7 Common mistakes that a first time investor makes

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Investing is an art, say experts and they are not wrong. If you want maximum returns from your investments, you should know how to invest. Is the process difficult? Not at all! Investing like a seasoned investor only requires some tricks up your sleeves. If you understand the basic principles of investing, you can easily invest your money in high-yielding instruments that promise you good returns.

Experts also believe that experience is a good teacher. In the investing world too, experience teaches you valuable lessons through your mistakes. But mistakes are the foundation of your learnings, aren't they? What about you? Are you too a first time investor? Or have you also made mistakes when you were new to investing?

A first-time investor is bound to make mistakes (otherwise how would he learn).

Here are seven common mistakes usually made by a first-time investor and also tips on avoiding them:

1. Unplanned investments

The first rookie mistake which most of us make when starting our investments is investing without a proper plan in place. Having extra cash in hand, we invest in the first instrument which comes to our attention without knowing whether such investment would be suitable for our investment profile.

What you should do?

Though starting investments is exciting, you should have a well-placed plan in place before you invest. You should understand whether the investment you are making would be suitable for you in the long-run because investments are not done for a short period.

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2.Investing aggressively

When you are new to investing, all you desire is getting the maximum possible returns. That is why you have an aggressive investing approach. You try and invest the maximum of your savings and also do not hesitate in taking investment risks. The share market and mutual funds hold the most appeal to you as the returns are attractive. But so are the risks!

What you should do?

You should go slowly. Though the returns are luring, take small risks at once. Do not invest all your savings into risky instruments. Make small investments at one time and wait to see their performance before you proceed further.

3. Concentrating investments in one instrument

Another common mistake is having favorites. We do not usually like changing our choice of investment instrument or getting out of our comfort zone. If our instrument is giving us satisfactory returns, we become complacent. This results in a lopsided investment portfolio leaning heavily towards our favorite investment avenue. This is wrong.

What you should do?

Diversification is a beautiful concept wherein you can get maximum returns on your investments and also lower the inherent risks. You should sample different investment avenues rather than sticking to just one or two. The market has a wide variety of choices when it comes to investment instruments. Understand these instruments, invest in them and diversify.

4. Not researching before investing

How many times have you gone on the advice of your elders and peers when taking your first investment decision? Though our friends and family are our well-wishers, just blindly taking their advice on investment matters is wrong. After all, it is your money, isn't it?

What you should do?

You should research your chosen mode of investment. Find out the historic returns, the asset class, the company or the team managing your investment, the risk and, above all, the suitability of your choice to your requirements. Only after complete research should you invest.

Also read : Where To Invest In 2017 For Maximum Returns? Here Is A New Opportunity You Must Try

5. Not taking any risks with investments

While at one end of the spectrum, there are aggressive first-time investors, at the other end there are risk-averse investors too. Many of us love the no-risk returns promised by bank fixed deposits. As such, we fail to realize the full income earning potential of our investments.

What you should do?

As mentioned earlier too - diversify. Get over your love for fixed interest bearing investments and try to take a little risk. You would be amazed at the returns you can get.

6. Ignoring the effects of taxation

Your investments and their returns are subject to the implications of tax. While some investments and their returns are tax-free, others are not. When starting afresh, we usually ignore the tax implication of our investments only to pay taxes on their returns later on.

What you should do?

Find out whether your invested amount and the return you get from the investment are tax-free or not. Investments help you plan your taxes and so, when investing always take the tax angle into consideration.

7. Sticking to age-old investments instruments

Yes, the last mistake new investors do is following the age-old rule of investing in tried and tested instruments. If you are an aggressive risk-taker, your choice would be the share market and if you are risk-averse, fixed deposits would be your preferred choice. But what about the other new investment options in the market today?

What you should do?

Break the mold and try something new. The investment market has other new investment avenues which promise great returns for your investments. Find out these avenues and try investing in them for better returns.

So, these are the common mistakes new investors make. What about the last one? Do you know about such new investment avenues which promise good returns?

Peer-to-Peer lending is one such revolutionary investment avenue. It is an online marketplace where lenders and borrowers come together. While lenders can invest money by providing loans to borrowers, borrowers can avail loans for their financial requirements. Lendbox is one such online P2P platform that allows you to invest your money as a lender. By registering free of cost on our website you can find potential verified borrowers for your investment and earn returns as high as 36% per annum. What's more, your investment at Lendbox also promises you liquidity through monthly income (EMI repayments by borrowers for the money lent).

We make mistakes unknowingly and you as a new investor have been warned. Avoid falling prey to these common mistakes and try the P2P platform for a new investment experience.

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