Many people like words like wealth creation, equity, SIP, etc. It does not mean they understand the whole process is not so difficult. Neither is it so easy.
Let us see some mistakes people make with their investments...
Illustration: Dominic Xavier/Rediff.com
1. Breaking/Stopping a SIP: One of the kids in the office went to a mutual fund office to see his ELSS statement. The girl at the counter said 'you can withdraw Rs 43,940' as these units are more than 3 years old. He had no need for that money, but because he could withdraw, he did.
2. Continuing the same example...
He also stopped the SIP. Why? No particular reason, just stopped. This was an ELSS and this year he will end up paying more tax. Such stupidity is not uncommon.
3. Not having an emergency fund / not having adequate medical insurance: 'Sir my mother had an accident so the money was withdrawn and the SIP stopped.' Accurate but amazingly stupid excuse. Have heard it many times.
4. My bank relationship manager asked me to take a life insurance policy. So I withdrew money from my mutual fund and 'invested' in a ULIP.
5. The amount of money you save is the gap between your ego and your income. Ego can include anything done to show off -- buying show off assets, doing show off charity, and eat into your saving / investment.
6. One very important wealth creation tool is 'not caring' what others think about you. Not very easy especially when you are young and more vulnerable to peer pressure.
7. Looking for fun in investing. Some of the best returns that I have got are in dull NBFCs, fertilisers, toothpaste and mortgage companies... none of these industries have any glamour or thrill.
8. Markets can go up far longer than you have patience, and can come down even faster than YOU want. None of us know what will happen in 2015 (or any future year). So rest assured you are in good company. Stick to your SIPs, do not watch TV.