If we take careful steps while investing, we can remarkably increase our probability of business. There are seven general errors which should be avoided to make investment successful. Investors should be aware of these usual errors and take necessary steps to avoid them so that they are not repeated.

1. Proper Planning

Before investing prepare your business plan. As it is the matter of money and you are investing it for the purpose of gaining profit, so plan about all the aspects of business.
Your business plan includes the following:

• Goals and objectives: Set your goals and objectives. What you want to achieve is a question which lead you to the way of your success. Success is not to beat others but it is to achieve what you want. E.g. your goals are to save money to build home or for retirement after 60’s.
• Risks: Determine the risks that are relevant to your portfolio. E.g. you are saving to achieve long term goal then volatility can not be a risk but inflation can be because it increases daily.
• Asset allocation: You need to decide how much %age of your money you prefer to invest in certain portfolio. E.g. in Gov. equities, international stocks, bonds, high-yield bonds, etc.
• Diversification: Diversification means distributing your investments in different portfolios. It is not wise to invest all your saving in one type of investments. For example you can invest in different stocks.

Focus: Your business plan in written format provides you guidelines to stick a long-term goal regardless of changing market conditions.

2. Financial Media

Just relay on your own knowledge. Financial news shows just give information they does not have key to success. If they do have any key then why they aren’t millionaire, why they are on TV only for few bucks?

Avoid News: Watch financial news shows only for information and try to spend less time on TV and reading newsletters. Pay out more time constructing your own conclusions and focusing your investment plan.

3. Time Limitations

Determine the time horizon for which you are planning to invest. For example if you are for your son’s college education and he’s in high school, then your time horizon is relatively short and your asset allocation should reflect that fact.

Focus on Investments: The majority of investors like short term investments. So try to focus more on short term investments.

4. Re-balancing

Re-balancing is rethinking on your business plan, processing return at your portfolio, its targeted asset allocation as mentioned in your investment plan. In re-balancing you need to sell the better asset and buy those of bad performing assets. This contradictory action is very difficult for many investors.

Re-balance: Re balancing give you profit when your outclass performance assets give you good return and the worst performing asset starts to take off. Re-balance is consistent and bring in the long-term returns.

5. Focus Indexing

Investment needs instant decision and there is very less time to evaluate the performance oft managers and mutual funds. Normally, if low-cost index funds are actively managed then they perform in upper second-quartile or if they give 60-70% of return, its better for the long-term.

Indexing: Whatever asset class you have, try to index all or a large portion of it. If you still want great performance mangers, than keep a fraction (20-30%) of each asset class to allocate to active managers.

6. Managers Performance

Manager are human beings and human is porn to error so don’t be over confident about your managers. Even the reliable managers can also under perform his standard. There are very few persons that can gain advantage from the time and the market over the long term.Investors’ are wrong, for having overconfident in the selection of managers for their ability to market-time.

7. Achieving Targets not Performance

Don’t always run after good performance. It is possible that any asset class has performed very well in past 2,3 year but that cycle might be gone due to uncertainty factor. Various investments are based on asset class strong performance in recent years. That can direct to bad investment. Try to focus on your investment plan and re-balance; this is the way to good performance.

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