Avoid these 5 mistakes when managing money

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  1. Never assume that what is delivered in the past from the asset will continue in future
    • Classic example in todays age is Snap Deal story , investors lost tons of money and these are seasoned investors and the who’s who in the investment banking & startup funding  , not every investment works the way the prior investment decisions worked , taking cues from this we see umpteen number of decisions being taken which have been on the same principle past is the guarantee for future performance .
    • Asset Allocation therefore plays pivotal role in money management , there are always two sides to the coin when you take a concentrated asset exposure . Avoid this mistake and you will sail through .
  2. Never undermine risk management when managing investment
    • Investment Decisions in stock look fashionable from outside but there is no gain without pain this holds in every facet of life and Investment is not different .
    • Often stock market success is seen as a heroic event , look at telecom industry once this industry was termed as a sunshine industry , imagine your portfolio having major exposure in telecom stocks today , you know the answer , risk management is more about spreading the exposure in a manner which does not allow one single investment or industry to pre-dominate the portfolio return .
  3. Never think Insurance as an Investment 
    • Insurance is only meant to come in force on a contingency , look at your car insurance , have you heard that the car company pays your premium back plus accrued profits if you don’t hit the car .
    • Often people fall prey to relationship managers from the bank who work on targets to sell insurance , all the creativity in making it look fancy goes into it .
    • Keep it simple just avoid these mistakes and you are good to go . Get a plain vanilla term insurance and your job is done .
  4. Never keep tax saving at the core of every decision you make for Investment 
    • Classic example is the housing decision , more houses are bought to save tax than to stay , and government knows about it .
    • laws changed and the attractiveness is lost in a second
      • Deemed income on rent if owning more than one house in your name
      • Max 2 lacs allowable as deduction , rest keep carry forwarding
      • Capital gains is 2 years from 3 years
    • What to do now
      • put your house on rent
      • sell your house if rental yield is not attractive so is in most cases
      • over supply restricts future growth in this asset , everything revolved around growth
  5. Never copy paste solutions what others have adopted make it work for you 
    • Look at your life situation , don’t copy paste , ask yourself a question , do you ever buy a clothing without looking at the size , colour , shape , style , appeal . Then why investments or any money managing decision , you are unique and you require a unique solution , each case is different , avoid falling prey of salesmen out there who pretty much bucket you in a life stage and tell you the solution without paying attention to factors required to be analysed before an investment advice is given and before you take and consume .
    • Avoid this mistake , always ask why before you take a leap

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