The root cause for these types of investors behavior is that investors always try to maximize their returns by timing the market. Investors don't realize that several historical analysis have shown that leave about common investors, even star fund managers can not predict the market with cent percent accuracy every time. So trying to time the market may be a futile exercise.
They should realize that rather than maximizing returns, they should try to settle for a decent return. If they are willing to settle for a decent return, in the long run that will make them richer by 99% of the people around them. The moment you try to maximize returns, you go for an entry and exit strategy. Some people even try to time the market with their SIPs (systematic investment plans.
According to Modani, the problem is with investor be havior and the question is how they should behave in situations like these. Here comes the distinction between controllable and noncontrollable factors. There are factors like markets, interest rates etc. which are noncontrollable factors for an investor. So it's better to not bother much a b o u t these factors. On the other hand factors like trying to time the market, existing all of a sudden, panicking etc. are controllable factors for every investor.
According to financial planners, every investor should plan, set financial goals for every investment they are making, with a clear time frame when they want to achieve that goal and then invest in a disciplined manner to achieve those goals. Uncontrollable factors could come in between those years before they reach their goals and try to derail their financial plan, but in such situations they should rebalance their portfolio and re-align their plan to suit the market reali ties.
In vestors should set goals for their in vestments and stock to those goals. And if your goals are decades or more in the future, you should invest in equities.However, if your goals are months or a few years into the future, then you should stick to other fixed income instruments.
Even if there are volatile phases in the market, retail investors should stick to their plans and keep on align ing their investments to their goals, finan cial planners say.
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