When it comes to personal finance, most of us usually lock up all our cash in a Savings Account. Even the well-paid lot are averse to investing, keeping their money stashed away in a Savings Account.
Though keeping one’s money in a Savings Account is a safe option, it will earn very little interest compared to the other options. The returns usually are not even enough to beat rising inflation rates. In that case, why aren’t these high-earning individuals not opening up to investments?
This mentality could be due to the surplus investment choices out there. It is common for people to avoid making a choice when there are a lot of options to choose from. The reason is that they don’t want to end up making the wrong choice.
Also, most people are afraid of making mistakes. What if they make an investment and later realise that there was a better option? Therefore, some people feel that it is better to let things be as they are. So, they let their money lie in the bank even if it is not earning much. At least it is not losing value because of any investment error.
Who is most affected by this syndrome?
Well, the people who fall in the age group of 40 to 65 years (Source: Economic Times). The rise in incomes, that we see today, is more of a recent occurrence. The people that fall in the above-mentioned age group may have been born and brought up in a rather inflated and deprived environment.
But today, people have access to a lot of wealth – many earn way more than they can spend. Yet, they are still not open to the idea of investing. They still maintain a conservative stance when it comes to spending and investments. Everything boils down to confidence and caution.
So, what should people do to get rid of their fear of investments, build confidence and practise caution at the same time? Here are a few quick tips to follow:
Past is history
Investment mistakes you have made in the past should not determine your present decisions. If you are still working and retirement is not anywhere on the horizon, then you still have a lot of time to make up for past mistakes and invest and grow your money.
How to get started? First, choose an investment intermediary to help you with your investments. There are a plenty of options, like automated ‘robo’ advisors, personal advisors, tech platforms, Internet operations through your bank, etc.
No complications, please
Your investment decisions should not be complicated. Out there, people are going to tell you that you must set your goals and invest in a variety of products each dedicated to a specific goal. But, it is better to un-complicate things and start by focusing on just one goal – to grow your wealth that is parked in your Savings Account at a rate that beats inflation. If you manage to do this, you will be able to fund all your other goals easily.
Typical formulas don’t work for everyone. For example, if you already save half your income and have more than enough money in your bank to buy a new house, then you will just have to focus on growing the money in your bank by investing it wisely. You get the drift here, right?
Create an annual investment plan for yourself. At least four to five investment products should be a part of this plan. If you are not confident enough to make this decision, you can always take the help of your investment intermediary – financial advisor, banker, broker or platform.
Make sure that you nag your intermediary for thorough information about an investment. Don’t forget that you are paying them to do this job. Apart from that, you’ve got to do your own research and make comparisons if you don’t want to end up investing in dud products.
For example, when it comes to equities, you need to check the long-term performances of funds rather than just the immediate performances. Make your decision only after considering and carefully analysing the investment product.
Also, you need to review your plan every year (that’s why it is called an ‘annual plan’). And do not hold more than 10 different products in your portfolio at a time.
Now that you have already chosen the best investment products, stick to them. You may be tempted by new products with big promises. Or your funds may not be performing very well. But, always remember that you had chosen these products after much deliberation.
So, don’t give in to the temptations and stick to your plan, as long as it makes financial sense. Consistency matters!
If you think that a particular new investment product is worth considering, you can think about it further during your annual review.
Whenever any new product hits the market, it will come with a lot of promotion, advertisements and public discussion. Don’t let these get the better of you. Rather wait till the product proves itself in the market and only then should you consider putting your money in it.
On a final note…
Money lying in a Savings Account isn’t going to help you build wealth. If you want to grow your money, you need to invest in the right products. Investments may seem scary at first. But with a little caution and the right help, you will be able to get rid of your fear and become a pro-investor. All the best!
If you want to get started with your investments right away, sign up as an investor on our website now!
This article was contributed by Sanesh Mathew.