7 investment lies you might be believing and how to avoid them
This is a big one! Investing can actually be quite straightforward. There are options available that allow you to get started with just a little money, and you don't need to be a financial expert.
Chakrivardhan Kuppala is Co Founder & Executive Director at Prime Wealth Finserv.
Have you ever felt a little lost when it comes to investing? You're not alone! Many people struggle with myths and misconceptions that can make investing seem confusing. These myths can hold you back from reaching your .
This guide will help you see through some common investing stories that might not be entirely true.
Myth #1: Investing is only for the rich and requires a lot of work.
This is a big one! Investing can actually be quite straightforward. There are options available that allow you to get started with just a little , and you don't need to be a financial expert. Remember the story of ?
This legendary investor proved that a simple plan, like an S&P 500 index fund, can be very successful over time.
Myth #2: Saving all my money is enough for the future.
Saving is a great habit, but inflation can slowly chip away at the value of your money over time. Think of it like this: if inflation is 5% and your savings account offers a return of 3%, you're actually losing buying power each year. To build wealth and reach your long-term goals, you might need to consider different options for your money, like stocks, bonds, or .
Myth #3: My Provident Fund will take care of everything when I retire.
While your Provident Fund is helpful, it might not be enough to cover all your expenses after retirement, especially since people are living longer these days. Let's imagine someone who starts working at 30 and earns Rs. 50,000 a month. To maintain their current lifestyle after retirement at 85 (assuming inflation is 5%), they might need around Rs. 4 crores. However, their Provident Fund might only accumulate about Rs. 1.9 crores by retirement. This shows why it's important to consider additional ways to invest for your future.
Myth #4: You need to predict the market perfectly to be a good investor.
Trying to guess exactly what the market will do can be stressful and might not be the best strategy. Instead, focusing on investing consistently over a long period, even during market ups and downs, can be more beneficial. For example, if you had invested in a popular index fund like the NIFTY 50 throughout the past 20 years, even if you only bought at the highest points, you would have still earned a good return (around 10.8% annually). This shows that staying invested for the long term is more important than trying to time the market perfectly.
Myth #5: The more investment funds I have, the better.
Spreading your money across many different funds isn't necessarily the best approach. If all the funds you choose are similar, it might not give you the kind of protection you're looking for. The key is to have a variety of investments across different categories, like stocks, bonds, and real estate. A well-diversified portfolio might only need 3 or 4 carefully chosen funds to help you manage risk and reach your goals.
Myth #6: A lower investment fund price means it's a better deal.
The price per unit of a fund (NAV) shouldn't be the only thing you consider when choosing an investment. What matters most is the percentage return you get on your investment. Whether you buy a unit of a fund at Rs. 10 or Rs. 100, as long as the percentage return is the same, your overall profit will be the same.
Myth #7: Life insurance is a good investment.
Life insurance is a valuable tool that can help protect your loved ones financially if something happens to you. However, it's not the best way to grow your wealth. Term life insurance provides a large amount of coverage for a low cost, while investment-linked insurance policies might offer lower returns and less protection.
It's better to keep your insurance and investment strategies separate. By using investment tools like mutual funds, you can focus on growing your money for the future.
By understanding these common myths and making informed decisions, you can take control of your financial future and feel more confident about investing. Remember, knowledge is power, and with the right information, you can navigate the world of investing without getting lost in a maze of misconceptions.
(Chakrivardhan Kuppala is Co Founder & Executive Director at Prime Wealth Finserv. Views are own)
Source: Stocks-Markets-Economic Times
