INVESTMENT: Inaction is the biggest mistake

These days, World Environment day, World Earth Day etc are celebrated with lot of gusto especially on social media. There are innumerable posts, tweets, hash tags shared over and over again. But how many remember their resolve to use less plastic or energy conservation after a week? It’s similar to taking a New Year resolution to loose weight. People sign up for gym memberships but do not end up going to the gym. I find the same parallel where investments are concerned. I have met so many people who get enthused to take charge of their finances, after watching shows on “How to get Rich” but end up not doing anything. Then there is a set of people who will blindly invest in various products when they hear colleagues boasting about the returns they made from certain investments. This is basically Investing Inertia. The main cause for investing inertia is fear, that is, the fear of loosing, the fear of the unknown or the fear of not wanting to leave one’s comfort zone. This is why most investors still prefer traditional investments like fixed deposits and gold. The sheer number of schemes available also intimidates investors or the complexity of products and this leads to investing inertia. Yet many get placid because they are not making quick money. A parallel would be with the weight loss regime – there are so many different types of diets, exercising options and one doesn’t really know what to follow. Further, not seeing quick results demotivates most people and they lose interest in improving their health. Most of the time though, procrastination is the main cause of not taking financial decisions. The millennials are busy spending their money for experiences while GenX are using their wealth for buying assets and high lifestyle expenses. All the experiences, fancy assets, fancy vacations, gadgets, etc lead to low savings and high Equated Monthly Installments. I have so often heard people cribbing: “I just cannot save”. In my sessions, I find that inaction to be the biggest mistake because of very little knowledge on financial matters or even a clear thought process on financial planning. But how can we expect people to have the understanding of managing money when this subject is not taught at school or college or even discussed at home. There is also lack of ready or specific information available. Mostly, people get over their investing inertia when they are faced with a crisis and are then forced to act. However, simple steps can help overcome investing inertia: Have an expense tracker to keep a track on non-essential expenses. You will be surprised to see how much you spend on frivolous, unnecessary things.Automating investing is the key to being able to save more. Investments must be automatically debited from your account as soon as you have your salary credit. Investing in mutual fund Systematic Investment Plans is a good way to automate investments. It is imperative have a financial plan done and if you cannot hire a planner, at least start by using a free online financial planning tool. Start small and diversify investments. If you have the fear of losing money, start by put a small portion of your wealth into a risky investment and increase the amounts as you get more comfortable. Further spreading your wealth across different instruments helps with risk diversification. If you do not expect quick returns from real estate and gold or an insurance policy, how can you expect the same from market-linked instruments? Slow and Steady wins the race! Finally, what matters as you grow old, is good health and having enough for you to spend your time the way you want to. If this is what is important to you as well, stop postponing and start investing. The writer is Director Finsafe India and Co Founder, Womantra   Original Source: *Photo credit: Investment, Thinkstock Source: Article written by Mrin Agarwal in DNA Original article link: http://www.dnaindia.com/personal-finance/column-investment-inaction-is-the-biggest-mistake-2624705


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