Remember, successful investing requires patience, discipline, and a well-thought-out strategy that aligns with your financial goals and risk tolerance. Yet, several investors end up making mistakes that can easily be avoided. Such mistakes can cost dearly and disrupt one’s financial plan. Here are some of the common mistakes that investors end up making.
Copycat investing: Some investors make the mistake of making direct stock picks just based on the portfolio disclosures of their mutual funds, to mimic the fund manager. While it is not inherently wrong to consider these sources, it is important to be aware of potential pitfalls owing to the fact that fact sheets and portfolio disclosures provide a snapshot of holdings at a specific time, and due to this, investors might not know the full context or the investment rationale behind those choices.
These documents don’t include a thorough research, analysis, or market insights that went into the investment decisions. By the time an investor sees these disclosures, market conditions may have changed, and the portfolio may have already been adjusted.
Moreover, these stock picks might not align with the investor’s own risk tolerance, financial goals, or investment time horizon. Relying solely on a few stocks or mimicking a fund’s holdings might result in a lack of diversification, increasing the overall risk. Investors can use fact sheets and portfolio disclosures as a starting point for research, but should also do their own due diligence.
Concentration and over-diversification: Putting all your eggs in one basket is what causes concentration risk. When all your investments are too heavily focused on a single asset class or a few asset classes, it means you have a
Read more on livemint.com