rising market market they would also rise, then you have goofed up already. To give an example, Pentamedia Graphics Ltd share price was Rs. 2130 in February 2000 and today’s price is around Re.1..so for how long should one wait to get its buying price which looks next to impossible here.
Instead exit and invest in performing one.
Changing Asset Allocation:
If your current asset allocation is 70:30 equity:debt and you have long term Goals. You decide to change Asset Allocation seeing the Markets rise or Fall.
Dhirendra Kumar Mutual Fund expert says that “Asset allocation should be independent of Market Conditions.”
Do not react in impulse state. To read more on Asset Allocation https://hareepatti.greatestdesignever.com/asset-allocation-as-a-tool-to-wealth-creation/
About the Author: Gurleen Kaur is a Financial Consultant and devotes her time to her company www.hareepatti.com. She has done her Bachelors in Finance and Investment Analysis(BFIA) from College of Business Studies(CBS, Delhi) and MBA from IMT, Ghaziabad. She will be a Certified Financial Planner by June 2014. She can be Contacted at gurleen@hareepatti.greatestdesignever.com