SMART MONEY : LESSONS FOR 2009

Here are the major mistakes people did in last one year and the solution for the same from financial experts -

2008 - a year that saw volatility hitting its peak. With the stock markets crashing across the globe, it wasn't long before the numbers changed colour on our screens and our financial lives. Amidst rising uncertainty, did we then have kept a straight head and made the right decisions?

Here are a few areas where most of us went astray:

Equity: High risk, high reward game
It was all about earning that quick buck. From an MBA grad to a taxi driver, people speculated, traded and even made money. But in the bid to get higher returns, momentum stocks ruled the roost. The deal turned sour for investors who stayed on and did not make a clean exit at the right time.

Equity Analyst Gul Teckchandani said: People lost money because of margin trading and speculation. Becoming greedy and not exiting at the right time was the main reason...

But all is not lost, say analysts. They feel, a falling market is in fact the best time to pick up stocks as they come to you at throwaway prices.

Smart Money suggests...
Understand your risk appetite: Unless you are sure that you have the stomach to take some losses you should not trade in stocks.

Portfolio balance is very important
With the stock markets taking a headlong tumble, the NAVs of mutual funds could not have fared better. Ineffective diversification, high-risk sector funds investments and lugging around a large portfolio with haphazard selection of funds, did take its toll on most mutual fund investors. The result as expected was a portfolio imbalance.

Smart Money suggests..
Don't chase returns: what's good for your neighbour might not be suitable for you

Borrow only as much as you can repay
It was not only share market that spelt doom. The year 2008 saw a whole lot of volatility in home loan rates as well. With interest rates shooting up, most investors delayed their plans of buying property.

On the other hand real estate which saw enormous demand in last couple of years faced a slowdown if not a slump. In their quest to make earn a quick buck in the property space, most people ended up taking loans that they just could not afford repaying. When developers failed to sell their properties, what they faced is a liquidity crunch on their projects. Let's not forget the investors who also took a hit!

Buy property after due diligence
While the real estate party that has been on for the last few years has ended, it is just the right time to take stock and chart the way ahead.

Smart Money suggests…
If you know what goal you want to meet, choose your investments accordingly so that you are not taking too much risk, or locking up your money for too long.