Step 3: Avoid the 'noise'
If you have been doing your homework religiously, you will find discussions on some trends/investments cropping up more often than that on others. For some time now it's about gold; earlier it was about mid caps, ULIPs (unit-linked insurance plans) and infrastructure stocks among others.
Investing only according to the latest trend can often be a surefire recipe for disaster as investors found out in 2000; then technology/media/telecom (TMT) proved to be the undoing for many an investor.
Typically investments tend to polarise around such noise. That's not such a good idea, because by the time these trends get written/spoken about, the opportunity to make money is often gone. You run the risk of investing in the 'idea' at the peak.
If you have done your homework well, then you will be a in a position to avoid such pitfalls and catch the trend earlier on. Even if you don't catch the trend soon enough to make money, at least you will avoid investing in it when it's too late.
Image: A man walks past a brokerage house with an advertisement for a mutual fund in Mumbai. | Photograph: Indranil Mukherjee/AFP/Getty Images
Also read: Words of wisdom from Rakesh Jhunjhunwala
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