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Over the years, we have seen erratic market conditions where some
capitalized on opportunities and created wealth, while many have missed out. This is because a typical retail investor is susceptible to making common financial mistakes. Let's look at such mistakes and also see how best to avoid them:

1) Balancing greed & fear:

The most common among all mistakes is our own behaviour of letting emotions — greed and fear — rule over logic, investing process and asset allocation. Your investment portfolio will have some performing and nonperforming investments.

Most investors fall in love with their performing investments and forget to realize that their investment was to generate return and wealth creation.

Similarly, they hold on to their non-performing investments with the hope that it will generate returns in the future and fail to exit at an appropriate time, leading to higher losses.

2) Don't time the market:

Investors feel they understand the market dynamics and can time their entry and exit.
However, in reality, not more than 2% of investors have created wealth by timing the market.

This misconception, coupled with lack of patience and benchmarking their return on past performances, may not always be the right investment strategy. Most investors fail to understand that it's not about timing the market but time in the market that creates wealth.

3) Optimum asset allocation:

Most of us believe that we have a portfolio that is aligned to our risk profile. Various asset classes perform differently in changing economic and business environments, exposing our portfolio to multiple risks.

Another common mistake investors commit while building their investment portfolio is imprudent diversification. This becomes critical in asset allocation as under-diversification concentrates your portfolio and exposes it to volatility, while over-diversification results in the portfolio delivering average returns.

4) Set goals and milestones:

Most investments are made without identified goals and milestones. It is important that we identify our financial needs and objectives, and our cash-flow needs in the near future — be it child's education, child's marriage, creation of an asset like house, retirement planning or pure wealth generation. Besides giving a clear understanding, this tremendously helps in bringing discipline and control over investment portfolio.

Once these goals are properly identified and investments are earmarked, one is less likely to fall prey to the temptation of an impulse resulting in shortfall of an identified goal.

5) Choose the right financial advisor:

Most investors are unorganized about their financial investments and end up either relying on their friends or any third person who comes to them at the time of some financial surplus. I have not come across many investors who try to identify the background, capability and reputation of the individual as well as the institution. You must be able to trust your financial partner on capability, un-biased advice and reputation, and not purely on the basis of familiarity.

Happy Investing!!

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Invest in Tax Saving Mutual Funds ( ELSS Mutual Funds ) to upto Rs 1 lakh and Save tax under Section 80C.

Invest Tax Saving Mutual Funds Online

Tax Saving Mutual Funds Online

These links can be used to Purchase Mutual Funds Online that are regular also (Investment, non-tax saving)

Download Tax Saving Mutual Fund Application Forms from all AMCs

Download Tax Saving Mutual Fund Applications

These Application Forms can be used for buying regular mutual funds also

Some of the best Tax Saving Mutual Funds available ( ELSS Mutual Funds )

1. ICICI Prudential Tax PlanInvest Online
2. HDFC TaxSaverInvest Online
3. DSP BlackRock Tax Saver FundInvest Online
4. Reliance Tax Saver (ELSS) FundInvest Online
5. Birla Sun Life Tax Relief '96 Invest Online
6. IDFC Tax Advantage (ELSS) FundInvest Online
7. SBI Magnum Tax Gain Scheme 1993Invest Online
8. Sundaram Tax SaverInvest Online
9. Edelweiss ELSS Invest Online

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Best Performing Mutual Funds

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4. Sector Funds Invest Online

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2. ICICI Prudential Regular Gold Savings Fund
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