Investor: Is this a right time to book profits? Market is at its peak.

Advisor: Well, we have a long-term plan, that we are following & you have more than 15 years until you need to start drawing on that money. So, I think we should stay the course & not make too much of market highs & lows.

Investor: Well……….. Okay.

Few months down the line.

Market in the downward path / with few hiccups in the market.

Investor: Market is on decline, maybe I should cash the funds before my gains get diminished more.

Advisor: First of all, let me remind you that we have more than 15 years till your planned retirement age. The economy looks good & your portfolio is well positioned & balanced with your set goals. There is no reason to change the course unless your life goals are changed. If that’s not the case, I would suggest to stay the course & not be distracted by what is happening daily in the equity market.

Investor: No, there is no change in set goals time horizon. I think you are right. Let’s stay the course.

This sample test conversation provide us with a small glimpse at the psychological pitfalls, greed & fear related to market we all face while engaging financial planning/ investment. Our brains regularly set little traps for us, sometime decision taken in emotional haste have very real cost associated with them. There’s a great quote from Sir John Templeton, which he says: “Bull markets are born on pessimism, grow on skepticism, mature on optimism, and die on euphoria.” In other words, when it comes to investing, it can often pay to know which way the herd is heading. There will always be time when even the best of us will get enticed by these trap holes.

Here are some of financial pitfalls we need to avoid:

(A) Underestimating the income required post retirement :

Majority of people have no clue about the approximate income they would need to live a financially independent life post retirement. A vague assumption is what people work around which if too high can be un-achievable and if too low can lead to financial crisis later in life. Every individual has different needs and following any general rules can be misleading. Retirees tend to spend on different things and considering their lifestyle, the income needed post-retirement needs to be calculated. This can then translate into annual or monthly savings figures.

(B) Avoid Get Rich Quick Mentality:

Market is for building long-term wealth where you run a marathon, not a sprint. Stories of people becoming rich in short span may be true to some extent but then you have to consider after how many years of experience and hard work did he manage to find way to investing that works for his way of investing. There are lots of people who may have made a fortune overnight but then it is not just one of fortune that makes them what they are but a systematic wealth-building plan that truly made them that money.

(C) Not planning for healthcare:

In today’s fast-paced life, keeping good health is often a tedious task. With numerous ailments and medical conditions that come with the old age, treatment costs will burn a hole in your pocket, forcing you to break your savings early or avail monetary help around. To avoid such circumstances, it is recommended to avail a health insurance plan that will take care of uncalled medical expenses and hospitalization during your old age.

(D) Shying away from seeking professional help:

Many of us feel shy discussing our finances with an unknown person. Yet we unconsciously or consciously/ get influenced by media reports, relatives & friends. By seeking help of an expert, whose sole job is to take care of investment portfolios, we could avoid the biggest financial pitfalls.

So, all in all, Financial success relies equally on planning & discipline as much as on investment return. Sticking to sound investment plan carved with the help of an expert & controlling the emotions, whether it is greed or fear, and also not blindly following market sentiments is crucial to successful investing strategy.


By Abhay Gupta

With background in e-commerce and IT, Abhay manages operations and backend processes at SAKSHAM Wealth. He is a data cruncher and his expertise with MS Excel helps the team in research.

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