5 Financial Mistakes every young investor must avoid.

As time has changed, financial literacy among people is increasing and now young learners understand the importance of investment in their life. Once upon a time, the majority of people used to save money with fixed deposits. According to research by ET money, in the last years (2017-2020), they have observed an increment in young investors of age group 18-35 by 65-70% on their platform. Also, as women are also entering into the corporate culture for jobs and business, the investing area is not confined by men. This same research states that the number of women investors grew drastically in the last few years. It signals that people are now not limiting themselves to saving in banks or FDs and looking for alternatives that can help them to beat the inflation rate in the future. But there are many mistakes that these young investors are making and should take a step to avoid from this financial year onwards. Let’s discuss the same matter today.

• Overrating or underrating insurances

Insurance is somewhat that is crucial for everyone as financial protection in uncertain times. But some people see it as the only option to save tax. But if you are just thinking of blindly buying an insurance policy to save tax, then you should broaden your vision and also consider other tax-saving funds which may yield better returns.

But on the other side, some young investors ignore their need to protect their health or life. A majority of them end up getting a saving or endowment plan that does not provide enough life cover. Moreover, as their employer is offering a medical plan, they tend to ignore the fact that these plans will cover them till they are working in the organization. But what if they lose their jobs or unfortunately met with an accident? Therefore, it is suggested to cover your financial responsibilities and health with a health cover and term plan. Enough insurance cover is a must for everyone and insuring at a young age means that your premium will quite lower and affordable.

• Not maintaining a reserve for emergency

A majority of young earners usually spend their entire salary. When it comes to savings, they don’t have much financial support for 2-3 months without salary. In a time of recession, these savings can be really helpful and you won’t need to borrow money from others and add a liability on your shoulder. So what should you do? Before spending, save money as an emergency fund. Save till you are able to save 6 times your salary. Also keeping them in liquid funds can help you earn some interest without risk. Here are many apps like Easy plan that can help in the same.

• Investing in plans due to peers

There are many people who follow in their friend’s footsteps at the time of investment without considering the consequences and benefits. Especially when it is about investing in stocks, you shouldn’t blindly walk this area because before investing in such an option, you need to understand how the stock market works. Before investing in equity, research thoroughly and take your time in analyzing the shares.

• Forgetting about liabilities or overspending

As per the recent trends, young investors hold multiple credit cards and love to swipe it at every possible store. As a result, they are burdened with heavy credit card bills Also, if any loan is already in active mode, then plan your expenses well and never miss its EMI. Investments can be delayed, but paying off the liability is important.

• Opting for just secure investments and not diversifying investments

Most people prefer investing in gold, FDs, etc. that does not involve any element of risk. So definitely It is a good option and one should invest in such options. But the problem is with the return. The rate of return is not high as the value of money decreases every year due to inflation. So you should diversify your investment in other options like equity, SIP, etc. Moreover, you will be able to save some amount on tax too.

These were some of the major mistakes that every young investor should avoid for better returns in the future. For a personal consultation on financial planning or tax-saving, you can contact the team of Inside Tax. It is a reputed organization that offers expert help on financial services like investment planning, GST/firm registration, tax filing & having, etc. So contact them today & save tax in this financial year.