Always Keep These Things In Mind While Investing

The recent global economic slowdown and the resulting setbacks have taught multinational companies and wealthy investors valuable lessons that they can use to save their money in case such a storm hits again. What are these lessons—

Keep an eye on the network

It is very important to maintain a balance between income and loans. By exercising restraint in spending and borrowing, you can save your portfolio from huge losses when the market falls. An investor should know the clear difference between a good loan and a bad loan and prepare a solid plan for repayment so that the heavy interest expense does not hurt his pocket.

If a person spends 30 percent of his salary in repaying loans, then such a person can get into trouble. You can exclude home loans from this list, because paying the EMI will make you the owner of that house one day. This is called a good loan; But the loans that should be kept under control include car loans, credit card dues and personal loans, etc.

The logic behind this is that you spend 30-40 per cent of your salary on lifestyle and other household needs. If you spend another 30 per cent on repaying your debt, it will be almost impossible to reach your financial goals.

Don’t dare to predict the market movement

Many investors try to predict the stock market movement. They hope that they will enter the market at lower levels and will be able to exit it at higher levels. We all know how often this happens. Financial planners say that it is not possible to predict which direction the market will take the next moment and many investors lose money while trying to do so. There are many investors who enter the market during the boom and start to panic to exit the investment in case of loss of capital. However, the correct strategy is the opposite, because they invest in the market at higher levels and not at lower levels, so the recovery of capital takes a longer time.

Diversification is the right strategy

Investors should remember that diversification of portfolio can save them during the market downturn. Diversification strategy should be adopted while investing in both mutual funds and shares.

Secondly, you should limit your investment across sectors and it is very important to maintain a balance while deciding how much money is invested in large cap and mid cap shares. If a person fails to keep an eye on stocks regularly, then he should prepare a portfolio which includes only mutual funds or can also take advantage of portfolio management services. This will help the investor to recover the capital and make profits at a faster pace.

Systematic plan is a long term strategy

Experts advise that during the fall in the index, Systematic Investment Plan i.e. SIP should be used. Stopping investments is a mistake that investors should avoid. During a downtrend, you should correct the mistake of having your portfolio biased towards a single stock or sector and continue investing regularly during this period. If investors adopt a diversified and systematic investment approach as a part of a long-term strategy, they will be able to reap benefits despite a downturn in the market.

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