Financial rules not to follow blindly

Investing in the stock market can be a challenging and daunting task, especially for those who are new to the world of finance. There are numerous financial rules and guidelines that people often follow in order to make the most of their investments. However, blindly following these rules without considering your individual financial goals and risk tolerance can lead to poor investment decisions and suboptimal outcomes.

One of the most commonly cited financial rules is to always invest in a diversified portfolio. Diversifying your portfolio by spreading your investments across different asset classes, sectors, and geographies can help reduce the overall risk of your portfolio. However, blindly following this rule without considering your individual financial goals and risk tolerance can lead to an over-allocation of assets that do not align with your financial plan. For example, if your goal is to grow your wealth over a long-term horizon, investing in high-growth assets such as stocks may be more appropriate than investing in low-growth assets such as bonds.

Another financial rule that people often follow is to only invest in low-risk assets. Low-risk assets such as bonds and cash are less volatile than high-risk assets such as stocks, and may be appropriate for investors who are nearing or in retirement. However, blindly following this rule may prevent an investor from earning higher returns over the long-term, especially if the investor has a long time horizon or is willing to accept more risk.

A third financial rule that people often follow is to save a 10 percent of your income. Saving a certain percentage of your income can help you achieve your financial goals, such as building an emergency fund or saving for retirement. However, blindly following a rule may not take into account an individual's unique financial situation, such as high living expenses, and may not be feasible. It's important to consider your individual financial goals, expenses and earning potential while determining how much you should save.

Next financial rule that people often follow is to always max out their retirement accounts. Contributing to retirement accounts, such as CPF Special account and Supplementary Retirement Scheme (SRS), is important for saving for your long-term financial goals. However, blindly following this rule may prevent an individual from focusing on other financial goals, such as paying off high-interest debt or saving for a down payment on a home.

Another financial rule that people often follow is to never sell losing investments. Holding onto losing investments in the hope that they will recover may be appropriate for some investors. However, blindly following this rule may prevent an investor from cutting their losses and reallocating assets to more promising investments.

Many people also often follow is to always invest in what's hot. Blindly following this rule may lead to chasing after trendy investments, rather than making informed decisions based on an individual's financial goals and risk tolerance. It is important to do your research and understand the trends before investing in any asset.

Another financial rule that people often follow is to never pay for financial advice. While it's important to be mindful of costs, blindly following this rule may prevent an individual from seeking professional advice, which can be beneficial in developing a customized financial plan that aligns with your specific goals, risk tolerance and financial situation.

Finally, another financial rule that people often follow is to never invest in individual stocks. Diversifying your portfolio is important, but blindly following this rule may prevent an investor from taking advantage of the potential for higher returns that can come with investing in individual stocks. It's important to do your research and understand the risks and potential rewards of investing in individual stocks, and to consider your individual financial goals and risk tolerance before making any investment decisions.

In conclusion, while financial rules and guidelines can be helpful in guiding investment decisions, it is important to consider your individual financial goals and risk tolerance before blindly following them. It's important to develop a customized financial plan that aligns with your specific financial situation, and to seek professional advice if needed. Remember to do your research, stay informed, and make informed investment decisions that align with your individual financial goals and risk tolerance.