Investing and then earning returns is sheer bliss. But most of the time, the money that has been put in might not bear the sweetest of fruits. This is because the root of the investment tree is rather weak. Many people invest without knowing and conducting research. The get lured by some offer and simply dream about high returns and earning money quickly. Here we will talk about a few mistakes that you should avoid in a bid to create wealth:
Leaving out increment in the income
The first rule of investing is never avoid any increase in income. A majority of investors are unhappy because of low income which implies low or ZERO savings, constrained lifestyle and continuous worry about the future. But they need to realize that they have to be more active to earn more rather than waiting for their investment to give them the results. Therefore, do not sit idle. Always keep looking out for more opportunities with higher pay. In a recent survey, it was shown that 39% investors make the mistake of not focusing on increasing their income. Investment gurus suggest that people should invest in themselves first before putting their money on mutual funds, etc.
Getting trapped in the vicious circle of debt
People these days are crazy about using their credit card. The first thing that they reach out in their pocket while paying their bills, loans, EMIs, etc., is the credit card and before they realize, the debt already reaches sky high. A word of advice would be to use money or digital wallets as it would then keep the expenditure in check. Spend responsibly and only on things that you need. There is no need for a car loan or a home loan in the early stage of your career.
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To achieve big results, you have got to take big risks. But plan it out. The right time to take a go at catching the big fish is right when you start because by the time you get old, you wouldn’t be able to do so as you will have to act more responsibly and you wouldn’t have enough time to fix your mistakes. Whether you want to start your own business, invest with a friend, change your field, etc., you can do all of it when you are young. So, get out of your comfort zone and explore.
Beginning the charity at home
This is one thing you most certainly should not do. Do not purchase any sort of investment products from a relative or a friend. Of course you would be pressured by your parents to purchase from your relatives, but do not do that. Whose collar would you grab in case something wrong happens? How will you express your dissatisfaction? Food for thought! Research and compare online, read a few books on investment, attend workshops or even hire an advisor, if you are lost somewhere in the middle, but never begin the charity at home in case of investment.
Investing just to save tax
Most of the people invest for saving tax, but is it advantageous? Absolutely not! People who have been doing it, they continue with it, year after year, and the new ones just ‘follow the herd’. The result of this mindless investment is that they end up having a number of policies which they have no idea about. Tax saving is good only when it is meaningful. Dig deep in the market, put some time and brain, and find a product that aligns with both short and long-term goals.
People always regret their mistake of postponing or delaying the investment. They wait for the right time while it passes by them. To reap more benefits, it is advised that the investment is started at a young age. This would ensure that one doesn’t have to suppress their desires once they are old. Usually people don’t invest for the first five years after they start earning, they ‘spend’. Actually, they splurge. This leads to the loss of valuable time and obviously, money. They wait to save a big figure and then invest it thinking that it will fetch them big return. But unfortunately for them, that is not the truth. So it is better that you start with a small amount and start right now.
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People often have no idea about the product that they invest in. They just conduct a half-hearted research and are mainly allured by the so-called “big returns” or short-term goals like tax saving. At times, they also invest in instruments that are unapproved or believe blindly on what they see in the media. Furthermore, they also invest the wrong amount, putting all their hard-earned money in just one investment. The right way is to invest in different instruments and at regular intervals to mitigate losses.
Relying on past performance
A few investment blunder stories also include taking investment decisions based on the past performance of an instrument. The best way to choose an investment is to understand its market situation, read current analysis of the experts and then only one should proceed with it.
So what is the correct process to start investing?
- Start early
- Save and invest, even if it is a small figure
- Have a health insurance policy
- Start a Recurring Deposit account
- Invest in SIP for a small amount which you can guarantee that it won’t stop for the next 5 years after starting
- Hire a financial advisor
Lastly, learn from others’ mistakes and understand that no one can become rich overnight by simply investing. The Internet is filled with case studies of people making wrong investment decisions. There is always a solution if you have already repeated the mistakes. Seek professional help.
(The author is CEO & Founder, PolicyX.com)