Once bitten twice shy investors often fall victims to popular myths about investing rather than learning from their mistakes. In the bargain, they lose out on other opportunities. Here we took a look at some of the myths that are prevalent in the minds of those who have lost money.

I can do it myself

Investors feel that they do not need investment advisors and can make investment decisions on their own using their trusted sources. However, one must remember that markets today are far more complex. It is virtually impossible for any one individual to track all asset classes. Hence choosing a good advisor, helps.

“An advisor is equipped to look at your changing needs and risk profile, and offer appropriate solutions given the market conditions and basket of products available. They are experts and will help you navigate the journey towards financial freedom with a high degree of certainty,” says Ashish Kehair, business head, private wealth management at ICICI Securities.

The NAV is high

The NAV is the total value of all the securities in its portfolio, less any liabilities, divided by the number of units outstanding. The NAV does not signal an entry or an exit point. Instead, one should look at the portfolio quality of the fund, see whether it is a large cap, mid-cap or small-cap oriented, the fund manager, the past performance and the style of investing.

“Individuals should look at the return on investment rather as a pure number to the NAV has no meaning”, says Anil Chopra, Group CEO, Bajaj Capital.

Bonds are risk-free

Bonds or debt mutual funds carry interest rate risk. In a rising interest rate scenario, the value of your bond falls and you lose money and vice versa. Besides, there is a credit risk with bonds of private companies. Hence investors must factor in that before making an investment in debt.

Invest 100 minus your age in equity

This works for a lot of people, but this is not sacrosanct. For example, if you are 30 years old and have a loan and are the only working member in your family, and barely manage to meet your monthly expenses, it may be risky for you to put 70% of your assets in equities. Alternatively, if you are an HNI and 60 years old, with your retirement nest built and well taken care of, then you can still afford to invest more than 40% in equities. Hence, it is best that you discuss the same with a financial planner before taking a final decision.

Chase multi-baggers

A lot of investors are constantly trying to find the next multi-bagger. First, in an individual capacity it is not easy to spot one. Even if you have a multi-bagger but it constitutes a small percentage of your portfolio then it does not make significant difference to your returns. “In the process of identifying a multi-bagger, investors accumulate as many as 15 small-cap stocks, 14 of which would go down, so it is not really worth the effort,” says Radhika Gupta, director and founder of Forefront Capital.

The best time to invest

Most investors think that they will buy at the bottom and sell at the top, in short they want to time the market. However, during their investment journey sooner or later they realise that timing the market is not possible and in the process they miss out on many opportunities. “There is no best time to invest, but there is a best time horizon to invest. If you have the time horizon to live the shocks of the particular asset class, you will make money,” says AV Srikanth, executive director, Anand Rathi Wealth Managers. Investors should build a portfolio over a period of time, depending on the risk that he can take.

Diversification’s the key

Financial advisors advise diversification of portfolio to increase returns and reduce risk. However, diversification does not mean buying stocks and funds at random. “Overall we believe that investors should not have more than 20 instruments be it stocks, mutual funds or fixed deposits in their portfolio as diversification beyond that reduces returns without reducing risk”, says Sandeep Raichura, business head, wealth management at Pioneer Wealth Management.