What Mistakes Investors Must Avoid

Many people believe that investing is that science which they can’t understand so they never try to enter into it or even try to understand it. Many people also say that one should invest their hard earned money in equity and must forget about it afterwards, so it gets compounded and grown in a longer term. But a common investor has some shortcomings, he or she can’t wait without observing it once in a week or in a month. Which makes him or her anxious about their investment.

I always believe that investment is for building wealth. But many people don’t have that sort of patience so I suggest them to take investment as a second source of income and they should work towards that.

Along with investments there are certain common errors that investors who are both beginners and seasoned make. I have also made some of these mistakes but learnt from them and never repeated these mistakes. As the cost of making these mistakes are big. They are common and often ignored but leave a mark of adversity. Let us see a few common investment mistakes that investors make.

1.) Waiting for right time: Many of my well earning friends stay away from investment. They believe its not the right time to invest or they will wait for couple of years or they have their own constraints or excuses for not investing. But they never realize that time never stops for anyone. In investing it applies very well. Investing only ask from you is time. If you give it enough time then it will give you good returns.

Small amounts can compound in to big sum of money if invested for a long period of time. Investors also make the mistake of thinking they can always invest lump sum amounts and make up for the loss of time. Unfortunately the science of compounding does not work in that manner.

Hence, there is no time like the present to a make an investment. Investments can be started with as less as र 500 per month. Hence, start now because you are living in the right time.

“Do not wait; the time will never be ‘just right.’ Start where you stand, and work with whatever tools you may have at your command, and better tools will be found as you go along.” – Napoleon Hill

2.) Investing only for Tax Saving purpose: Many of my fiends invest only at the time of tax saving and at that moment they invest a lump sum amount in different schemes. Most of the people go for the LIC plans because they believe its the best scheme they can have which can grow their money and they never try to really calculate the actual return which one LIC scheme is providing. I have seen people with multiple of LIC policies and they are happily investing in them without worrying about percentage of return on their investment.

Many people think that mutual funds are bad and they can loose money in it since they take it for lesser period of time. Compare it with LIC, they are ready to stick for 10-15 years with LIC schemes but in ELSS which has only 3 year lock in period they try to take the money out after completion of the lock-in period. If only, they are patient enough to keep their money in ELSS for longer period of time; they can enjoy the power of compound interest.

Best ELSS schemes to invest for 5 year time period:

3.) Debt Trap: Our generation has much more financial power than any one else. If you have a credit card, bank might provide you a liberty of breaking down your transaction into several parts through the facility of EMI.

In today’s time you can convert your small and big; every transaction into EMI. A common man gets into trap and starts believing that he has more credit limit to spend in the particular year and he increases the debt trap which banks are spreading like a virus. Banks even call you oftenly to make you aware about the EMI option on your transactions. Young people like you and me have to think carefully before converting any transaction into EMI. Surely there will be some interest rate charges involved with it that is a hidden cost with processing fee but it seems so less and banks make it so lucrative that one becomes fascinated; but one must be cautious while taking such decision.

4.) Insurance: In today’s time medical and education are two fields where inflation is around 20%. For small operation hospitals are charging huge money. Surely, we are becoming sound economically but the expenses are increasing in much faster rate. Most of the people in India have insurance which is not pure insurance; they have schemes which come with little money and very little insurance. Therefore most of the people in India are under-insured or uninsured.

I believe every one should have a Health Insurance and a Term Plan. Health insurance can be helpful to you in case you face some disease or accident; it will cover up all your expenses. Surely you have to check the terms and condition of scheme due diligently. Whereas, Term plan will be helpful to your family in case something unfortunate happens to you; then your term plan will help your family in financial aspects.

Investment is a rigorous process that requires the investors to take active part. These are the very basic and stepping stones for your well being in long term. You must keep in mind that life is not about short term happiness, you must consider and see it as an investment for your long term well being. By following the above guidelines, surely you will be among 10-20% people who are joining hands for financial freedom.