A lot depends on how your investment experience was the first few years of your journey.

A bad experience sets you back not only in terms of money but also hits your confidence. You constantly second guess your investment decision leading to sometimes making wrong choices.

 I believe that these experiences, while frustrating, offer valuable lessons for building more resilient and informed investment strategies. 

What could be the reason for the bad experience and how to avoid it.

  • Emotional Investing: Decisions based on fear (panic selling during a downturn) or greed (chasing high-flying stocks) often lead to poor outcomes.
  • Lack of a Clear Plan: Investing without defined goals, risk tolerance, and a long-term strategy often results in impulsive decisions and missed opportunities.
  • Insufficient Research: Investing in products or companies you do not fully understand, or relying solely on “hot tips” from friends or the media, can lead to significant losses.
  • Poor Diversification: “Putting all your eggs in one basket” (e.g., heavily investing in a single stock or sector) amplifies risk. If that one investment performs poorly, your entire portfolio suffers.
  • Trying to Time the Market: Attempting to buy at the absolute bottom and sell at the absolute top is nearly impossible and often leads to missing out on long-term gains.
  • Ignoring Fees and Taxes: High expense ratios or frequent trading (which incurs transaction costs and potential short-term tax implications) can erode returns over time.
  • Unrealistic Expectations: Believing investing is a “get-rich-quick” scheme, rather than a long-term commitment, can lead to disappointment and premature exit from the market. 

So how do you avoid it or atleast keep it at a lo

  • Investment Plan: Firstly, start your investment journey with a Goal and a clear-cut plan. Nothing works unless you have a plan; the same goes for investment as well. If you don’t have an investment plan then you don’t have any roadmap to your goals and this is why most people never reach there. When you don’t have a plan, you also don’t have a strategy. You may end up in a loop of wrong investments, negligible returns, and repentance if you invest without any strategy.
  • Asset allocation & Diversification: Strategically reallocate your assets across different sectors and types of investments to manage risk effectively.  Instead of investing in shares of a particular type investors divide your investments into different assets, across various sectors and types of funds. As a result, the investments are not limited to only one type of asset, and the volatility is spread. If one sector performs poorly the other would make up for it. Thus, portfolio diversification helps in reducing investment risks.
  • Focus on the Long Term: Understand that market volatility is normal. One of the ways to earn well through investments is by making long-term investments. In a hurry to earn from a short-term investment, you may invest in high-risk funds in a volatile market and lose your hard-earned money. Automating your investments will bring in consistency and discipline, two key factors for investment success
  • Consult a Professional: A verified financial advisor can help analyze your current portfolio, understand your risk tolerance, and develop a sound strategy.  A financial advisor also plays the role of motivator and sounding board in your journey.

When investing money, don’t let the experience of one bad, or good investment be the deciding factor on what investments are like.