Investment Lessons from 2023.

    Investment mistakes can provide valuable learning opportunities, providing insight into how decisions can be better made in the future. It is difficult to navigate the complex world of investing, and there is a great deal of room for error. For example, there can be significant financial implications for insufficient research - It can lead to substantial losses. In addition, when determining the timing, location and duration of investments, there is a common tendency to overlook the risk profile of the investor. Your portfolio may be compromised by overestimating or underestimating the risks. But fear of mistakes should not prevent us from taking action and waiting for investments to grow on their own. 

Due to the unique combination of geopolitical tensions and market slowdowns, investors in 2023 faced a demanding environment. This combination of factors made the market ripe for potential mistakes, as unsuspecting investors poured funds into new offers and hopped between investments in the hope of capitalizing on sudden, unexplained market shifts. It is important to note that a thorough understanding of the risks involved as well as an informed decision-making process are needed in order to invest on the market. 

The market’s unpredictable fluctuations fueled a pervasive “fear of missing out” mind-set among investors, leading them to hastily switch from one trending investment to another in pursuit of quick gains. Unfortunately, this often led to the purchase of assets at inflated prices, which will inevitably result in significant losses when the bubble burst. Moreover, some individuals have concentrated all their investments in one asset and avoided diversification because of the temptation to pursue high returns.

We need to reflect on our financial objectives and make sure we're on solid ground with our money. This includes being able to operate on guard rails, having clarity and peace of mind about our finances, and making good decisions. It is important to first understand what not to do in order to ensure that your financial situation is stable. 

Let's take a look at the things that shouldn't be done to make sure the finances are in order first. 

One of the most common financial mistakes is to view finances through the lens of investments.  As people often invest in products that are already doing well or where their colleagues and friends are investing, this product centric view can be problematic. Instead, the portfolio should be tailored to the individual's and family's specific needs, rather than to include products that are doing well or that their friends are investing in. This is the start of building a strong financial foundation.

Second, investing solely for saving taxes is a foolish exercise. Rather, a portfolio of investments should be set up based on objectives, risk profiles, duration, income requirements, returns and tax efficiency. If it is also possible to save taxes as a byproduct, it is acceptable. 

Thirdly, it's not a waste of money to have a security net and to spend money on it. Many people think what they're paying for insurance is money that goes down the drain.  However, insurance is a risk transfer for small premiums; only when catastrophic events occur does one realize its importance. Life throws us curveballs, and having insurance is the safety net. It's also a good practice to have adequate contingency and liquidity funds! Covid's helped a lot of people understand it! 

Let us talk about some of the things we should do with our money now. 

First, we've got to have a plan for our lives and our money. We're planning most of our life's events, birthdays, vacations, weddings, etc. But we're often operating without a plan when it comes to our finances. Money's important, and we've been working all our lives for it. It is therefore essential to take a serious look at our own money and wealth so that we can come up with a plan of action. 

Second, most of us have a number of financial goals. These objectives need to be prioritized, resources allocated, and investment directed at them. In order to achieve the objectives, it is essential to work in a planned manner and to achieve them in a deliberate manner. It's equally important to keep within the budget, so that money allocated for one goal like retirement doesn't get consumed by other goals like children education. 

Lastly, we must shift our focus to controllables, such as our own expenses, our goals, and what we put aside each month. It's not going to sound inspiring, and it's probably going to make you yawn. 

During the investment term, investors are often faced with unforeseen events like asset cycles, market downturns, interest rates, economic and geopolitical developments. However, it is not productive to obsess over these factors. Instead, it would be best to stick to the plan and adjust accordingly to changes in the course of the journey. That's because long term investment is a game of patience and discipline. A diversified portfolio that is compatible with investment objectives and risk tolerance is important. It is vital to make the right allocation of assets when investing. Studies have shown that asset allocation is the main driver of portfolio returns, not the specific selection of schemes. The importance of asset allocation cannot therefore be underestimated.

The cornerstone of wealth creation is regular investments. Because most people receive their income on a monthly basis, it's wise to set aside an amount that can be invested in the future. You can spend the rest of that money after you've invested, without guilt!

In conclusion, building wealth requires discipline, determination, and patience over a long period of time. It is not possible to create wealth overnight. To achieve great results, it takes time, effort, and a willingness to stay the course. You can build a strong financial foundation to help you achieve your objectives and ambitions by following the principles of good investing and choosing appropriate investment options.

Keep in mind, the key to success is that you keep your focus, remain disciplined and continue on course!