Top five mistakes Mark Mobius wants investors to avoid during Samvat 2073

NEW DELHI: The opportunities that India presents are incredible. Investors must avoid making simple mistakes in order to make the most out these while taking investment decisions.

This was the message from Mark Mobius of Templeton Emerging Markets Group on the occasion of Diwali.

“First of all, have a good time this Diwali. Make your investments and then enjoy yourself during the celebrations. I believe if you are patient and do your homework well, you will do very well,” Mobius said in an exclusive interview with ETNow.

The first thing that people have to realise is that investment in stocks is probably one of the best ways to save and grow money. Companies have an objective of being profitable and sharing their earnings with investors.

Here is a list of top 5 mistakes that Mobius identified in his interview with ETNow:

Global diversification: We might have heard about diversification in stocks and sectors, but Mark Mobius goes a step further and says there are tremendous opportunities available outside India as well, which investors should track.

Often, our investment gets limited towards domestic plays, but even some global players could offer tremendous returns in the near future. “For India, the opportunities are incredible. There are companies with very smart management and people who are capable of acting on the world stage, not only on the India stage,” Mobius said.

“But investors in India must remember that it is a global market now. There are great companies in India, but there are also great companies in other parts of the world. So you must think globally. India will not have the best emerging market performance year after year,” he said.

Don’t jump to make investments: Often investors jump in to make investment without checking the management pedigree, life cycle of a product, growth of product pipeline or balance sheet strength, among other things.

“It takes time, usually a five-year timeframe, for a company to set a goal and reach that goal. As an investor, you must also think of a five-year timeframe,” Mobius said.

“Do not jump in and out of the market. Do not trade in and out. Try to look at the company very carefully, look at the management very carefully and then take a decision to invest,” he said.

Don’t sell in reaction to news: The biggest mistake one could make is to act on misinformation. We have seen that happening whenever there is any negative corporate news, which has resulted in blanket selling across a group or specific stocks. “The mistake that people make is to react to daily events. They pick up a newspaper and read about something and they react to it too quickly without giving a thought as to what the event can actually mean,” Mobius said.

“I think that is probably the biggest mistake people make. That is why sometimes it is better to buy something and just go away. Do not read any newspaper for next five years and you will probably do quite well,” he said.

Think long term: Think big, think long term. That is the message that Mark Mobius wants to send out to every investor. Don’t jump in and out of your investments frequently if you want to generate serious wealth.

“The crux of the experience is to think long term. Do not think short term. Many of the mistakes I and my colleagues have made came from short-term decisions which usually are not very good. Sometimes they are right, sometimes they are wrong,” Mobius said.

“Over the long term, we would have been better off making a decision after careful consideration and sticking with it. I remember one person asking to buy when others were selling despondently and to sell when others are greedily buying. It pays the highest rewards. But that also requires great patience and fortune. That principal is very, very important for everyone,” he said.

Cost averaging: The best way to generate wealth is to buy shares in a scattered manner to achieve cost averaging. Don't buy lumpsum, leave some cash to be deployed on dips.

“The best way to do that is on a cost-averaging basis. In other words, if you want to buy 100 shares of a company, buy five shares this month, five shares next month and so forth,” Mobius said. “Stock price will fluctuate but over time and you will get a very good average price. These are the basic principals one should keep in mind,” he said.