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What’s stopping you from getting rich? Not bad luck, but faulty investing strategies

Add comment   |   October 22, 2014    08:51pm   |Contributed by Indian Realty News

You are a diligent saver, a careful investor and a meticulous planner. Yet, you have not been able to build wealth even as everyone around you seems to be wallowing in money. What’s stopping you from getting rich? If it’s bad luck, you can buy one of those good fortune charms hawked on late night TV shows. But if you really want to get to the root of the problem, you need to assess where you are going wrong in your investments.

Our cover story this week is about the money myths and investing flaws that prevent you from getting rich. It could be the lure of penny stocks or the tantalising potential of the futures and options segment. Small investors often lose their shirts (and nearly everything else) when they enter these high-risk arenas without adequate knowledge.

But mistakes can happen even if you play ultra safe. If a fixed deposit offers 9%, the post-tax returns for someone in the 30% tax bracket will be barely 6.3%. That’s not too bad until you factor in 8% inflation. So even though the investor does not feel it, his money is losing value. This is one of the biggest investing mistakes Indians make when they pour money into fixed deposits. In the following pages, we have listed the common hurdles that prevent investors from getting rich.

Many of these hurdles are really self made. They can be done away with by changing your approach to investing. Gold, for instance, should not occupy more than 5-10% allocation in your portfolio. This can happen if you treat the yellow metal less as an investment and more as a hedging tool.

There’s no point in dwelling on mistakes unless we can offer a solution. So, each financial mistake has been followed by advice on how to avoid it. This stress on utility has been ET Wealth’s hallmark since the time it was launched. In this 200th issue of the newspaper, we hope to live up to the expectations of our readers.

You might be losing your money in the following ways:

Investing in equities? Avoid penny stocks and value traps Don’t chase ‘stable returns’ promised by FDs, recurrent deposits Here’s why SIPs are a better option than a lump-sum investment Buying life insurance for the wrong reasons can jeopardise your financial goals Why real estate is not quite a failproof investment Why exiting gold might not be the best investment move Short-term trading will incur tax liability that can shave off gains Be sure about your capabilities to negotiate a better salary Don’t get confused by interest rates on loans & don’t borrow without need.

Source: ET

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