Investing is important to achieve financial freedom and meet various life goals. Traditionally, people were risk-averse, and fixed deposits (FDs) were widely used for investments.
These instruments continue to remain popular due to their assured returns. Private and public banks and non-banking financial companies (NBFCs) offer such deposits.
You can open an FD for a certain period at a pre-specified rate of interest. At the end of the term, you receive the principal and the interest. Alternatively, you can withdraw the interest at periodic intervals. The biggest advantage of deposits is their guaranteed returns based on the fixed deposit interest rate, eliminating investment risk.
While deposits are a good option to invest in, you may consider other alternatives like post office FDs, mutual funds, and equities.
Before starting your investment journey, here are five errors you should avoid:
Having a lack of knowledge
Financial literacy remains low in the country, and you may not have the expertise required to invest in different products. Often, your investment decisions may be based on recommendations from family or friends. Do your research or seek expert advice to refrain from committing this mistake.
Investing emotionally and impatiently
Often, emotional decisions are common when you invest in stocks. Additionally, impatience may result in panic leading to losses. You need to stay invested for the long term without an emotional bias to maximize your benefits.
- Failing to diversify
It is important to have a diversified portfolio, which includes various products like fixed-income securities, stocks, mutual funds, and other instruments to mitigate investment risks. Every product has inherent risks, and diversification reduces this by including different asset classes in your portfolio.
Having unrealisticexpectations about returns
Financial institutions pre-set the FD rates. So, market fluctuations do not affect them, which means you know your returns on investments. With other products like stocks, you may have impractical hopes of earning high returns in a short period. Chasing quick returns combined with limited knowledge can result in significant losses. So, you should not follow this practice.
Not monitoring your portfolio periodically
You need to have an assorted investment portfolio to manage the risks. However, it is also important to frequently review the performance of your investments. It is necessary to ensure that the investments are performing as per your expectations and are in line with your life goals. Moreover, doing a periodic analysis lets you make any changes to your investments, as necessitated by circumstances.
To sum it up, you need to make wise investment decisions in 2021. If you are a conservative investor and looking for a stable investment option, you can visit Mahindra Finance’s website and start an FD.