I am normally a person who likes to say ‘be careful’ rather than say ‘do not break it’. The mind always sticks to the most important word – so the ‘break’ sticks to our head. However there are a few mistakes that I have been seeing and hearing from IFAs, websites, etc. and think it is necessary to summarize them in one place. All of us have made these mistakes, so lets begin by seeing how many of them we can avoid / minimize:

  1. Optimism: this is a lovely thing to have, except when it comes to investing. When people invest in equities they have some outlandish expectation – say 28% cagr or 17% cagr. No clue who gives them such ‘lofty’ expectations. Yes, some of us have got it in the past, but hey we have perhaps just been lucky. A Rakesh Jhunjhunwala or a Vallabh Bhansali have got much higher returns, but you have no clue about the efforts and team work that has gone behind all this. A Naren Sankaran or a Motilal Oswal is perhaps capable of getting far better return, but their risk taking capacity and sheer size of funds managed puts a huge limitation to the returns. So please temper your expectations. Just because you expect less it does not mean you will not get it. Keep your expectations at a far more realistic 20-25% OVER PPF returns – so if you get 8% in ppf, expect to earn about 10-11% over  a long period of time, tax free. It can do magic to your portfolio over say 50 years like it has done for some of us early starters.
  2. Risk and Return: The fact that you take more risk DOES NOT MEAN YOU HAVE TO GET greater returns. It is not your RIGHT, it is just that the odds favor you. If if was certain, there would be no risk. Long term can mean really long term – say 13 years and you may have just lost patience after 12 years and 5 months. Be very clear that for goals that are 7-8 years equity is a good investment, but you will need a back up plan just in case it back fires.
  3. Consumerism: Buying every shiny thing on the store shelf or on amazon and flipkart are not the way to create wealth. When you feel like buying something, wait. Think of the last 5 items that you bought and what you did with that. Clearly the manufacturer and the shop keeper want you to buy all that is made and displayed. It is up to you not to do so. Investing more and for a longer period is the single, single, only route to a greater portfolio.
  4. Planners love to complicate things, ignore complex plans. Simpler plans are far superior.
  5. Inertia: Good and Noble intentions will not protect your family or create wealth for you. So get off your backside and get that Term insurance, medical insurance, provident fund nomination form, …NOW and start your investing program, NOW. If you do not believe this, see the amount of money lying in bank deposits, savings banks, post offices around the country, what can be better proof? Even better see your own savings bank account and see how much of interest has been credited. Kick ass start.
  6. Impulsive actions while in spending, investing, saving, eating, health issues,…only lead to pain later on. Learn some meditation and act in leisure. Relax, do not get bullied by bankers, contractors, salesmen, cousins, friends, television experts – by anybody. Collect all the data, and then sleep over it for a day. Take a decision to do the action after a few hours, preferably 24 hours. Do not believe the agent who says “this scheme is closing…” LIC’s agents have been using it for the past X years and doing it very successfully. When you have the money, a new scheme is born every day. Usually in a better form.
  7. Ask: Ask the people who know before you invest. There is no point in asking about contraception AFTER the pregnancy has occurred. Parachutes are to be on your back BEFORE you eject from the plane, it cannot be sent to you mid air..
  8. Greed: If you have invested in 50,000 shares of a company at Rs. 30 a share and the price goes up to Rs. 50 in 2 weeks time, great. Partial booking – of say 1000 shares every time a share jumps an X % is not a bad idea at all. It is only the owners who can ride a share from its start to end of life – like a Premji or a Narayana Moorthy can/ will do. Yes there are many theories here, but hey, greed kills more than it makes you go. Be careful.
  9. Mess: Do you have 40 items in a portfolio worth Rs. 1 crore? you are a mess. You need to have nor more than 5. Okay make it 8, but not more. So please prune the mess, and clean it up. Swachha Bharat Abhiyaan, anyone?

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  1. reg #9, some clarification requested…
    does it mean 5-8 MF schemes/shares or does each investment/savings option count? e.g. with EPF, PPF, 2 SB accts, 1 ins policy, there is hardly any space to accommodate ~5 MF schemes, let alone equities. please guide.

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