4 SHOCKING reasons you’re not investing your money wisely and the DAMAGE it can cause your wife and kids!

4 SHOCKING reasons you're not investing your money wisely and the DAMAGE it can cause your wife and kids!

Ah, the smell of freshly brewed coffee in the morning combined with the radiant and content look on your wife’s face is a great start to your day. Think about it – how would it feel if you had to wake up to an always worrying face of your wife, not good! Apart from lots of love and care, there is something else that will ensure that her contentment and peace of mind are here to stay – the financial security of the family, in which your investments are a key player.

You must remember that when it comes to investing your hard-earned money, there are few universal truths that you can rely on.

Here are 4 reasons why you may not be investing your money wisely –

1) Your Investments Lack Diversity 

Have you heard the phrase about not putting all your eggs in one basket? In a financial scenario where you invest all your money in one instrument is a very bad idea. For example, if you have invested all your money into equities, which is a very volatile investment option, then you are in trouble. If the markets suddenly head south, all your hard-earned money can be wiped out. Similarly, if you only invest in safe avenues like fixed deposits, then your returns will suffer. While they may be low risk, the returns fixed deposits offer might be too low for you to be able to fulfil your family’s dreams.

What you can do –

Balance your portfolio by investing in multiple avenues like equities, bonds and fixed deposits, depending upon your financial goals. For example – You can choose to invest 30% in equities, 20% in fixed deposits etc.

2) You have Debts

Debts are a major obstacle to your financial goals. To maximize the benefits of wealth appreciation, you need to make sure that you are free from any debts. Any loan that you may have taken – home loan, car loan or education loan, focus on clearing it up at the earliest. Else, in the long run, you could miss out on the compounding returns that your corpus could be earning.

What you can do –

Avoid taking loans to invest (except home loans if you’re looking to make a wise purchase on that front). Also, assess your goals and needs to understand if you really need that personal loan for that swanky smartphone or car.  Maybe you could purchase an even better model a year later when you get that raise? Planning and prioritizing is key here.

3) You are not investing in the right insurance products

Insurance is as important as investment, not having an insurance plan (be it health or life) can be a serious impediment to your family’s financial security. How will your family manage with their expenses, should you pass away in an untimely manner (especially if you are the sole breadwinner)? Having an insurance plan will ensure that your family will not face any hiccups in your absence. In addition to having an insurance plan, you also need to make sure that it’s the right one for you. Say if you are investing in an ULIP, which offer the dual advantage of insurance and investment, you need to make sure it’s the right kind of product. Investing in a product that is not suited to your financial goals is a risky maneuver.

What you can do –

Go through the scheme documents carefully before starting a plan. You can also compare various plans on the internet and choose one that meets your requirements.

4) You have a single plan for all your goals 

Let’s start with an example – say you want to buy a car in a year’s time, which is a short term goal, then you should ideally invest in liquid funds like short term funds. If you planning to build a corpus for your retirement, which is long term in nature, then you should invest in something like equities or mutual funds.

What you can do –

Define and prioritize your goals according to long and short term. Once you have demarcated your goals clearly then you can choose your investments accordingly.

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