Popular investment myths busted to help you plan finances better
Investment gurus, analysts and even your neighbours will always present can’t-go-wrong scenarios when it comes to investments. The problem? They invariably go wrong. The problem lies in oversimplification. And in the complex world of financial investments and number crunching, simplicity is as big a myth as these 5 myths we’re here to bust. Take a look and begin your journey towards being a smart and prudent investor.
Myth 1: If You Are Not into Equities, You’re Missing Out:
After hearing stories of major returns, have you ever thought to yourself, ‘How I wish I had bought stock in company A or B”? You should actually be asking yourself whether the stock market is a veritable gold mine. The answer is not always. Stock markets come with their inherent problems and if you’re not a financial whiz, you may end up losing a lot more than you thought possible. Yes some companies have given 20% returns, but these are seldom consistent and if you cannot decipher which are the right picks but go merely on hearsay from your friends, relatives and neighbours, your journey could turn into one of repentance.
Myth 2: Real Estate Is Where True Wealth Lies:
Are those who bought that penthouse up on the hill with a view of the sea five years back richer today? History teaches us that it is not necessarily so. Consider this: The IMF, in its World Economic Outlook 2003 reported that output losses from real estate crashes are worse than those faced in the stock market. The bitter reality about investing in realty is that real estate prices have not increased and the number of unsold inventories is on the rise. So when you invest in real estate, be careful about where, when and why you’re doing it.
Myth 3: Invest in A Sector That’s Trending Right Now:
The chatter of where you should invest in and how much you should invest is deafening. When the dotcom bubble of 1995 burst in 2001, many had invested in IT firms thinking that they would cash in on the profit they thought companies with a .com address would make. How does one decide which is the ideal allocation to be made considering that we are constantly bombarded with reams of data? Today gold may be touted as an ideal asset class, but by the time you pick it up it will have lost its sheen as an investment avenue to consider. So rather than going for long-term high-value investments in sectors that are just seeing a profit, be careful, study the market and invest with caution.
Myth 4: Retirement Planning Is for After Age 60:
Today you could land one job and tomorrow be asked to relinquish it. Whether your company needed somewhere younger, someone with a different skill-set or someone that’s simply not you, getting laid off has become a common scenario today. A staggering 1.2 crore youth apply for jobs every year. India’s Labour Bureau reports that only 1.35 lakh jobs were created in 2015 and 4.93 lakh in 2014 across eight sectors. If you juxtapose the job demand with the employment supply figures you could be on the highway to retirement well before you touch 60. So do not always bank on the myth that you will work until you are a senior citizen and that your job till then is there to stay. Reap the rewards by staying invested regularly in safe options.
Myth 5: Guaranteed Rewards Abound:
Are you always planning investments with an ROI calculator? That’s both good and bad. Jumping the gun and seeing returns makes many of us make the wrong decision. Like all things in life interest rates are variable and therefore uncertain. The uncertainty is even more palpable in small savings where the interest rates keep bobbing up down depending on which direction government policies flow. Sometimes they could favour the borrower; other times, they could favour the lender.
If you’re wondering how to plan your investment portfolio, don’t be disheartened. You could end up making good choices on a variety of investments, be it in stock markets, real estate or a talked-about sector today. But the only way you’ll be entitled to a promised return is on a fixed deposit. So choose an FD with a good interest rate in the tenure of your choosing and make sure that it is a part of your portfolio.