Investing Habits That Can Derail Your Investment Process

It is the dream of every investor to be able to achieve different investment goals over a lifetime. However, to achieve that, it is important to follow the right investment strategy that involves a disciplined process and choosing the right asset classes in the right proportion. In the absence of this, it can be quite challenging for investors to build a portfolio that can help them achieve the desired results. [EasyDNNnews:PaidContentStart]

So, it is all about inculcating the right investing habits. Unfortunately, many investors imbibe some bad investing habits that not only put their hard-earned money at risk, but also result in leaving a gap between what they set out to achieve and what they actually achieve after their defined time horizon. Here are some of those bad investing habits and how you can get rid of them: 

Not having a household budget
Spending without any budget often results in having too little to invest. It is an evil that can destroy your finances. On the other hand, a household budget, if made practically and followed, can ensure reduction in wasteful expenditure and help in directing your hard-earned money towards your respective investment goals. 

Unplanned investments
Investing without a plan is like travelling without an itinerary. Simply put, investment becomes directionless and the most likely outcome could be a compromise with your financial future. If you have been following this, you must get rid of this habit immediately and start following a financial planning process. This will help in ensuring that you practise asset allocation in the right manner and remain invested at all times during your defined time horizon. 

Delaying the start of investment process
Many investors make the mistake of not starting their investment process early. By doing so, they end up compromising big time, as every 10 years of delay in the investment process requires them to invest 3 times more to build the same corpus that they would have built if they had started investing 10 years ago. Therefore, it should be your endeavour to start investing as soon as you start working and step up your investment amount every year. If you have already delayed the start, remember that it is never too late to start investing. 

Combining investment with insurance
In our country, there are millions of investors who have been investing heavily into traditional insurance products, thinking that these are best suited for them as they get to achieve both, i.e., insurance and investment. The fact remains that these products neither provide the kind of returns one would expect from long-term investments, nor the quantum of risk cover one may require. Therefore, it is important to separate insurance from investment and choose the right products. For example, a combination of a term plan and Mutual Funds can be a much better option. 

Allowing emotions to drive investment decisions
Investors are often guilty of allowing their emotions to drive their investment decisions. As a result, they stay away from potentially the best asset class like equity during market downturns, and end up investing aggressively during rising markets. While investors suffer because of wrong investment decisions, they suffer even more because they refuse to make changes, as that would mean booking a loss. In reality, if you take corrective action, you can not only correct the mistake, but give yourself a chance to recover losses and make money in the long run. 

Compromising long-term goals for short-term gains
Attempting to time the market to take advantage of the emerging market situations can be quite risky. More often than not, you may end up making wrong decisions and suffer in the process. More importantly, you may form certain misperceptions about an asset class like equity and stay away from it. It is important to stay committed to your pre-decided asset allocation, as that helps a great deal over time 

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