A lot of our life is lived according to our habits. Like getting up from bed, making our bed, brushing our teeth, …the human body loves a routine. Habits and routine save a lot of energy for the brain, and hence the search for a routine.

This impacts our investments too. Let us look at some of the other mistakes:

1. Trying too hard: Investments require some patient and active inaction. Once you have invested in a company you need to sit tight, many investors lose patience. This also happens because they visit too many investment websites, facebook forums, yahoo groups, …and in short they itch for action.

2. Overconfidence: Reading is good, but I find novices visiting the forums start talking about knowing how to invest. Who will tell them that experience cannot be taught?

3. Trying to do extraordinary things: When a No. 8 batsman is playing with a No. 4 batsman, the No. 8 batsman should just take a single and let the senior batsman score. Instead he tries to hit the ball outside the ground and loses his wicket. Ditto in investing. Investors keep looking for doing that one ‘extraordinary’ thing and in that quest forget the main aim of investing. One such very important thing is to maintain accounts – for your expenditure and for your investments. How many of us do it religiously? Why not?

4. As the market is uncertain (it always is) putting a solid process, keeping an investment diary, writing down an Investment philosophy statement, keeping account of expenditures, of goals, knowing the asset allocation and monitoring it, creating an investment criteria before you buy…all these are far, far more important than the fund ./ equities that you choose.

5. Not losing money is far, far more important than spotting tomorrow’s multi bagger. If you do not have a process in place it is possible that you buy a share at Rs.20 and be thrilled that it doubled to Rs. 40 in 2 years and sell off. Then have the mortification to see it go to Rs. 500 in 3 years time! You did not have the process to spot it (you had luck in buying it), and hence lost out on the real wealth creation journey. You need to concentrate on the process. NOW.

6. When under stress do not take too many decisions. Especially if you are a trader! When the market falls too fast and too hard, the best thing to do could be to stay calm. This is easier said than done.

more will follow…

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  1. “You did not have the process to spot it” – I think most of us would love to get our hands on articles that address and discuss such processes. Although off and on we get some information (educational and instructional material) in bits and pieces, it would be nice to learn in details on the tools and analyses needed for a wholesome view.

  2. Process and Patience- as you rightly said- is the key.

    Have a good investment process like SIP. Have patience for 20 years and stay the course through ups and downs- huge wealth is all yours!

  3. One such very important thing is to maintain accounts – for your expenditure and for your investments. How many of us do it religiously?

    After understanding this gem of advice, am maintaining two SB accounts- one for the expense and one for investments- and also automated the transfers and sips

    thanks sir

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