Although we are still at an average level of financial planning, it’s easy to point out certain financial mistakes(decisions) which could have been taken or avoided or done differently to be at a better position now. We hope that this information would be helpful to others.
Not investing early
While I started my career in 2007, my investments started in 2010. In these three years, I could have saved and invested some amount from my salary which would have added significant value to my current assets due to the magical effect of compounding.
Learning: While its OK to splurge on the freedom and lifestyle that comes with the first job, one should target to invest at least 5-10% of the earnings. The % will surely go up with career growth and experience in managing the investments.
Lack of curiosity
When I started investing, FD and RD were the only instruments that I was aware of. Although terms like equity, real estate, mutual funds, share market, bitcoin etc. came up frequently in discussions of colleagues or relatives; I never had a curiosity to understand them in detail. Thus, many opportunities were lost due to my lack of curiosity.
Learning: If one is serious about financial planning, gaining insights on the different types of investments is a must do. To invest or not is then one’s own decision based on evaluating the pros and cons. Also, we should not hesitate to ask for help from people who have the knowledge and experience.
Risk Aversion
In the majority of the cases, young bachelors who are in an early phase of their careers would have fewer liabilities and hence can take higher risks for higher returns. However, I shied away from instruments like equities, bitcoin etc. and lost great opportunities as the time was right.
Learning: One has to take higher risks to get higher returns.
Investing in ULIPs
Investing in ULIPs was not a mistake, it was a blunder. They have exorbitant charges and do not provide significant insurance coverage. I was too late to understand this theory. I surrendered my ULIP after paying 5 years of premium(40,000*5) with zero profit or loss.
Learning: Keep insurances and investments separate. Buy term and medical insurance as per your family needs.
Not contributing maximum in PPF
I started my PPF account in 2008. Although my father advised putting the maximum amount(1.5L) each year, I contributed the amount which was required to complete the limit of 80C after EPF and ULIP deduction. Although I’ve been investing the full amount since 3-4 years now, it decreased the returns that could have been reaped by investing fully.
Learning: If you can, invest maximum amount in PPF. Compounding will do wonders to your returns which will also be tax-free.
Investing/trading in the stock market without research
I started investing in Stocks from Aug-2017. During the FY 2017-18, I made some profit(~Rs. 40,000) and became overconfident with my strategy(probably beginner’s luck). Without doing any kind of research on stock recommendations, I invested and traded carelessly and suffered significant losses (Rs ~ 2,00,000). I’ve stopped adding any more stocks to my portfolio for now until I’ve enough knowledge of how the system works.
Learning: If you want to be successful with the share market, do proper research before jumping in.
Which financial mistakes do you regret most? Please share in the comments section.
No comments:
Post a Comment