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The hallmark of successful investing: patience, discipline and strategy | Mint – Mint

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Remember, successful investing requires patience, discipline, and a well-thought-out strategy that aligns with your financial goals and risk tolerance. Yet, several investors end up making mistakes that can easily be avoided. Such mistakes can cost dearly and disrupt one’s financial plan. Here are some of the common mistakes that investors end up making.

Copycat investing: Some investors make the mistake of making direct stock picks just based on the portfolio disclosures of their mutual funds, to mimic the fund manager. While it is not inherently wrong to consider these sources, it is important to be aware of potential pitfalls owing to the fact that fact sheets and portfolio disclosures provide a snapshot of holdings at a specific time, and due to this, investors might not know the full context or the investment rationale behind those choices.

These documents don’t include a thorough research, analysis, or market insights that went into the investment decisions. By the time an investor sees these disclosures, market conditions may have changed, and the portfolio may have already been adjusted.

Moreover, these stock picks might not align with the investor’s own risk tolerance, financial goals, or investment time horizon. Relying solely on a few stocks or mimicking a fund’s holdings might result in a lack of diversification, increasing the overall risk. Investors can use fact sheets and portfolio disclosures as a starting point for research, but should also do their own due diligence.

Concentration and over-diversification: Putting all your eggs in one basket is what causes concentration risk. When all your investments are too heavily focused on a single asset class or a few asset classes, it means you have a concentrated investment portfolio. For example, if most of your investments are just restricted to large cap mutual funds, that means you are possibly exposed to the same set of stocks across your mutual fund holdings. If even some of these companies perform poorly, your entire portfolio could suffer as a result.

On the other end of this spectrum, over-diversification is also an investment mistake. Over-diversification is when you spread your investments too thin. For example, several investors end up investing in 4-5 schemes in the same category. At any given point in time, some funds would do well and some would not. But due to an over-diversified portfolio, the investor’s allocation to the outperforming fund would be minimal. Also, studies show that beyond a certain number, the benefits of diversification peter out significantly, but an over-diversified portfolio will reduce the return potential of your portfolio. The ideal approach should be to smartly diversify by looking for funds with different investment styles.

Frequent and unnecessary portfolio churning: Churning refers to the frequent buying and selling of investments within a short period. Each time you sell an investment for a profit, you trigger a capital gains tax liability. Short-term capital gains (for assets held less than a year) are usually taxed at a higher rate than long-term gains. For direct stock investors, frequent trading can lead to higher costs with each trade, as you incur transaction costs such as brokerage fees. These costs can eat into your overall returns, particularly if you’re making frequent trades. This may also prevent your portfolio from benefiting from the power of compounding over time.

To mitigate these issues, consider a more strategic approach to investing, focusing on your long-term goals. Minimize unnecessary trades, opt for a buy-and-hold strategy, and consult a financial planner to create a diversified portfolio aligned with your objectives, while also managing tax implications.

Trying to time the market: Trying to predict market movements and timing entry/exit points can be challenging and often futile. Rather than doing their independent research, investors often get swayed by overall market sentiments, and end up buying at market peaks and selling at market bottoms. To be fair, it is not possible for anyone to identify peak and bottom of the markets with accuracy on a consistent basis. So, investors should remember that it is not so much about timing the market, but about the time invested in the market. Research shows that those who stay invested over the long run in a well-diversified portfolio generally do better than those who try to profit from the market’s difficult-to-predict turning points.

Emotional decision-making: Letting emotions like fear or greed drive investment decisions often result in impulsive choices. This takes us back to the importance of a disciplined approach to investing and sticking to one’s financial plan. Through bust and boom, it is important that investors stay focused on their goal-based investments and not unnecessarily tinker with them. Investors should learn to block the external noise, avoid chasing short-term trends or be driven by greed for superlative returns.

Nisreen Mamaji is founder of MoneyWorks Financial Services.

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Updated: 24 Aug 2023, 09:37 PM IST

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Economy

S&P/TSX up more than 200 points, U.S. markets also higher

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TORONTO – Canada’s main stock index was up more than 200 points in late-morning trading, while U.S. stock markets were also headed higher.

The S&P/TSX composite index was up 205.86 points at 24,508.12.

In New York, the Dow Jones industrial average was up 336.62 points at 42,790.74. The S&P 500 index was up 34.19 points at 5,814.24, while the Nasdaq composite was up 60.27 points at 18.342.32.

The Canadian dollar traded for 72.61 cents US compared with 72.71 cents US on Thursday.

The November crude oil contract was down 15 cents at US$75.70 per barrel and the November natural gas contract was down two cents at US$2.65 per mmBTU.

The December gold contract was down US$29.60 at US$2,668.90 an ounce and the December copper contract was up four cents at US$4.47 a pound.

This report by The Canadian Press was first published Oct. 11, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

The Canadian Press. All rights reserved.

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Economy

S&P/TSX composite little changed in late-morning trading, U.S. stock markets down

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TORONTO – Canada’s main stock index was little changed in late-morning trading as the financial sector fell, but energy and base metal stocks moved higher.

The S&P/TSX composite index was up 0.05 of a point at 24,224.95.

In New York, the Dow Jones industrial average was down 94.31 points at 42,417.69. The S&P 500 index was down 10.91 points at 5,781.13, while the Nasdaq composite was down 29.59 points at 18,262.03.

The Canadian dollar traded for 72.71 cents US compared with 73.05 cents US on Wednesday.

The November crude oil contract was up US$1.69 at US$74.93 per barrel and the November natural gas contract was up a penny at US$2.67 per mmBTU.

The December gold contract was up US$14.70 at US$2,640.70 an ounce and the December copper contract was up two cents at US$4.42 a pound.

This report by The Canadian Press was first published Oct. 10, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

The Canadian Press. All rights reserved.

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Economy

S&P/TSX composite up more than 100 points, U.S. stocks also trade higher

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TORONTO – Canada’s main stock index was up more than 100 points in late-morning trading, helped by strength in the technology and base meta sectors, while U.S. stock markets also climbed higher.

The S&P/TSX composite index was up 106.70 points at 24,179.21.

In New York, the Dow Jones industrial average was up 280.87 points at 42,361.24. The S&P 500 index was up 26.51 points at 5,777.64, while the Nasdaq composite was up 69.52 points at 18,252.44.

The Canadian dollar traded for 73.08 cents US compared with 73.22 cents US on Tuesday.

The November crude oil contract was down 67 cents at US$72.90 per barrel and the November natural gas contract was down eight cents at US$2.66 per mmBTU.

The December gold contract was down US$2.30 at US$2,633.10 an ounce and the December copper contract was down five cents at US$4.41 a pound.

This report by The Canadian Press was first published Oct. 9, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

The Canadian Press. All rights reserved.

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