I am not sure whether the Internet and especially Google have done harm or good for the investing community. I see a bunch of self styled (or even qualified with great sounding and little meaning degrees) take some anecdotal examples and write about personal finance. I daresay that personal finance, portfolio management, investing are the most abused space on the net.
No. I am not saying that going to a personal finance adviser or expert will help. Neither am I saying that you need to get yourself a PhD in personal finance.
I am just saying ‘Please, please, see the pathetically poor quality of personal finance that is available at an atrocious price – not in terms of rupees, but in terms of what damage they can do to your portfolio’. If you do not know that, God bless you.
Now let me go about doing my job of the worst OR CRITICAL mistakes that I see:
1. Going to an ‘expert’ who actually messes up your portfolio. This could happen online or offline.
2. One ‘expert’ took money from a friend – fees for helping structure the portfolio – and then vanished.
3. Overconfidence of status quo: ‘Subra it has worked for me in the past 4 years, so it will work for the next 40’ – why a 55 year old with limited means will hold on to a 80% real estate portfolio. His financial planner is happy tinkering with his small mutual fund portfolio and charging a Rs. 7000 per annum charge – I have no clue for what 🙂
4. Trust and Control: Many people – especially older people – are in a completely ‘I trust my planner and he is in control’ mode. I think if you do not participate, many planners have an amazing ability to destroy your portfolio. I see tons of damage already.
5. I do it myself : People who have now learnt that they can invest directly – completely swinging based on the market channels have done much more damage! If you are trying to save 0.5% of trail fees, you better be sure that you are getting returns far greater than 1% at least! Sheer incompetence gets worse when a person is aged 69+!!
6. Excessive concentration and excessive worrying.
7. Overspending and saving too less – and having no clue what they are doing….
8. Ignoring inflation. Not understanding compounding. Double whammy for portfolio destruction.
there are of course others like assuming that one’s brain will work perfectly till they day they drop dead, cognitive bias, etc. but I thought these 8 are critical…
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