Don't be stupid

Don't be stupid, you know I love you

Don't be ridiculous, you know I need you

Don't be absurd, you know I want you

Don't be impossible

The famous lyrics from Shania Twain's hit song are also relevant to the world of investing. Don't be stupid.

It I said that doing badly in the investing process can be as equally difficult as doing very well; as long as one sticks to the basic principles and one does not do anything stupid. Often, managing risk is key to getting the job done. Lack of success in the world of investing has less to do with taking great decisions and more to do with just avoiding stupid stuff. Avoid too much risk and success will follow.

So what are the stupid things that one needs to avoid?

For starters, temper your expectations. Although this is not a decision itself, how one sets expectations has a strong impact on the decisions one will take. If your expectations are within limits, you will tend to take less of stupid decisions that are driven by over expectation and hence disappointments related to the actual performance of your investments. Don't get swayed by what you read on social media. 25% CAGR is not really necessary to succeed. As long as one is achieving 5% to 6% over average inflation, you are already on the path to success. Hence keep your expectations within reasonable limits. 

Maintain a balanced portfolio. Having assets across multiple asset classes will ensure that you ride the cyclical waves of each asset class. There is no need to take unnecessary risk and allocate a disproportionate share to any one asset class based on recent performance. Remember, everything reverts to the mean eventually.

Save and invest aggressively. There is no substitute for this. Consistent investing and holding the investments over a long period of time is a critical element to success. There is no quick magic. And if you read about how other  people are getting rich quickly, run away from such stuff. Stay consistent.

Anything else that you suggest? Mention your suggestion in the comments below