3 Investing Mistakes That Destroy The Returns

Investing is an art and a science. Sometimes the science works and most of the time art works. You must have heard about technical analysis? Well most finance professors teach that markets are a random walk problem. Price moves are random with no pattern and rhythm behind them. But finance professors have been proved wrong again and again with technical analysis. Charts speak what the markets are thinking at a particular point in time. Price measures the market sentiment.

As an investor your aim is to beat the market. How to beat the market by making a better return as compared to S&P 500? If you do not make these 3  mistakes the chances are you are going to beat the market with a very good return. As an investor you must avoid these 3 mistakes:

1. Single Stock Focus

Don’t think that just buying one stock will make you rich. Sometimes it does work. Those who had bought the Apple stock IPO reaped huge returns. But that was once in 20 years. But think about the cons also.

That is, holding one or even a few individual stocks puts investors at risk of company specific woes such as management changes or poorly executed strategies, which in turn can cause shares to tumble. “60% of households have at least 10% of their portfolios in one single stock,” Sha said. That’s largely because employers often provide access to their own stocks through incentive programs.” In a word, diversify.

2. Financial Patriotism

Investing in the domestic market is a good idea but keep in mind that you too can profit from the global growth by investing in emerging market stocks.

3. Trading Too Much

Trading too much is also a grave danger to your portfolio. Don’t try to chase stocks on a daily basis. Just choose a few strong candidates by doing your research well. Keep in mind that the more aggressively you enter and exit the market, you more cost you will have to pay in the shape of broker commissions which will reduce your return.

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