Right from the day we begin earning, our heart yearns to fulfill all the desires that we have had since childhood and growing years. Isn't it? One by one, we wish to tick off everything from our bucket list, like the latest gadget or that adventurous trip we only dreamed of till date.?
But, it's our mind that puts us into a dilemma. Should you spend that money as per your heart¡¯s wish, save it, or put it to better possible use for future? Confused? That's exactly where investing can come to your rescue!?
We already work hard to earn every day, so why not let money work for us too? Wondering how? It's through smart and disciplined investing. No, we aren't talking about the biased opinions or hearsays that often form the base of most people¡¯s investment decisions. It¡¯s all about doing what most people?don't?do, i.e. taking timely and right investment steps.
Eager to know how investing can revolutionize your finances and help you grow money? Read on as we unfold some of the biggest investment mistakes that can prevent your money from working for you in 2022!
Many of us just shrug off the idea of investing, especially in our years of career, and insist on waiting for the ¡®right time¡® to begin it. Ever wondered why that ¡®right¡¯ time never comes? Because there is, in fact, no better time to invest than right now! So wait no more and begin investing today itself. After all, ¡®time is money¡¯.?
And still, if you feel lethargic or ignorant towards the idea of investing right away, just remember that the sooner you begin investing, the more time your money has for wealth creation through maximizing the power of compounding.?
Whereas on the flip side, the more you delay and wait for the ¡®right time¡¯, the higher would be the chances of failure to accumulate the desired corpus on time.?
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This is probably the biggest money eater for most people who invest but still fail at wealth creation. The age-old and traditional mindset of sticking to investment options like FD, PPF, etc which offer sub-optimal returns, is what prevents your money from actually maximizing the potential of wealth creation.
The returns of these fixed income instruments are often not able to beat inflation, especially the post-tax returns over the long term, besides the returns being much lower than market-linked instruments like?mutual funds.
Moreover, despite knowing the relatively higher returns of mutual funds, if you still choose to stay away from the?¡®risky¡¯ mutual funds, then it's time to pause, hit the refresh button and read this out.?
Yes, mutual funds do involve an element of risk since they invest your money in various market-linked securities like bonds, equities etc., but that risk varies across different mutual fund categories and can even be managed through an appropriate asset allocation strategy, which helps in tackling market fluctuations as well.
And that's not all. Mutual funds involve a wide array of categories and schemes that ensure there's something to offer for all types of investors, across different risk appetites and investment horizons. You can also conveniently decide the route of investment, i.e. SIP or lumpsum, depending on your preference.?
Even mutual fund returns have also historically proven to outperform most traditional fixed income instruments like bank FD, PPF, etc by significant margins, more so in the case of equity investments over the long term.
Plus, if you fall into the taxable bracket, then there are tax-saving mutual funds in the form of ELSS to help you achieve twin goals of wealth creation and tax saving!?
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I don¡¯t have much savings or I don't earn enough to start investing, these are the two ideologies believing which is a big mistake.?
If you too are amongst those who do so, then just pause and rewind a bit. Try to remember the last time you checked the features, process etc to invest in any instrument, whether it's PPF, Mutual Funds, FD, NPS or any other.?
Did you look at the minimum amount of those investment options? There¡¯s no rocket required when it comes to beginning to invest. Besides knowing that the best time to start investing is today, it's equally important to shun any thought that stops you from doing so, like the minimum investment amount.
You would be surprised to know that the minimum investment amounts of most options are on the lower side, and aimed to help anyone begin investing with whatever small amount they have.
For instance, mutual fund SIPs can be started at as low ?100-?500, bank FDs can be started with minimum deposit amounts of usually ?1,000-10,000 and PPF can be started with a minimum investment of just ?500
Hence, the next time you think of giving this excuse of not having enough ¡®money¡¯ to invest, remember that you are letting go of the golden opportunity to grow your money through timely investment! Keep in mind, something is better than nothing. So just start investing with whatever small but disciplined steps you can take.
Wealth creation, and that too for the long term, can never be complete without equities in your portfolio. Aiming for long wealth creation without including equities is just like trying to fire a gun without bullets in it!?
So, just shrug off whatever biased opinions or hearsays you come across when it comes to investment in equity mutual funds. Keep in mind that the volatility associated with?equities?is high only in the short term and not the long term.
Remember that, over several decades, equity as an asset class has been significantly outperforming both inflation and fixed income instruments like bank FDs, debt funds, PPF etc by a wide margin over the long term. That's exactly why it is the most suitable asset class for achieving long-term financial goals like retirement, child¡¯s higher education/wedding, etc.?
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Yes, you read that right. The absence or inadequacy of an emergency fund is capable of harming your investments as well. Wondering how? Let's put this straight for you.
I hope you remember the past two years wherein the pandemic showed us how life can come to a standstill, people can suddenly lose their jobs and livelihood, and struggle to even pay for day to day necessities.
Such adverse circumstances in life can strike any day, anytime and in front of anyone. So, instead of living in fear of what the future holds, isn't it better to plan and remain ready to tackle it, come what may. That's exactly what?emergency funds?are for. This fund helps you to tackle the financial aspect of life¡¯s exigencies which are capable of harming your income inflow temporarily, such as a sudden job loss or severe illness.?
Note that, when your income stops due to any reason, your recurring or mandatory expenses would still continue to be incurred and get piled up. So, isn't it imperative to maintain this fund for such rain days??
Ideally, your emergency fund should amount to at least six times your recurring monthly expenses like EMIs,?rent,?SIPs, utility bills,?insurance premium?etc.?
Now, coming back to how all this impacts your investments. Imagine a financial exigency strikes and you need urgent funds not just to tackle that exigency but even to meet your day to day expenses as well, besides having to continue debt repayments like loan EMIs and bills like credit card and utility bills.?
In such adverse circumstances, you would in all likelihood be forced to redeem your investments as well, right? And such premature withdrawals can not just attract penalties, but can even result in you sitting on a pile of losses if your market-linked investments had to be redeemed during that time when your portfolio was bleeding red.?
Hence, to avoid harming your ongoing investments and continuing debt repayments plus recurring regular expenses, it's best to create and maintain an adequate emergency fund. Don't treat it as an option, but necessity!
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