Dusshera personifies victory of truth over the lie, good over evil. Traditionally Dusshera is celebrated by burning Ravan’s effigies hoping it takes away the evil in humanity. But that’s not it, Ravan Dahan can teach you how to burn bad habits that are stopping you from creating a life you want; financially too. So quickly let’s have a look at the 10 Ravans that you need to let go of-
Copying portfolios of big investors-
One bad habit a person can develop which may ruin his finances is not creating a strategy of his own. Newsflashes of Rakesh Jhunjhunwala moving certain shares in his portfolio is mimicked by novice investors which later hurts them. Every investor has different goals, risk appetite and time horizon. Create your portfolio accordingly.
Having no clear financial goals–
Investing your hard-earned money without a figure or goal in mind is troublesome. Goals not only inspire and help you focus but also teach you to navigate through future needs. Your investment needs can change according to the dynamic nature of your goals. Goals can be an emergency fund, children’s education fund, 5- year plan etc.
Spending ruthlessly without saving-
The golden number is 30. Never spend more than 30% of your income. This 30% also includes fixed expenses like electric bills, house rent, food expenses etc. Festivals and celebrations are an exception to this rule though.
Overlooking asset allocation-
Dynamic asset allocation ensures that all your eggs aren’t in the same basket. If all your assets are invested in one fund there is always a possibility of negative returns. Choose investment options wisely and keep on rebalancing.
Reducing long term investment for short term expenses-
Events like a luxury vacation or foreign travel need a lot of money upfront. But to do the same investment amount of your SIP need not be reduced. Doing so may lead to unstable finances in future that may affect future goals.
Not including finance in drawing room talks-
Life is full of uncertainties and no one knows what tomorrow may bring. If your family is aware of your financial decisions and investments, during emergencies it will be easier for them to access it. They should know who to call, where to go, who are the nominees, what shares are bought etc. Also, your children will learn personal finance right from home because no school or college teaches that.
Not having an optimum insurance cover-
For at least a few uncertain times you must have insurance cover. So, in dire times the policy will look after your financial needs and save your family the trouble. Also, the cover shouldn’t be too less or it’s going to be of no use.
Not having an emergency fund-
Your emergency fund should cover at least 4-6 months of fixed expenses. Remember Covid-19, lockdown in the year 2020? Those who had sufficient emergency funds didn’t find lockdown very hard. Lockdown took a toll on a lot of us emotionally, physically and mentally. Knowing that you have enough money that will cover your fixed expenses puts your mind at ease and prepares you to deal with the real problem at hand.
Not being patient with your investments-
The market was all red and bad during the first half of 2020. But have you seen the past few months? It’s all bull run. Hence don’t try to time the market, it will go up and down. Pick a strategy and stick to it for some time at least. Investors are sadder when they sell winners too early and see them outperform later.
Ignoring important advice-
Having a teacher or a coach will guide you through the toughest times in life. Same with investing, hiring an investment advisor and listening to his advice is crucial to navigating through the market. He will not only reduce the stress but also will maximize the CAGR.