Financial Planning is pimportant - If you fail to plan, you are planning to fail

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Though financial well-being is an extremely important need in today's world, a vast majority of investors fail to follow some of the basic rules of good investing . Here, we highlight a few common errors that investors commit and how to avoid those mistakes.

Not setting financial goals

Every investor has different long-term goals based on his/her current status, income, risk profile and investment horizon. Laying out one's long-term financial goals can be a simple exercise, yet few investors actually do it. Those who consciously plan out their goals are usually more empowered, create more suitable portfolios and increase the odds of actually achieving their long-term goals.

Short-term mindset

Meeting long-term goals involves implementing a longterm strategy. Investors who want to make a quick fortune take high risks, trade too frequently, invest large amounts in short-term fads and face the prospect of losing their capital over a period of time. Patient investors have greater visibility over future portfolio movements as they prefer stable returns over a longer period, they invest in longterm themes and in wellresearched ideas.

Pre-tax myopia

Investors often look at gross return, not calculating how much they really get to keep after taxes. Investments have different tax rates and one should always compare "post-tax" returns. For example, for an investor in the highest tax bracket, a taxfree bond at 8% is actually better than an FD offering 10% interest rate.

Inadequate understanding of risks

Credit, interest rate and concentration risks are inherent in markets and all investments carry them in different proportions. Common precautions such as diversification, low modified duration, investing in high rated companies, etc, are the tools investors should use to protect their capital.

Inadequate product knowledge

There are innumerable instances of investors losing money in a product they thought was capital-protected or of getting margin calls when they thought there was adequate margin cover. Investors who question, query and understand the products they invest into often turn out to be better investors since they understand how these investments will behave in different situations.

'Fill it, shut it, forget it' mindset

Investors often don't take the time to review their portfolios. Markets are increasingly dynamic and regular review of a portfolio can maintain its efficacy. Interest rates, GDP growth, inflation, exchange rates, crude prices — these are some of the many variables affecting our investments. Investors should review their portfolios once a quarter and align the same to market movements, thus reducing chances of being caught by surprise after two-three years.

Investors today are faced with a complex market and ever-more complex instruments to invest into. However, the ground rules for making investments haven't changed much: Be informed, ask questions, have a long-term mindset and check for taxes! Investors who stick to common sense ground rules should be well on their way to achieve their long-term goals.

Happy Investing!!

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Invest in Tax Saving Mutual Funds ( ELSS Mutual Funds ) to upto Rs 1 lakh and Save tax under Section 80C.

Invest Tax Saving Mutual Funds Online

Tax Saving Mutual Funds Online

These links can be used to Purchase Mutual Funds Online that are regular also (Investment, non-tax saving)

Download Tax Saving Mutual Fund Application Forms from all AMCs

Download Tax Saving Mutual Fund Applications

These Application Forms can be used for buying regular mutual funds also

Some of the best Tax Saving Mutual Funds available ( ELSS Mutual Funds )

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6. IDFC Tax Advantage (ELSS) Fund Invest Online
7. SBI Magnum Tax Gain Scheme 1993 Invest Online
8. Sundaram Tax Saver Invest Online
9. Edelweiss ELSS Invest Online

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