Let me share with you the greatest mistake average investors make.
In general, average investors will jump onto the bandwagon hoping to sweep off highest return possible from their investment portfolio. In most cases a big quantum of them fail and from that point of failure comes the feeling of displeasure. Subsequently, their investment skill changes to defensive mode and if possible, they will withdraw all their funds at a below average return. Thereafter, if they were asked to invest again, they will stay away from investing.
This bias in investment will then create a negative scenario that will cause a dent in the growth of capital investment environment. Investors of this kind, will picture a thorny issue and their words of mouth will thread through every segment of investment society and eventually will puncture a mutating hole in the health of Malaysian capital market.
Okay, enough of the consequences and now let me tell you how to avoid being in a situation mentioned above.
Identify your risk profile.
Not all funds are for everyone. If you are a conservative type of investor, do not dream for higher returns. Likewise, if you are an aggressive type, you got to accept the high volatility generated in the net asset value of the fund, in pursuit to higher future return.
Mark your investment period.
Irrespective of your risk profile, it is a MUST to identify how long you wish to hold on your investment. Redeem your position when portfolio achieve its objective. Alternatively, you may exercise switching into a low loaded funds to lock in your profit. Real life cases have taught me that prices may go down as well as move up.
Managed Fund
Unit trust funds are basically a managed funds. There will be times where NAV of funds will go south and times where it may head north. It is advisable to make regular top ups during declining market scenario in order to collect greater units. The concept applies here is "BUY LOW and SELL HIGH".Greatest mistake investors make is "BUY LOW and SELL LOW".
Premature redemption of positions are actually resulted from the misaligned risk-reward profile of investors.
So, avoid making premature redemption of funds, avoid ignoring your risk profile and do mark your investment holding period.
Happy investing!
Vijaya Devan
