Logical vs Emotional Reasons

People usually invest for the wrong motive. They get life insurance for the wrong reasons: fear, greed, pity, frustration, taxation, and so on. The true motive for purchasing a life insurance policy to safeguard your family in the event of your death is never explained!

Similarly, whether it is for child education or retirement planning, people prefer insurance to mutual funds since the former is sold on emotions while the latter is sold on logic.

It has also been observed that high-performing salespeople play on emotion rather than logic. They are aware of the client's weak point and pitch the policy accordingly. Furthermore, when people buy insurance, they feel emotionally comfortable and keep the policy for decades. When it comes to pure investments, the majority of SIPs are terminated within three years. They are not deeply attached to their investments.

                            

 

 

Again and again repeating basic mistakes

Investors are roaming from here to there with no destination, blueprint, or investment planning in the hopes of double their money.

You always stray if you don't know where you're going. For example, if you want to go to Mumbai, you look for the Mumbai route, establish a strategy, and follow through on it. If there is a hiccup along the way, you may be delayed, but you will definitely arrive at your destination if the goal is already set.

Investors never consider what they should get after 10-20 years. They just have one purpose insight: I have free money for the next one to two years; where should I invest it now? In that situation, they choose the products that delivered the best returns in the previous year, with the expectation that they will make similar gains in the future as well.

Sometimes investors invest in gold, silver, stock market, mutual funds, commodities, insurance, bitcoin, and even in ponzi scams. They eventually stuck up for years. Finally, they perform even worse than FD returns, and after suffering significant losses, they prefer to choose FD. The bulk of investors have a similar narrative to tell. They keep switching from one product to the next because they are unsure about their financial objectives.

Any professional planner has a role to play in setting up a road map for what you can accomplish with your funds. A detailed financial strategy to help you achieve your objective. They assist in removing roadblocks to make your experience more impactful and pleasurable.  Hand holding is important.

We invest with zero IQ

We conduct an extensive study before purchasing any household products or commodities. We spend a lot of time researching whether it's a mobile or a car. Furthermore, when we acquire or build a property, we scrutinize every detail, from the location to the architecture and planning.

However, when it comes to investing, we reserve all of our common sense, intelligence, IQ, knowledge, and skill sets specifically for the stock market.

First and foremost, we have no plans.

Second, even if we plan ahead of time, we procrastinate.

Third, our execution is inadequate.

Fourth, we never follow through on our plans.

Fifth, we swing in response to market movement.

Sixth, our biases become roadblocks to advancement.

Seventh, we restrict our knowledge and research.

Eighth, there is a lack of proper diversification & asset allocation.

Ninth, we never rebalance our assets.

Tenth, failing to secure future earnings.

We make a lot of bad financial decisions in our life.

Do we look for a better option while purchasing a vegetable?

The impact of compounding

Some investors have a practice of checking their portfolio multiple times per day or at least on a daily basis. If you are a true long-term investor, examine your portfolio every now and then is a waste of time. On the contrary, it will stifle growth as your previous biases begin to influence your portfolio.

Furthermore, if you watch every day, you will see no significant changes. It's as though we see our own reflection in the mirror every day. Do we notice any differences? However, significant developments have occurred over the last decade. Although change occurs on a daily basis, we can only see it over time. This also applies to our portfolio.

Essentially, it is your financial advisor's responsibility, not yours, to oversee your portfolio. It is totally acceptable to maintain track of investments once every six months or once a year. Beyond that, you will kill your investment growth, for sure!

Break the Pattern

We human beings have a common tendency. We love to follow the pattern and soon become comfortable with that. Purposely or unconsciously, we continue with the same throughout our life whether it is a career, finance, profession, money, business, investments, relationship, everything & anything.

In fact, we generally learn personal finance from our folks & relatives and attempt to follow how they managed their funds. We ought to comprehend that numerous things got changed over the most recent thirty years since we got liberalized and turn into an open economy in 1991. Further, with the development of new technology & investment avenues, assumptions like return, inflation & expectation got changed over a period of time. The specific thing which was significant before is not anymore fitting or suggested now. 

Change is inevitable and we need to change before it's past the point of no return. We need to break the pattern and emerge from our usual comfort range of familiarity to grow every day in the life. In spite of the fact that it will give you a ton of agony and make you awkward in another zone, we should understand that if we don't transform, we will be out of the race. The solitary thing to proceed is to keep refreshed ourselves with novel thoughts, developments, strategies, and innovation, And so on Continue mastering new abilities and update your insight is the way to progress.

Online Frauds & Phishing

Lot many individuals become a victim of online frauds & phishing. These days one can not stay away from technology and indulge in online transactions. However, a great many people don't learn it appropriately, barely focus on the guidelines & safety measures to take, and much easily rely on an outside third party.

Types of call or messages or emails, we often get as: 

• I am calling from State Bank and we offer a guaranteed product of 11%
• I am calling from IRDA and your money back payment from the insurance company is not paid as your bank detail is not updated with us
• I am calling from Icici / SBI / HDFC / Kotak and there is a guaranteed scheme of ......
• I am calling from xyz insurance and there is a waiver of GST or discount in premium .... 
• I am calling from Income Tax dept. regarding your IT refunds 
• Your Debit card is going to block today... pl share last four-digit card number
• You got a lottery of 1 lac pound, pl deposit 10,000 in the account number...
• Your parcel arrived at customs, we have opened it due to security check and found value worth Rs....... Now you need to pay a duty of Rs.... to claim your parcel
• There is a gift hamper for you... Please come to the hotel along with your spouse, attend a 1-hour seminar & collect your parcel
• Install mobile tower at the house with NOC of TRAI 
• One of your friend asking for immediate money on Facebook

Once we entertain the call, further details are sought from us and we get into the trap of fraud. Understand following do's and don't to avoid any trap. 

Don'ts:

• Do not share your personal details
• Do not share Bank account number & IFSC code
• Do not share Credit Card / Debit Card Number
• Do not share CVV number (in any case)
• Do not share OTP (in any case)
• Do not share your policy number/folio number/signature
• Do not share your PAN, Aadhar, or any personal documents
• Do not give a blank cheque
• Do not give a signed delivery slip of Demat in advance to share broker or common transaction slip of Mutual Fund

Dos:

• Can give identify proof & address proof to authenticate company for KYC
• Provide canceled cheque but without a signature
• Provide masked Aadhar copy (where all numbers are not visible)
• Keep your checkbook in a secured place like your currency & valuables
• If any scheme, do ask them to provide information through email with supporting leaflets, etc.

Further, beware of online social media fraud:

If you receive any request from one of your best friends on social media asking for immediate financial help, do not follow it blindly. Do some verification checks as it could be a hacker.

a) Call your friend & talk directly or otherwise ask your friend to call back. Check whether he has called from his registered mobile number already with you.

b) There could also be a possibility if social media account got hacked so as the mobile number too. Check the voice & tonality of the caller. Ask for the video calling.

c) Ask for the Bank details and see whether the mandate is in name of your friend or belongs to any third party. Check the given IFSC code of the bank, whether it is of the same city where your friend is residing. If a Paytm number is given, check whether it belongs to the same number you already have.

d) Ask him to send his current location and also the contact number of his family member, if you know them.

e) Check whether the personal details of the social media profile are matched with your friend or a fake id is created.

f) Finally, speak to any of your common friends.

Remember, if the request received through social media, mobile number is not matched, not able to get video call and/or payment is asked in third party name, now are know what to do the next!

Beware of fraud calls / SMS / emails. 

• There is no free lunch in life... you have to spend your time, money, energy to earn.
• There can not be 5 chawanni (5 twenty-five paisa) in a rupee.
• Do not instantly jump into any kind of freebie being offered to you.
• Do analyze properly of 1+1 free offer.
• Income Tax dept, TRAI, IRDA, SEBI, RBI doesn't make calls or advice you directly.
• And understand, if you get some free gift from someone unknown, you might be obliged to do a favor later on.

Fear of Losing Money

Quote: The greatest cause of human financial struggle is the fear of losing money - Robert Kiyosaki

Chrometophobia (Chrematophobia) is the extreme fear of money. It encompasses fear of thinking about money or touching money or spending money or investing money or talk about money-related matters. Regardless of whether an individual not having Chrometophobia, yet at the same time fears losing his money. 

A portion of the overall side effects or symptoms are mentioned beneath:

1. Procrastination:

This is a very common habit among individuals and they continue delaying their decision. At the subconscious level, their mind always thinks what if I lose my money by making investments. 

2. Doubt / Uncertainty:

Creating doubts about investing, despite the fact that their doubts are addressed multiple times but still they are not satisfied. Their belief system & conviction framework don't allow them to think beyond a certain level.

3. Overcautious / Overthinking:

Become overcautious make the decision poor. Agar sooch gehri ho jaaye ... toh faisle kamzor ho jaate hai. Don't think so much... if the thoughts become deep then the decision becomes weak. 

4. Worry:

Keep worrying about money never put you in comfort level and you will always fear losing it.

5. Indecision:

Failure to arrive at any conclusion and prefer status quo. 

Moral: Don't let money fear hold you back from creating wealth.