There are some investment myths which are important to debunk because these myths are preventing you from doing something important for your good future. So let’s debunk these top investment myths;
Top investment myths
Here are the top investment myths;
Investing is only for rich people
Probably the most convincing myth is this one. Investing can be as simple or as complex as you choose. Ironically, investment can also be as easy as you want it to be. You can invest a significant amount of money in hedge funds and other esoteric investing alternatives after spending a great deal of time, money, and energy reading stocks, charts, and complex derivatives. These investing techniques are very complex, and only high net worth individuals should consider these products due to the extremely high minimum capital requirements. However, by simply owning a few low-cost index funds or mutual funds, you can make returns that are just as good, if not greater, than those of these investors.
Saving is enough for your future
Saving money is essential to securing your financial future. However, this is just the beginning. Your money will eventually be lost if you do not use your savings to purchase items that can outpace inflation.For example, you are depleting your wealth if the yearly rate of inflation stays at 5-6% and your funds are in a savings bank account that pays out 3-4% annually. Most reputable banks currently give a return of between 5 and 5.5% on fixed deposits, even if you park your money there. You will receive 3.5–3.7 percent in post-tax returns from these FDs if your income is below the 30% tax threshold. Your post-tax returns will be between 4.4% and 4.4%, even if you are in the 20% tax slab. It is lower than the average inflation rate.
Fund Diversification will secure you from downside of the market
It is imperative to diversify your portfolio, as it is not advisable to place all of your eggs in one basket. However, the diversification needs to be significant. If you select eight or ten large-cap equity funds, it makes little difference.This will lead to a significant overlap of the underlying equities and complicate the management of your portfolio. Diversification across asset types, such as equities, debt, gold, real estate, etc., should be the aim of diversification. and expand your diversification inside those asset types. If you invest in equity funds, for example, spread your money among large, midcap, and small-cap firms. ELSS funds or Flexi Cap funds, which make investments throughout the market cap, can be used for this. Thus, around three to four funds are
Life insurance is an investment
Thinking of life insurance policies as investment items that also provide life cover is one of the biggest misconceptions people make when investing. Not really. All insurance policies do is act as a risk reduction tool, supporting your family in the event that something untoward occurs.Thus, if you want a sizable coverage at a very affordable price, you should purchase a term insurance policy. Rather, a lot of investors wind up purchasing insurance plans with extremely limited coverage because insurance salespeople tell them that they would earn a guaranteed better return and that their family will receive a set amount if they pass away during this period. This is a classic case of misrepresenting a product by saying something that is nearly
