Investment decisions are made depending on various personal factors like short-term, long-term goals, risk appetite, and other wider factors like market conditions and so on. However, there are certain investment actions that can negatively impact your investment portfolio thereby hampering your wealth creation process.
Read on to know the 5 mistakes that you can make that can hinder your wealth creation:
1. No spending and investment plans
Planning your expenses, savings and investment is necessary if you want to know how your investment portfolio should span out. So, have a vision and set clear goals in terms of both spending and investing. For instance, your salary is 50,000 INR and you need to save at least 30,000 INR to meet your retirement goals etc. but if you spend 30,000 INR, this will have severe repercussions on your investments over the long time frame.
2. Overspreading the risks
Any experienced investor will suggest you not to invest only in one investment avenue. But, going overboard with the diversification will again affect your investment plans. For instance, if you invest in mutual funds but your plan includes investing in 10-20 or maybe more mutual funds, then some of your investments can cancel out the others thereby bringing your overall returns down. Instead, chalk out a properly balanced plan and consider spreading the risks across small-cap, mid-cap, large-cap, stocks, debt funds, etc. depending on your goals. Consulting an advisor is usually the best way forward. This brings us to the next point…
3. Professional insights
As a beginner or someone who invests once in a while, depending on market conditions, you can end up making blunders while investing. Professionals have good technical knowledge, are well-equipped with market research, and have the ability to keep emotions at bay when investing. At the end of the day, you cannot do away with the market volatility but experts can handle your investment portfolio with prevailing market risks and hence they are called experts. So get in touch with experts.
4. High-interest high-amount loan obligations
While it is true that taking loans to purchase a car, home, etc. is necessary, taking loans with higher amounts than actually required or opting for loans with higher interest rates without researching can affect you in the longer run.
Say, for example, you take a loan to buy a home at a higher rate or higher amount than required, for 50,00,000 INR but your actual requirement is only 30,00,000 INR. Besides, you choose an interest rate of 15% instead of 7% for 20 years. You will end up paying 1,58,01,474.9 with interest of 1,08,01,474 instead of 55,82,152.3 INR with interest of 25,82,152 INR.
6. Living without emergency corpus
Creating a reserve for contingencies like medical emergencies etc is important otherwise you will exhaust your investment sooner than planned. Set aside some funds from your savings for emergencies like this.
So, don’t simply invest and forget your investment portfolio. It is advised to regularly keep a check on your investments to ensure they are performing as expected. On the flip side, don’t even keep trading and checking so often that you end up making mistakes. We hope you will avoid these common mistakes that can negatively influence your investment portfolio. Should you have more queries, please feel free to contact us.
