(Milcah Anila, Intern Journalist) Vijayawada: Investors are a little more aware today compared to the past. Extensive media coverage, digital tools, data access, and technology awareness are all raising awareness among investors. But, at the same time, there are still some misconceptions and misconceptions about financial planning and investment. These are not without the risk of hurting their financial planning and investments. So everyone needs to know the truth behind these kinds of misconceptions and beliefs.
Long-term loans must be paid off in advance.
The advice to save interest by repaying long-term loans in advance is usually heard. Believing this, you can repay the long-term home loan in advance and continue with the personal loan taken for a short period. But, it would be fundamentally wrong. This is because the interest rate on a personal loan is high. The interest rate on a home loan is low. On top of that, there are also income tax benefits on it. “Considering the tax benefits, the actual cost of a home loan is less than 6 percent for those who are taxed at 30 percent. It would be a mistake to repay the home loan in advance, rather than a high-cost personal loan, ”said Tanveer Alam, CEO of FinCart.
Financial advisors take care of…
For those who are not financially savvy, it is a good idea to seek the help of financial advisors. Once you meet a financial advisor like this, it would be a mistake to assume that they will take care of all their investment plans. It is important to understand that planning is a beginning but not an end. Also, blindly trusting advisors may not seem right in all cases. “It is up to us to hand over matters relating to financial accounts to the advisors. If not, the onus is on investors to make the decision, “said Amol Joshi, founder of Planned Investment Services. You are responsible for the investment decisions but not the financial advisors.
There is no risk with SIP
Financial experts generally say that investing in a hierarchical investment approach (SIP / Systematic Investment Plan) lowers the average price of equity purchases (higher-priced, lower-priced purchases) and thus reduces risk.
Some, however, cite SIP as a great tool to avoid risk altogether. “Sip does not eliminate risk. It’s just a tool, not a tool, ”said Amol Joshi, founder of Planned Investment Services.
It should be understood that even if the returns are poor in some years due to SIP, there is a chance of good returns on the whole due to good performance in some years. Another important point is that even if you are investing in the SIP way, you should know that if the stock markets stay in the Bears Gupta for years, then they will have to bear the losses.
The budget should be detailed.
There is also the misconception that every family should have a detailed financial plan. “Budget means everything has nothing to write home about. Costs should be classified into three types of buckets. Expenses, payments, savings, ”said Amol Joshi.
Individuals’ income levels depend on what they have in each bucket based on what stage they are at in life. For example, for high-income earners, expenses should not exceed one-third. Also, those who have no loans do not need a payments department. How much and what should be in each section depends on their needs and expenses. “Husbands and wives can sit down and discuss and decide on their expenses in 15-20 minutes.
Dinner, movies in a restaurant with indiscriminate expenses … Also, travel expenses should be clarified, ”said Sedagopan. It is also important to make sure that the budget is not exceeded. If that happens then long-term goals will be affected. Consider which segment the highest costs are coming from. For example, if you want to buy a phone immediately due to damage to your smartphone, then there is no harm in using the savings set aside for your annual trip. Instead, divert your thinking to good things in life, such as saving your child’s fees or retirement savings.
Risk is not right for the middle class.
Another misconception is that middle-class people should not take risks. Needless to say, it applies to just a few rather than all things. Lack of awareness can lead to complete avoidance of risk and failure to reap the desired results. This category is moderate in income for them.
If Versace risks and invests in low-risk tools for their life goals … investing in low-risk tools will not be promising at all. Very low incomes make it difficult to raise funds to meet their goals. These types of people must invest a certain amount of inequities. Thereby providing higher returns in the long run. “Those with limited sources of income should not ignore equities. If the same happens their investment will be swallowed up by inflation.
Retirement planning is about money.
Some people have the misconception that planning for life after retirement is the only way to save. In addition to funding, there should be room for other items in the retirement life plan. ”
Retirement life is 30–40 years. Coordination between money and other activities is required. Spend free time for their hobbies, to restore relationships with friends. It is also a pleasure to spend some time on social responsibility, ”said Amol Joshi.
The retirement plan should be divided into two sections. The first is related to the period when you are healthy. The second is intended for the period after that. In the second section, you may need the help of someone else.
Experts suggest that those who are not sure that the child will cooperate should plan how to behave at that time.
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