21 mistakes every DIY investor needs to avoid

Written by Rohit Shah

September 28, 2020

​Over years, the most common mistake we have seen with prospective clients is that they trade in shares basis tips from amatures and end up with losses. 

They are heavy on such speculative bets but low on basics like emergency corpus, goal based SIP, term plan, own health plan and so on. 

In fact, our observation is that the easiest way to lose money is:
  1. Invest in shares based on tips
  2. Lend money to our relatives

Let us remember that Investing is a System 2 decision. One needs to take time to think through. Please see ‘The Monkey Business Illusion’ video on YouTube]
When one has a relatively small amount left,
​it needs even more efforts at preservation.
So here is our curated list of mistakes that DIY investors make!
  1. Investing in direct equity basis tips 
  2. Inadequate emergency corpus 
  3. No plan, no risk profiling, no goals, no asset allocation, no re-balancing
  4. Single asset class / single country portfolios
  5. Too much concentration [Mid/Small Funds]
  6. Can’t handle volatility
  7. Blindly going by the star rating, past or recent performance
  8. Stopping SIPs in 2-3 years as ‘My MFs are not performing’ 
  9. Not giving enough time to understand, think, and plan 
  10. Blindly focusing on returns [ignoring costs and risks]
  11. No periodical reviews 
  12. Fractured financial life – No single screen consolidation 
  13. No housekeeping. Address, email ids and mobile numbers not in sync 
  14. Not compliant (e.g. Not updating residency status even after moving abroad) 
  15. Short term tactical views. Not letting the portfolio do it’s work i.e. compound 
  16. Switching to new term plan to save a few thousands
  17. No personal health insurance
  18. No will. No physical records {Family has no clue]
  19. Spending disproportionate on children’s education & neglecting retirement 
  20. Not including the spouse in money matters 
  21. Filing Non-compliant IT Returns

Can you relate to any of these? Must add your experience in the comments.

Cheers
Rohit

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