If you don’t have a purpose, your investment behaviour will be driven by market movements and not by the need to achieve your financial goals
Having an action plan and sound investments that suit your financial goals is great. Kudos to you for taking charge! But there might be a few things that you’ve been doing unknowingly which, could have a negative impact on your investment journey and the fulfilment of your goals. Here are 5 bad investment habits that you need to break right away:
1. Investing in “Get rich quick” schemes
Make sure to stay away from such schemes. Investing in an asset class such as equity mutual funds is a long term journey where letting your money grow and compound results in wealth creation. Thus, if you are investing in mutual funds for your goals, stay invested for the duration of the goal.
2. Not making an investment budget
Budget isn’t necessarily just for your day-to-day expenses or vacations, it can help bring clarity and discipline to your savings and investments too. The golden rule here is to ‘invest before you spend’. To spend your money guilt-free, make sure the first thing you do on payday is investing.
3. Investing for returns only
Investing without a purpose will do more harm than good. Your purpose could be anything and for the short term or the long term. But you need to know what you are investing for when you get started. A goal can be as simple as “to make me rich” to as specific as “for my daughter’s higher education in XYZ university in the USA after 18 years”. If not, your investment behaviour will be driven by market movements and not by the need to achieve your financial goals.
4. Giving in to family or peer pressure to invest
Friends, family, neighbours, and uncle-aunties will all claim to have the best advice. But is their advice suited to your goals? Invest some time in finding out. If the answer is no then refrain from acting on it.
5. Delaying investing for retirement
Retirement might seem like a distant goal. But the corpus you’ll need is huge. Keep in mind inflation and that life expectancy post-retirement could be more than 20 years. Thus, starting early is crucial. Starting an SIP of just Rs. 5000 every month now could help you accumulate a corpus of a little more than a crore in 20 years with a suitable portfolio of equity mutual funds. If you’ve already started, then be sure to periodically track your portfolio’s performance.