Top 5 Investing Traps That You Should Know

The reason why people think thousand times before getting started with investment is that a simple mistake or negligence on your part can cost you even more than you’ve invested. But once you’ve started with investment, you are bound to get tempted by various other options that will come your way.

So, you need to understand as to what is good for you and what just seems good at the present time but is actually a trap. Let’s have a look at some of the most common traps that an investor tends to fall prey to: 

  1. Withdrawing FD money for not so important expense

    Investment in fixed deposits is made with a financial goal in mind. However, in case you come across a financial crunch where you see no other option to help you with the situation and it definitely is important, at that time you can withdraw money from FD. But otherwise, avoid withdrawing money from FD just because you are in a financial crunch. Save enough from your income so that you can pay for your monthly expenses and not have to withdraw money from FD even with minor inconveniences.  

  2. Concentration on single product

    Diversification helps in expanding a person’s horizon. Therefore, while creating a portfolio, don’t put all your money into just one product. One may never know that it might not live up to your expectations. With investment in other products too, one can always remain on safe side. 

  3. Reactions on market dips

    Risk is the nature of stock market. But even the most experienced investors tend to panic when market dips even though they’ve invested in for the long term. In this moment of panic, encashing one’s investment or changing fund seems as the only feasible option. That is a trap. Every investment comes with its own type of risk. Until and unless your investment isn’t doing badly and you are in for the long haul, remain invested as these dips don’t last long. 

  4. Too many expectations

    The reason we invest is because we are uncertain about our future and it’s always better to be safe than sorry. So it is obvious to have some expectations from the investment made. However, these expectations should always be in line with the investment made.

     Higher expectations will always lead you to disappointment which might force you to switch to another option available. There’s no upper cap on the gain that a person can make on their investment but one must always understand that the market is volatile in nature so it’s bound to change from time to time and have expectations accordingly. 

  5. Ignorant towards no tax payment

    The government has come up with several strategies so that minimum amount of tax has to be paid by the investor on their investments. Therefore, the investors needs to be vigilant about these opportunities and always grab it when the times comes otherwise you might end up losing a good opportunity of avoiding taxation.

Though there are no definite rules when it comes to investment, one can surely avoid these traps in order to excel at least some bit of investment. Rest, investors usually learn with time as to what is good for them and go ahead with that option only.