How not to lose money in 2025

The new year beckons. Market indices performed well in 2024 with midcap and smallcap indices returning 20 per cent per annum + returns. Investor interest in equities remains strong despite the volatility and challenges in the form of continuing geopolitical tension, sticky inflation, corporate earnings slowdown and depreciating rupee. 

With equities having a great run in the last few years, a vast majority of investors have flocked to the markets with low equity allocation. Now there are investors who now want to up their investments to catch up on returns or due to FOMO.  Many are driven by the quick high returns seen in the recent past. Overall investors are trying various ways to cash in on the equity boom. 

Market performance is unpredictable and losses due to the volatility is not in the investor’s hand. However, investors must try not to lose money due to their investing actions.

Social media or ‘finfluencer’ videos are the go-to information source for anybody wanting to make a quick buck. A recent study found that 72 per cent of stock recommendations given, from 2018 to 2022, by finfluencers with above 5,00,000 following,  failed to perform. Another misguidance in these videos is to show a well-known person from the financial world in the start of the video, which leads investors to believe that these personalities are providing the recommendations. 

Whatsapp and Telegram channels too entice investors with super high returns in a short timeframe. It is surprising that investors are willing to trust these platforms with so much money just on the basis of promised returns, without checking their background. People would hesitate to give Rs 100 to a known person but are willing to invest lakhs with unknown, faceless entities online. 

Futures and options (F&O) trading is another attraction for investors. In fact, there are investors, with no knowledge in stock research, blindly trading in stocks/F&O based on tips from their circles. Recent SEBI reports showed that 93 per cent of individual traders made losses in F&O trades between 2022-24 and 70 per cent of intraday traders suffered losses in FY23. Reason enough to stay away from day trading in F&O. 

American economist, Benjamin Graham rightly said “The investor’s worst enemy is likely to be himself”. In 2025, keep investing simple with these mantras:

Every investment is to be done for a financial goal. Be clear about the reason for choosing equities and keep in mind that the recommended investment horizon for equities is at least 7-10 years. 

Invest only with registered entities, whose registration can be confirmed on the SEBI website. 

Returns average out over time. Keep returns expectations to 10-12 per cent p.a. 

Leave stock picking to the experts. Mutual Funds are the best bet. Choosing between so many funds can be difficult. Index funds provide an easy and low-cost investment option. 

Choose a fund based on long term consistent returns. Do not churn funds to chase the recent best performing fund. Funds go through cycles and no fund remains at the top always.

Happy Investing!