POSTED BY July 12, 2008 COMMENTS (4)ON
If you want to save money it needs to be invested somewhere. But lot of people makes some mistakes in investing which seems very small at that time but they can prove a disaster to your financial life.
Today in this article I’m going to tell you 4 common mistakes in the investing world that you should avoid as an investor.
This is my favorite, because it is the mistake done by majority of people, Most of the people are highly under insured. By default, a person must be at least covered for 10-15 times his annual expenses. So a person who has a yearly expenses of Rs 2.4 lacs (20000 per month), must have a cover of around 25-35 lacs at least.
But they have insurance like peanuts, 2 lacs, 5 lacs, or 10 lacs. The biggest reason for this is that they take wrong type of insurance. Most of the people need Term Insurance , but they end up with Money Back plans.
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Most of the people don’t pay good attention at diversification. They are either in Debt or Equity. They must understand that they have to diversify along different types on investments to minimize risks and also to boost up there returns.
Some people have only FD’s, PPF’s or NSC in there portfolio, then there are people who hold only Shares or mutual funds. While the former misses on the returns, the later on is exposed to high risk. Combining both of them can decrease risk, increase stability of returns.
Most of the people rush for tax saving only in the month of Feb-March, when they get a letter from company saying that they need to submit proofs of investments under section 80C, and that’s the reason why people end up taking wrong products, just because they don’t have time to plan there investments. The best thing is to start planning for tax saving right at the start of financial year.
This is another big mistake people do, they do not start investing at the right time. A lot of time people actually can save some money but they feel that its not worth to save a small amount, they think that when they will be in condition of saving enough per month, that would be the right time to start, which is far from truth.
Watch this video learn more about 4 biggest financial mistakes:
Ajay Started his career at 22. He has worked for 8 yrs and now he is 30 yr old, He wants retire at 60, and can invest for another 30 yrs. He want to generate 4 crores for his retirement. He has 3 choices
1. 6000 every month for next 30 yrs.
2. Invest 10,000 every month for next 7 yrs and then leave it to grow for another 23 yrs.
3. Invest 20,000 per month for 3 yrs and leave it for 27 yrs.
Guess which choice will give him maximum money , The one where he is investing more for less years !!! . Yes .. The corpus generated is as follows:
1. 4.2 crores
2. 4.59 crores
3. 5.11 crores
So the idea is, start early and invest more … remember:
Start Early, Invest less = Start Late, Invest a Lot
Btw, Had Ajay invested 4,000 per month right from the time when he was 22, and invest for next 8 yrs and waited for that money to grow till retirement, He can generate more than 6.5 CRORES !! That’s better than all the 3 choices 🙂
Considering return of 15% per annum from Diversified Equity Mutual fund, If you invest 10,000 per month for 10 yrs and then leave it to grow for 20 yrs, your investments worth will be 4.5 crores, But before that if you also invested 5,000 for 5 yrs and then 10,000 for 10 yrs, your money will be 7.5 crores.
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