15 Mistakes to be avoided for Healthy Financial Future

             

15 Mistakes to be avoided for Healthy Financial Future

What are some of the mistakes of Indians that are destroying their financial lives? This Independence Day we are Sharing 15 Mistakes to be avoided for Healthy Financial Future.

1.       Buying insurance policies for investment purpose: Have you invested your money in insurance plan to get a return in future? Big mistake! Out of 100 people I have spoken, 95 have made this mistake.. Very few people understand the difference between term plan, endowment plan, etc.

2.       No idea about the power of compounding: Everyone has come across the formula of compounding but very few people really understand its power like Mutual Funds, etc. This is the reason people do not start saving early and hence lose out on the power of compounding. Albert Einstein said that power of compounding is the eighth wonder of the world.

3.       Buying stocks based on tips without any knowledge: You will find every Tom, Dick and Harry giving stock tips over Facebook, Whatsapp and TV. Unfortunately, a lot of people fall in a trap of these people and invest money without any knowledge. What is the end result? They lose everything!

4.       Becoming a victim of lifestyle inflation: Moving from 2bhk to 3bhk just because you have got a good hike, upgrading your car because you have got some bonus are some of the examples of lifestyle inflation destroying financial lives.

5.       Buying things just because they are on discount / Spending a lot of money on fancy stuff: From Amazon’s “Great Indian Sale” to Flipkart’s “The Big Billion Days”, everyone is en-cashing on the weakness of Indians buying things just because it is on discount. Funny thing is now you will find such sales every other month. A fancy car, a fancy house, a fancy watch, a fancy vacation. People want fancy stuff and willing to pay a premium irrespective of the value it generates.

6.       Spending a bomb on weekend parties: 5 days work and 2 days party: This is the new culture in India. Pubs are jam-packed on weekends where people would spend a bomb on Food and  drinks. By the end of the month, they are left with no money.

7.       No emergency budget: Not having any extra money in the case of an emergency results in embarrassing situations of borrowing money from friends and relative. Some people even break their investments and make a big mistake.

8.       No medical insurance: I have seen people losing out the lifetime savings just because they did not take medical insurance. One accident can shatter all financial dreams. Better be insured. Healthcare cost is rising and it is impossible to manage it without insurance.

9.       No diversification: Some people would invest all their money in real estate, some would invest all the money in gold, some would just keep it in the locker, some would invest all the money in the stock market. Very few people understand the right way of diversifying the investments.

10.   Buying excessive gold only to keep it in the locker: Gold worth lakhs is kept in lockers only to be used once or twice a year. This is resulting in the money getting blocked and hence not getting any returns on it.

11.   An extremely conservative approach with investment: Traditionally, people have been risk-averse. They would just have an FD and live on 6–7% annual interest. Some would just keep the cash at home.

12.   Procrastinating investment decisions: “I will invest from tomorrow”. But the problem is that tomorrow never comes.

13.   Lack of patience: “I can’t wait for my wealth to grow. I want to double my investments in 6 months. I need to invest in the stock market.” A lot of people lose their lifetime of savings because they don’t have the patience to understand the investment option and would blindly trust anyone with their investment.

14.   Depending upon others for investment decisions: “I don’t know anything about investment. Please manage my money.” Unfortunately, a lot of people are dependent upon others with their hard earned money. This is the reason we have a lot of self-proclaimed experts giving stock market tips. Consult Financial Advisor Who Have Experience and can Work on Your Financial Planning as Per Your Risk Taking capacity and Financial goals.

15.   Getting too greedy with investment: People blindly invest their money in penny stocks, day trading, futures and options. They eventually lose all their hard earned money. What is the root cause? GREED

Mehul Bheda  +91 9819592326

Email: mebheda@gmail.com

Why Small Cap Equity Mutual Funds are must for wealth creation.

Small cap stocks, i.e. stocks below the top 250 stocks by market capitalization, offer investors exponential growth opportunities. Since these stocks are under-researched and under-owned by the by institutional investors, there is considerable scope of price discovery in this market segment and small cap equity mutual fund schemes managed by good fund managers can generate considerable alpha relative to the broader market.

Small caps are the wealth creators

While large cap and midcap stocks can give good returns to investors in the long term, the multi-bagger stocks, i.e. stocks which multiply investor’s money (gives more than 100% returns), are all mostly from the small cap segment.

In the table below we are showing the number of stocks from different market cap segments which gave more than 100% returns in the last 5 years. You can see that the big wealth multipliers (5X to 10+X returns) are mostly from the small cap segment.

Why small cap stocks / funds have potential to outperform large cap stocks / funds?

Large cap stocks are concentrated in only a few industry sectors. Large cap stocks have limited presence outside Financial Services, Energy, IT, Automobiles and Metals. These 5 sectors account for nearly 85% weight in the Nifty 50 Index. Nifty stocks have virtually no presence in sectors like fertilizers, media and entertainment, services, industrial manufacturing, chemicals, healthcare services, textiles, paper etc. Sectors like chemicals, packaging, sugar and tea, ceramics and sanitary ware, hotels, logistics and construction can be played better through small cap stocks. These sectors are likely beneficiaries of a number of policy reforms enacted by the Government and have a great potential in the consumption driven India growth story.

Why invest in small cap now?

2018 was a very difficult year for small cap stocks. The Nifty Small Cap 100 index fell 30% over the year and many small cap equity mutual funds gave negative returns. It is natural that many investors may feel nervous about investing in small cap.

Small cap stocks are always more volatile than large and midcap stocks. They tend to fall more in market corrections, but they also bounce back stronger from the lows

Though Nifty Small Cap 100 index has recovered nearly 19% from its 52 week low, it is still nearly 30% lower than its all time high (made in January 2018). The examples discussed above shows that 25 – 30% correction in small cap provides a base for a strong recovery. Based on the historical precedence, current small cap prices may provide an excellent investment opportunity for wealth creation in the long term.

Point to Remember.

• Advisable for Long term Goals like Child higher Education, Retirement Planning & Wealth creations.
• Investment through SIP/STP is advisable.
• Strictly for High Risk taker Investor, Conservative Investor stay away with High Volatile Small cap Funds.
• Consult Financial Planner before investing in this space.

Mehul Bheda - 9819592326 | mebheda@gmail.com