Many may know how to crack an interview, or network socially. But when it comes to making personal investment decisions, many may feel flushed out with cash, that too if the individual has just stepped into his first job!
While career advises are important, money advises also play a very important role. Millennials often find it very challenging to tactfully manage their investment decisions independently. Here are the top 3 investment mistakes that Millennials mostly make.
1. No Retirement Investments
Most of the Millennials never give a first thought to their retirement investments. One of the major reasons lying behind is a high level of debt on their head. However, the compound interest could have a major progressive impact if one plans it in his 20s and 30s. So how do you make a proper retirement investment planning?
Essentially, before you plan to invest in any of the retirement investment schemes, you should note the following factors into account and choose accordingly,
- What is your financial goals and objectives post-retirement?
- How many years to retirement?
- How many years in retirement?
- What is your current risk profile?
- Do you have a healthy diversification across your asset classes?
It is much easier to start, but one has to start! Even a small investment of INR 50,000 would make a huge impact if you are planning for a decade of compound interest!
Too Much Conservative Investments
Millennials invest very conservatively thinking about their long term investment horizon. Moreover, they prefer cash investments. The main problem is cash looses value the longer it is held, and also at the time of inflation it doesn’t keep up!
However, holding cash is not a bad idea if you’re sure of the purpose. Say, emergency funds – you should have at least 6 months of living expenses in savings that could be easily available & accessible at times of emergencies (medical emergency/ financial urgency). Though it is tough to hit for 6 months in one go, it is easier to save at least 30% of your salary every month. The crux is forming a habit of savings and observe how that 30% increases gradually.
No Understanding of Investments
It would be daunting if you do not closely analyze how is you’re making investments. Say, how much money are you investing in your PF? Have you ever wondered about the management fees? And how much it would cost you if you keep your current investments? Fee analysis is a very crucial part of planning investments for you could analyze the risk involved easily.
The prime takeaway is if you do not understand your investments, you would be loosing money unnecessarily, be it investing in a portfolio that isn’t diversified, or in management fees. So, gear up to take a call today in order to make all your investments right going forward. Ask people you trust for help and guidance. It’s never too late for millennials to give a kickstart to their personal financing. You still have a long, long investment horizon!