This Valentine’s Day, we at Finserv MARKETS have decided to reach out to our customers and highlight where they go wrong multiple times when it comes to money.As an intelligent investor, you need to develop investment habits that can help you save more and avoid too much debt. Even the smartest of investors can develop bad money habits due to which they end up facing financial problems.
Explained below are some examples of bad money habits that you must avoid at all costs.
1. Investing in stocks without proper research
The recent fall in stock prices has resulted in losses for small-time investors who blindly invest in stocks without proper research. Pradip Mahato, a Mumbai-based investor, learnt his lesson only after losing about INR 1 lakh in some blue-chip stocks. What saved him were his other investments, which included mutual funds. Currently, these types of investment avenues are performing better than stocks.
2. Investing in too many funds and stocks for diversification
Hitesh Deshmukh, an IT professional from Bengaluru is a serious investor who opts for only the best-performing funds. However, he has just realized that his portfolio includes over 30 stocks, and it has become a cluster. Now, Hitesh is finding it hard to manage the portfolio. Here, the lesson is that investing in too many stocks or funds is counterproductive and is one of the bad money habits to be avoided. Modern portfolio theory states that 15 to 20 stocks from different sectors can reduce the portfolio risk.
3. Not saving for an emergency
You must learn the importance of saving money before it is too late. Ankita Das from Kolkata had faced such a scenario. She used to spend most of her income on shopping, travelling, and some investments. However, she never thought of collecting personal savings, until one night when she had to be hospitalized with serious stomach pain. Without any savings or a health insurance plan, she ended up in huge debt. Do not make the same mistake she did.
4. Buying insurance for tax savings purposes
Blindly investing in traditional insurance policies for tax-saving purposes might financially hurt you in the long run, as they do not offer adequate cover. To avoid this problem, you can consider investing in Unit-Linked Insurance Plans (ULIPs). However, the ULIP benefits are not sufficient for older investors, as they do not get enough time to build up a fund.
On the other hand, Sankalp Trivedi, a 32-year-old individual from Delhi, will definitely benefit from his investment in ULIPs. By the time he retires, he can build a huge corpus if he invests in a suitable ULIP for a long period. Therefore, to enjoy the ULIP benefits, you must start investing from a young age.
5. Venturing without proper knowledge
Mrs. Sengupta from Pune has recently stepped into muddy waters when her sales business faced legal trouble for not meeting certain regulatory standards. She has lost her regular income and the money that she invested in the business is stuck. This is a result of her starting a business without proper knowledge of its sector or knowing its viability. Never make this mistake with your money.
6. Ignoring your debts
Rahul Roy from Bengaluru was recently surprised with a huge credit card bill, which was a result of unpaid debts he had accrued over the previous few months. His brother was using the card without Rahul’s knowledge, and the unpaid amount has attracted huge penalties. You must always keep an eye on your debts.
Keeping this in mind will prevent you from committing serious financial mistakes.
Looking for a smart investment option? Get in touch with us and invest in a ULIP to reap the benefits of life insurance, returns on investment and tax-saving opportunities as per Section 80C and 10(10D) of the Income Tax Act, 1961.
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