1. Avoid the herd mentalityThe typical buyer’s decision is usually heavily influenced by the actions of his acquaintances, neighbors or relatives. Thus, if everybody around is investing, the tendency for potential investors is to do the same. But this strategy is bound to backfire in the long run.
Always avoid having the herd mentality if you do not want to lose your hard-earned money.
“Be fearful when others are greedy, and be greedy when others are fearful!” – Warren Buffett
2. Take informed decision
Investors generally go by the name of a company or the industry they belong to. However, proper research should always be undertaken before investing.
3. Invest in business you understand
Before investing in a company, you should have proper understanding of the company’s business and sector.
4. Create a broad portfolio
Diversification of portfolio across asset classes and instruments is key to earning optimum returns on investments. The level of diversification depends on each investor’s risk-taking capacity.
5. Have realistic expectations
There is nothing wrong with hoping for the ‘best’ from your investments, but you could be heading for trouble if your financial goals are based on unrealistic assumptions.
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