New Year 2025: What investing mistakes should investors avoid next year?

As 2024 comes to an end, investors can hope to avoid a repeat of last year’s mistakes. Some investors tend to rebalance their portfolios in order to enter the new year with renewed energy and positivity.

The idea behind rebalancing is to let go of the past and start a new beginning. So how can you make sure you don’t repeat the investment mistakes of the past this time?

For example, you might have selected a stock based on historical returns, but it turned out to be a bad bet. Or you overexpose your portfolio to stocks and throw caution to the wind. Now you regret your decision.

Here, we round up some of the key mistakes to avoid in the new year.

2025: Top investing mistakes to avoid:

Avoid rebalancing your portfolio

First, let’s dive into the reasons for rebalancing. First, you need to ask if you need it. Typically, rebalancing is necessary because a bull market causes allocations to one asset class (equities) to increase relative to other asset classes (debt).

The opposite is true during a bear market. Therefore, it is important to rebalance your portfolio from time to time.

“When an asset class performs well, people tend to allocate more. Most investors’ portfolios today have a higher equity allocation than before. The New Year is a great opportunity to take a closer look at your current asset allocation and Make corrections with the help of mutual fund advisors to ensure steady growth through 2025.

Echoing the same sentiment, Vivek Sharma, Head of Investments at Estee Advisors said: “Your portfolio should reflect your investment objectives and risk tolerance. Over time, these may change. Rebalancing ensures that you realign your portfolio to reflect your current investment objectives and risk tolerance.

However, Rajani Tandale, senior vice president of mutual funds at 1 Finance, sees it a little differently.

“Rebalancing your portfolio should not be viewed as a mandatory or frequent activity, nor should it be driven by the temptation to chase high-return schemes. The true purpose of rebalancing is to tailor your portfolio to your personality, financial goals, and risk tolerance. The ability to realign your asset allocation – rather than moving from one scheme to another for quick gains,” she said.

Invest based on historical returns

Experts say a key mistake investors should avoid is making decisions based solely on historical returns.

“Many investors make decisions based solely on a fund’s historical performance, assuming that past returns will be replicated in the future. For example, if a fund returns 50%, they may invest blindly without evaluating whether it is in line with future markets. prospects or their financial goals.

“When rebalancing, avoid letting market trends dictate your strategy. It’s tempting to follow last year’s best-performing businesses, but this can lead to over-concentration in certain assets and disrupt diversification. Past performance is not always future results. reliable indicators. Don’t make decisions based solely on short-term market performance.

Not taking advantage of tax harvest

Experts also point to not taking advantage of tax harvests as another mistake they should avoid. “Many investors do not take advantage of the tax harvest simply due to lack of knowledge. The Indian government allows $Long-term capital gains exemption of $125,000. This means bookings can earn up to $1.25 Lakhs is fully tax-free and the investor does not have to pay LTCG of 12.5%.