Operating too much and too often. Paying too much in commissions and commissions Waiting too long or using someone else's expectations Focus on the wrong type of performance. When it comes to investing, time matters. The ideal is to keep your investments as long as you can to maximize your returns.
Investing is something you do with the expectation of earning reasonable returns over a long-term period, Harrison says. They say that variety is the spice of life. Diversification has always been synonymous with a strong portfolio and is also a way to help alleviate the stress of market turbulence. What you're trying to avoid is investing too much money in a company or asset, a stock that has been the undoing of many investors.
If you're properly diversified, it's not that important that one of the assets in your portfolio doesn't work. When the COVID crisis began, global markets, along with Indian markets, took their toll. As a result, many investors, such as Ms. Sinha, became frightened and stopped their SIPs.
What investors forget is that the losses they see as a result of the market crash are paper losses and not real losses. It becomes a real loss only when you withdraw your investment. It's not that a bad cycle is going to last forever. Over time, markets will correct themselves and the value of their investment will be stimulated, as occurred in the case of the COVID pandemic.
Market corrections occurred and they are once again on an upward trend. By stopping your SIPs when markets are falling, you also lose the benefit of averaging the cost in rupees. When you invest in SIP, you invest a fixed amount each month on a certain date. The number of units in the scheme you get depends on the net asset value for the day.
As we said earlier, markets are cyclical in nature, they have some good times and bad times. Therefore, when markets decline, the last net asset value of the fund you invest in will be low. This means that you will receive more units from the fund on the day of your SIP fee. Similarly, when the markets are in good shape, you'll get more units from the fund due to the increase in net asset value.
This phenomenon will reduce the average cost of returns and, therefore, increase your total profits.