5 Mistakes to Avoid while making investments !!

“Oh My God !! All these years I did too many mistakes while making investments which I am realising when I compiling my IT return.” Said Prithviraj, a 33 year old IT professional to his friend Niraj.

“What Mistakes you made Prithvi?” asked Niraj.

1. Investment in a ULIP

“First mistake I did was investment in ULIPs, pre and post 1st Sep 2010. Prior to 1st Sep 10, an agent told me that ULIPs will become unattractive from 1st Sep, and thus, the right time to invest in ULIPs is now. I got convinced and invested in it. Later, the same agent came with a new ULIP stating that ULIPs have become much better now and thus I should buy one more ULIP from him.

Later on I realised that both the ULIPs were totally uncalled for and were a perfect recipe to drain my hard earned money to the agent’s greedy pockets.” Said Prithviraj.

Lesson: ULIPs / Endowment Plans / Money Back Plans are all combining insurance and investments together. If you want a good life risk cover, take term plan. If you want your money to grow, do SIP. Never mix insurance and investments.

2. Taking too little risk

“Second mistake was to keep most of the money in idle avenues like savings account, bank FD, endowment plans etc for a long time.

These avenues gave me poor returns, whereas inflation kept eating my money by 8-9% every year.”

Lesson: When you are planning a long term goal, equity would come very handy to beat inflation. Keeping a very high proportion of debt in your portfolio will strangle its growth and make it sluggish.

3. Not saving / investing beyond Rs. 1.20 Lakhs

“ Third mistake was to invest solely with the purpose of tax saving. This not only restricted my choice of funds, but also restrained me from saving and investing more. I am earning close to 7-8 Lakhs per year. Having said that, my annual savings should be around Rs.2-2.25 Lakhs which may be invested in asset classes not qualifying for tax saving, but still giving good returns in the long term.”

Lesson: While saving and investing, have a larger focus on what amount you would need on retirement, than what amount is mandated by government to save tax. Ultimately, you will be doing this in your own interest. The government need not incentivise you for everything you do in your own interest.

4. Investing at a wrong time

“Fourth mistake was to invest lump sum amount every year, just before 31st March ended. This usually resulted in investing at a higher market level and could never get the advantage of rupee-cost-averaging. Also, to make this money available, the savings were lying idle in the savings account for the entire year.

Lesson: The magic of investing lies in investing regularly in small amounts than occasionally in larger amounts. The rupee-cost-averaging helps to bring down the overall purchase price, thereby growing the wealth in long term.

5. Investing without Goal Planning

“Fifth and most important mistake I did was investing without having goals and without any plans. The entire focus was on, ‘there is some idle cash with me, let me pay the premiums so that I save tax and balance can be invested in some IPOs, NFOs etc to make quick money.’

Dint realise that unless there is a plan in place, one cannot reach the desired destination if he just keeps on walking. One should know, where he wants to go, how he can reach there and then start walking towards it.”

Lesson: Rather than investing in some “Fancy-named Plans”, plan your investments. Know what are you investing for: For a Child’s education / Marriage, Your retirement , buying of assets etc. Once you have a goal, you will also know the time frame to reach that goal. This will be of great help while deciding the strategy to invest.

“Thanks for sharing your mistakes Prithvi. Life is too short to learn from our own mistakes. At least I will not repeat them. I will:

  1. Keep Insurance and Investments separate.
  2. Take adequate risk depending on my risk profile.
  3. Not restrict my savings and investment to the Rs. 1.20 Lakhs limit by government.
  4. Invest at regular intervals through SIP / STP than try to time the market.
  5. Work out my goals and plan out my investments.” Said Niraj.

We look forward to your feedback and comments on the above article. Please feel free to contact us on saurabh@nidhiinvestments.com if you have any questions.

(The views mentioned in the article are personal opinion of the author. The characters used in the article are hypothetical)

Published by professorbajaj

Prof. Saurabh Bajaj is an Author, Mentor, Motivational Speaker and Wealth Planner. He has done his MBA from Narsee Monjee Institute of Management Studies (NMIMS) Mumbai, one of the top 10 management institutes in India. He holds the prestigious FRM (Financial Risk Manager) degree awarded by Global Association of Risk Professionals (GARP), USA. Till date, there are less than 15,000 professionals in the world, who have been honored with this degree. He has also been awarded CFGP (Chartered Financial Goal Planner) Certification by AAFM (American Academy of Financial Management). After his MBA, he joined J P Morgan, the second largest Investment Bank in the world. He has worked with J P Morgan as Risk Analyst for more than two years. Prof. Bajaj also holds an Advisory certification awarded by AMFI (Association of Mutual Funds of India). During his stint at Bombay Stock Exchange, he has handled Investment Management and Treasury operations of the BSE Corpus. He has set up an entrepreneurship venture in the field of Wealth Planning and Investment Consulting under the name “Nidhi Investments” and holds the profile of CEO. Prof. Bajaj sits on the Expert Panel of CAClubindia.com and MBAClubindia.com as Investment Expert. He is actively involved in investor education through his blog www.professorbajaj.com which has a readership from 78 Countries all over the world. His articles are also regularly published in caclubindia.com , mbaclubindia.com , totalca.com , charteredclub.com, bankbazaar.com and lawyersclubindia.com . He has been awarded the title of “Best Article Writer” from caclubIndia.com in Jan 2012 and has been selected amongst “Top 5 Technical Writers” from all over India in Feb 2013. He has been invited by various TV Channels like SPIN TV, CNBC TV18, UTV Bloomberg Etc for programs like "Expert Advice" , "What Markets Want ", "Budget Analysis" etc. He has been invited by Several organisations like Lions Club, Rotary Club, Agrawal Welfare Foundation, Rajasthan Mandal, Agroha Vikas Trust, Union MF, UTI MF, Arthamitra Gurukulam, Vidyalankar Institute of Technology etc for expert lecture on "Smart Investing", "Life is A Celebration", "Financial Freedom", "The Digital IFA" etc. He was ranked 8th Merit at All India level NMAT which got him selected for MBA programme at NMIMS, Mumbai. He did his MBA with Capital Markets as his specialisation. Soft Skills has become an inevitable part of every selection process and teaching learning process these days. The students from small towns and tier II cities, in spite of being talented and well equipped with technical skills, are seen struggling in the selection process. This is because of their lack of exposure to these soft skills. Mr. Bajaj has a zeal for training candidates to develop these skills and has been imparting the same on since last two years. This zeal and passion inspired him to set up his own firm called “Knowledge Circle” which aims to train candidates for soft skills. Till date, he has trained more than 5000 participants from over 220 organizations across various fields of soft skills. He has been associated with MSBTE (Maharashtra State Board of Technical Education) to conduct Soft skills training workshop for the faculties of Polytechnic Colleges in Entire Maharashtra (Mumbai Region, Pune Region, Aurangabad Region and Nagpur Region) since last 8 years. He has also been associated with ICAI (Institute of Chartered Accountants of India) for training CA Students on various topics related to Communications skills, Group Discussions etc. He was invited by Fr. Agnel Polytechnic College, Vashi for a motivational workshop for faculties. He was also invited by Vivekanad Polytechnic College for "Communication Skills and Email Etiquette" training for non-teaching staff. Apart from these, he has conducted “Capacity Building Soft Skills workshop for Faculties” at ITI Gunj, ITI Pusad, ITI Digras and ITI Umarkhed. This was the first ever soft skills workshop for faculties in the history of ITI’s in Vidarbha. He was also invited by Shivaji Education Society to conduct similar Soft skills workshops for the faculties and office staff of Shivaji Junior College Pusad, Shivaji High School Pusad, Shivaji Vidyalaya Belora and Shivaji Vidyalaya Bhojla. He has conducted training workshop on “Effective Presentation Skills” for the relationship managers of HDFC Mutual Fund, Andheri Branch, Mumbai. He has also been invited at College of Management and Computer Science, Yavatmal, College of Dairy Technology, Warud, B N College of Engineering, Pusad, B D College of Engineering, Wardha, College of Engineering and Technology, Akola, Dr.N.P.Hirani Institute of Polytechnic, Pusad etc. for the Guest lecture on “Developing Interview Skills”.

12 thoughts on “5 Mistakes to Avoid while making investments !!

  1. Awaiting for your article since Long !!

    Really Nice article encapsulating the most generic mistakes done by all. I think I was doing all of them at some point of time or other.

    Now I wont 🙂


    1. Thanks for the compliments dear.

      Yes you are right, the mistakes are mainly done due to lack of awareness. Its my earnest attempt to make people aware through this space.

      Thanks again for your visit and feedback. Looking forward to more in future.


  2. Very Nice Article Professor Bajaj.
    I did opposite of Mistake # 2 to beat the Mistake # 3 to join mistake # 4. And ended up taking tooo much of Risk. Which has again turned fatal. Courtesy :- My Agent. Now I have learnt a lesson a wrong way. Once i get out of the Lock period , shall only Invest after Consulting you Professor.

    1. THank you so much for your compliments Sir.

      I completely agree that the Agent fraternity is out-n-out busy making a fool of people. So better we learn from our and others mistakes and not repeat them.

      It would be a pleasure to guide you anytime.

      THanks again for your visit and feedback. Looking forward to more in future.


  3. May be a bit out of context here, but I remember attending one of those chain marketing seminar which say pay some money become member and for every member you make you get some money. I asked the guy, lets assume every one make two members. Soon everyone will be member then half of the world will not be able to make any new member then how they recover their money, so he suggested me become member now to avoid being in remaining half world :-). So, they (agents) can’t be under estimated, they are very smart people they use all gimmics and word twisting. I wish their smartness can be used more constructively than just selling ULIPs.

    Coming back to point of article, again a very good written article. Liked investment other than 80C and through out the year part. I wonder, say if section 80C is removed then will people invest?

    1. Thanks for the wonderful example Sir !! I am actually gonna write an article exposing these chain marketing schemes too. But for the time being, u pretty well made your point.

      In India, most people dont act when they have an option. They act only when there is no other option that to act. You will be surprised to know that there are some people who think that even investing money in 80C for tax saving is a waste. They should be exempted from Tax just like that and the “80C Money” should be made available to them to splurge 🙂 So when we have people with such irrational thoughts, it is difficult to expect that they would save without 80C. In future, People might start expecting the Govt to incentivise them to take a bath daily ( you never know)

      Anyways, thanks again for your visit and feedback. Looking forward to more in future.

  4. Hi.

    Great Article sirji… I am doing all the mistaked mentioned above ..;P
    Yaar I am planning to invest in STP. It will be really great if you can suggest me something on this front……..;)


    1. Thanks for the compliments bro. Hope this article will help you not to repeat your mistakes.

      As regarding your investment in STP, it is definitely a good tool to invest. Please feel free to call or mail me at saurabh@nidhiinvestments.com for any guidance.

      Thanks again for your visit and feedback. Looking forward to more in future.


  5. for me u gave this suggestions lil late 😛
    u konw y i m saying this….ha ha…..gud one bro…keep it up…

    1. Better Late than never Dear !! I will soon be writing on How one should rectify the mistakes done. Suggest you to read that one. It might help you to make some corrections on the mistakes you might have already done.

      Thanks for your visit and feedback. Looking forward for more in future.

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