5 investment mistakes to avoid in 2017


Want to know what investment mistakes to avoid in 2017? Looking for best tips on financial planning for 2017? Many of us have taken various resolutions for this year. Let us also take a resolution not to commit mistakes which would hamper our wealth creation. This article discusses five such mistakes which are to be avoided as well as a few useful tips on planning your finances wisely.

We learn from others and our own mistakes. Not only that, some momentous events teach us many lessons. Demonetization along with cancellation of currency notes of Rs. 500/- and Rs. 1000/- is an event which has taught us many lessons. We have learnt the importance of online transactions from this event. From the various events of 2016, common investors must learn some lessons for better financial management in 2017. They must avoid making some common mistakes. These are discussed below:

Don't make the mistake of not preparing expenditure budget

Without a monthly budget, it is not at all possible to understand our expenditure and the trend of the expenditure. Every investor must make a budget at the beginning of every month. In the budget, provisions must be made for various quarterly, half-yearly and annual payments. For example, the school fee of my daughter is required to be paid quarterly. But I have to make monthly provision for this purpose so that at the end of the quarter, I do not have to face much financial difficulty to pay the hefty amount as school fee. Along with making of budget, it is also very important to stick to that budget so that our expenditure does not go out of our limit and we do not fall in debt trap.

Don't throw away money on items which you don't need

Whenever we go for shopping, we get attracted by various items which we do not actually need. As a result, we purchase these items causing our shopping budget shooting above the roof. The investors must restrain themselves from splurging on unnecessary items. Instead they must save and plan for a beautiful family holiday once in a year. The annual holiday will rejuvenate them. Unnecessary shopping also causes taking loan from banks and other financial institutions, which is not at all necessary.

Don't make a mistake of not having an emergency fund

Human being is not powerful enough to know his/her own future. We do not know what is going to happen in our life. An accident may happen. Some of the family members may suddenly become ill. We may have to go to a distant place to attend some relative's marriage. All these require cash. For this purpose, a provision is required to be made. Every investor must set aside certain amount every month and preferably put it in a liquid mutual fund, so that this amount can be utilized during emergencies.

Avoid the situation of not having adequate insurance

Many of us make a major mistake regarding insurance. We take insurance as a vehicle for investment. We must remember that insurance is not an investment vehicle. Insurance is only a protective umbrella which protects us during unforeseen circumstances or protects our family members in case of our death. Every person, especially the young people between the age of 25 to 35 years, must take a term insurance of adequate amount (Rs. 80 lakh to 1 Crore) to financially protect the family members in case of his/her death. If a person takes a term insurance during 25 to 35 years, he/she has to pay a negligible amount of annual premium to get a term insurance of Rs. 1 crore.

In addition to the term insurance, we must take health insurance for the entire family, which would take care of financial needs in case of sudden hospitalization or accident. The health insurance is especially necessary for such persons whose offices do not provide such facilities. Health insurance gives additional tax benefit under section 80D of Income Tax Act. It is advisable to take family floater health insurance to cover the entire family.

Avoid the mistake of trading in stock without knowledge

Stock trading is a risky business. It makes a person unbelievably rich. At the same time, it can make a person pauper. Most of us don't know how to evaluate a stock, sectoral economy, country's economy and the world economy. We purchase stocks according to unscientific advises reeceived from friends, relatives or so-called experts. This behaviour is a sure recipe for disaster. So, nobody should trade in stocks without adequate knowledge. However, for creation of wealth, it is necessary to invest in stocks. So the investors must invest in good quality equity mutual funds, where the stocks are purchased after detailed research.

In a nutshell

Common investors generally invest to fulfill various needs and also for comfortable retired life. For this purpose, wealth generation beyond the rate of inflation is necessary. For investment, saving is necessary. For saving, budgeting is essential. On the other hand, we must take term insurance and health insurance to protect us and our families during unforeseen circumstances. Investors must remember these basic facts before investing. Remembering these basic facts would help the investors to comfortably sail through the turbulent financial ocean.

Happy investing in 2017!


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Comments

Author: Venkiteswaran10 Feb 2017 Member Level: Diamond   Points : 2

A good and compact article dealing on various matters, wherein people tend to commit mistakes due to ignorance or over confidence. It is presented as a crisp single article, but each sub titled para can have worth of separate article .

The article has dealt in Insurance, stock market, contingency fud, budgeting, savings and recycling in one single article. The lesson are obvious and self explanatory.
This article plus a read of the linked articles in related sources can be of good help for those who need to have a planned budgeting, investment, provisioning and savings.



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