We are always looking for the right investment tips so that our money is safe, secure and we get more than average. This is desirable for everyone, but not everyone manages to make the perfect investment. There are many people who have made one or more investment mistakes that they should avoid. Here are 10 obvious mistakes you should always be aware of: –
1. Purchasing any insurance plan other than a pure term plan
I strongly believe that all of you should have life insurance for yourself and your family members, but I strongly recommend that you buy only term insurance, not any other plan like endowment, money back etc. Because it’s so simple. If you consider companies to charge you a premium only for death charges, then in the endowment plan, they charge you an admin charge etc. and more death charges. If the traditional endowment plan is only 400-0% of the premium payable, charges will be levied in the first few years and this will affect the return you receive. Therefore, look at insurance plans as pure insurance and not a means of investment. Only buy a pure term plan from any insurance company.
2. Falling into a mutual fund for a “new fund offer”
The “new fund offer” is the lure that mutual fund companies use to lure customers. Basically a new fund offer is sold so that if you get a unit at a lower price of Rs 10, the NAV in the old fund may be higher than that. That’s why you get more units in the new fund offer. This argument is very wrong as there is a fundamental difference between the way mutual funds and common stocks / equities work. In equities there is a difference between the internal values of the stock and the market value, while in a mutual fund the intrinsic value and the market value are the same. So more units at a lower NAV is not a better deal for a mutual fund. In a new fund you may not even know the track record of the fund and the performance of the fund manager. Therefore, taking a shot in the dark who does not know the target and expects the best. My advice: stay away from new fund offers, always invest in funds with a proven track record over a period of 5-10 years.
3. Only invest in equity / mutual funds on the recommendation of the agent
Many people diligently put money into a fund based solely on the recommendation of their agent, without doing basic research on the quality of the fund, its performance track record, the fund manager and his credentials. It’s not easy or tentative when doing research. However, this does not mean that the agent will tell you where to put the money. Agents often have their own interests at heart before taking care of themselves and therefore their advice may not be right for you. They guide with the intention of forming a commission and can therefore advise accordingly. My advice: do some basic research yourself before investing, if you can’t do it, take the approach of a certified financial planner.
4. No investment in health / mediclaim plans
Another mistake people make is not thinking about medical emergencies and what they can do to their mental, physical and financial health. This can sometimes ruin your economy. Therefore, having a medical / health plan for the whole family is almost a necessity so that you are ready to be prepared if such a situation arises. My advice: buy a floater plan of at least Rs. General insurance firm.
5. Too much or too little exposure in equities
There are always strong reactions in the equity market which also show people’s investment habits. Most people make the mistake of investing in equities with either too much or too little exposure. Neither is desirable. Too much exposure means that you are exposed to market irregularities beyond management limits, and too little exposure limits the chances of the market making the most of the profits it makes available. So how much equity exposure is right for you? The built-in rule is to deduct your age from 100 to reach the equity portion of your investment corpus. For example, if you are 30 years old, you should have an investment disparity of up to 70% (100-30) of your portfolio. My advice: stick to the 100-year rule for equity investing.
6. Concentrated portfolio
The old saying is “Never put all your eggs in one basket” We should always have a diverse portfolio. The structure of a portfolio with concentration is more dangerous than the one with diversity and therefore can cause serious damage in difficult times. My advice: gold, equity, debt, bonds, mutual funds, FDs etc. Should have a good diversified portfolio of investments in. The extent of each of these factors will depend on your risk appetite and financial goals.
7. Don’t monitor your portfolio
Another mistake people make is that they stop monitoring their portfolios when they invest. It is very important to review the portfolio at regular intervals to find out which part or fund is working and whether asset allocation needs to be changed. From time to time bad artists need to be remedied by weeding. My advice: never underestimate the power of regular portfolio reviews. It can help you grow your money faster.
8. Splurging on credit cards
Many people fall victim to this. Credit card is such a convenient product that makes it much easier for you. We all need to stay away from it as it can put a huge strain on your savings and investments. My advice: Use credit cards wisely. Never buy luxury for credit on self.
9. Borrowing to invest in IPO / stock
I know there are a lot of people who don’t have the name of borrowing and investing in an IPO (Initial Public Offer) that ends fast on the day of listing. They hope to repay the loan and earn a profit. While this may work sometimes, it’s not a very smart thing to do because you don’t know if it will be profitable to make this list. As a built-in rule never borrow money to invest in the stock market in the hope of making money in the bull market or someone told you that the stock would be good or your friend made decent money. My advice: Never take out an investment loan. Only invest when you have extra savings from your earnings.
10. Start too late
This is a classic. Most of us have a laid back attitude when it comes to painting a picture about ourselves. Many of us start investing from the first salary. When a person starts early, the power of compounding is amazing. Friends, if you don’t want to make a mistake, this should be it. My advice: Today is the best time to invest. Remember his early bird that catches insects.