The market right now is at its peak. It’s performing better than ever and investors are getting great returns. This is making many investors especially the newcomers nervous. They are worried that it might soon crash and they might end up losing money. Many of them are asking their financial advisor’s specific queries regarding their investments. However, it is important that investors are careful not to commit the mistakes at this time.
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1. Don’t get greedy
Some investors especially those who have recently started investing get caught up in the noise of the market and how it is rising and delivering great returns. In the process, they start looking for funds that have delivered the highest returns in their categories. And then they withdraw all their current investments and then reinvest in these funds to earn higher returns.
But this may actually prove harmful in the long run. Funds that are performing well today are not guaranteed to continue the same performance even tomorrow. With the fall in the market, these funds may also go down. Hence it is important that investors aim for the long term and stick to their original financial plan.
2. Don’t panic
This may seem contradictory. Why would someone panic when the market is doing well? They should be happy instead. But there are some investors who become anxious hearing the news about the market going up and outperforming. Even at the slightest hint of reversal, they tend to flee the market.
This is also not the right approach to investing. If you have invested for the long horizon then you should not pay heed to these things. The market is bound to go through various phases. But it is important that you stick to your financial plan.
Also Read: SIP your way to mutual funds in 2018 | Buy low and sell high
3. Investors should ignore the noise
The stock market is very volatile-it keeps going up and down unexpectedly at times. Certain events like the party in power losing elections somewhere or hike in petrol prices may cause the market to crash. At other times, a decrease in inflation and good results for the party in power may send the market soaring.
These kinds of things are bound to happen. And pundits from all over the country will catch hold of them and start giving their recommendations. Suddenly the news channels and the newspapers will be flooded with expert recommendations.
A mutual fund investor should not be disturbed by all such unwanted noise. Most of these topics are relevant only to punters who build positions every day to encash on such news. A long-term investor need not worry about those. Most of them would look like trivial events after a long period.
4. Avoid impulsive decisions
Mutual fund investors should not take buy or sell decisions based on sudden news or information about the market. They should take a step back and read more about the topic. They should then discuss it with their financial advisors and experts and then decide accordingly. Impulsive buying or selling only hurts the investors by reducing their long-term gains.
5. Don’t try fancy ideas
Buy and hold for the long term is the only strategy that works in the stock market. However, it is too boring for some investors. Hence, they try to find out newer ways of earning money quickly. They listen to recommendations of so-called experts and buy or sell their mutual fund holding based on them.
This scheme of getting rich quick has caused more harm than good. Do not get caught in new fancy ideas if you want to achieve your long-term goals. Keep reminding yourself that investing a small amount of money regularly and with discipline over a long period is the only proven way of generating wealth.