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To err is human, but these mistakes can cost you money, especially if they are in the financial space. The consequences of the financial decisions that you make are largely dependent on the investment choices that you make. However, if you want your wealth reserves to increase, these are the common mistakes that you must evade:
Investing in Stocks without Diversification and Research
Investment in stocks is accompanied by huge risks. Hence, it is important to diversify your investment portfolio to minimize the risks. Instead of being completely aggressive with your investments, you can include low interest bonds in your portfolio to increase the opportunities to gain more returns. If you are new to stock market investments, you must research the market thoroughly before you begin short-term trading.
Investors usually enter scrips close to their peak, which eventually end up in their Demat account. Similarly, many of these scrips wipe out most of their returns of the year in the last couple of months alone. Moreover, low value scrips do not yield good returns even for loans against securities, as you need to pledge high value shares to avail the facility. Hence, it becomes imperative to ensure that your portfolio is balanced and consists of stocks that can yield both short-term and long-term benefits. While this is something that cannot be achieved as soon as you start investing, market research can be improvised with the experience of trading with a diverse choice of securities.
Mistaking Insurance as Investment
If you consider insurance as investment, you are committing a mistake. Insurance is not a means to grow your money, it is only a way to secure your and your loved ones’ life in case of medical emergency or untimely death. Getting yourself covered by term insurance is an ideal option that can cover you for more than 10 times your income by paying low premiums.
Unfortunately, the challenge arises when you confuse insurance with investment and invest in endowment or money-back policies. These policies do not yield optimum returns. Hence, it is important to opt for an insurance or health plan which is financially viable and does not affect your short-term savings.
Investing all Your Savings in Cryptocurrency
Cryptocurrencies have been trending on financial charts for a while now. They gained recognition as an investment class after the creation of Bitcoin in 2009. Bitcoin started gaining popularity in the investor community as the price started rising sharply giving more returns than expected. By 2013, it started giving unimaginable returns, thus capturing investor attention.
However, there came a time in 2017 when it could no more live up to people’s expectations and came crashing down from its peak and plunged down 50% in a month. This event created a major dilemma among investors regarding the stability of cryptocurrencies. While cryptocurrencies are definitely a favorable investment in the current economy, it is vital to understand that they are not a long-term investment solution for maximized returns. Hence, investing all your savings to enter the growing cryptocurrency bubble is not a wise decision.
Absence of Post-Retirement Plan
Retirement is a distant goal, hence not many people plan it effectively. To enjoy a smooth, glitch-free retired life devoid of any financial crisis, you have to plan the post-retirement corpus well in advance. Employee or Public Provident Fund are not enough to create adequate funds for your retirement funds. Instead, fixed deposits are one of the most suitable options for long term investments that guarantee returns. The FD interest rate varies across different financial institutions.
For instance, Bajaj Finance offers interest rates of 7.85% going up to 8.20%. Such high interest rates at Bajaj Finance, along with the credibility of being a trusted NBFC gives you the opportunity to park your funds for a long term with guaranteed returns. Moreover, you can begin early and invest in equities to get maximum returns from your investments.
Avoiding these mistakes ensures that you do not fall into the loop of bad investment decision making. Choose your investments wisely to tread with confidence on the path to riches.
Also Read :- Complete Guide to Investing