There are many personal finance myths persisting in the Indian society as people are still glued to old school ways of investments. The old saying “it’s better to keep your money safe in your savings account than investing in riskier portfolios” doesn’t hold ground today. Most of the people still think managing personal finance perfectly is difficult in terms of complexity & planning. This blog is an attempt to reveal the existing myths related to personal finance and in turn, educate investors on how to plan and execute their finances. 

I am too young to plan investment and retirement

It’s the most common saying among the youngsters “why do I have to plan now? No, not yet anyway, I am too young to be planning all this, everything will fall in place once the right time arrives”. 

This thinking surely needs to be changed. There is always loss if you start your investment late.

A smart person will start planning for retirement when he/she is young, as that is the phase of life when you have fewer liabilities on you and you can push yourself to earn more so that you can invest more. If you don’t start financial planning early you may need to compromise on your finances in future.

Equity Investment is Riskier so it’s better to avoid

Well, it’s true that equity investment is risky but so is a knife and fire, but we can’t live without them. Taking precautions and analysing the estimated risks always keeps us safe and the same is true with equity investment. It requires expertise and great analysis skills to invest in the share market else it can lead to bigger losses. Remember research is necessary to mitigate equity investment risks and you can make a good profit.

Investment in Gold is always best

Buying gold is the most common investment option persisting in Indian society for decades. However, it’s true that investing in gold keeps your money saved as well as invested at the same time. But when you will look at the facts, you will get to know that over the last 30 years, the price of gold has compounded at 9% annually. This indeed is one of the safest investment options but you cannot ignore the fact that other investment options can yield more returns than the gold.

One question may arise here- does holding gold increase your wealth? Over the past three decades, gold has given returns below the rate of inflation from March 1990 to March 2000 as during this time gold prices rose by 3.5% annually. However, gold has given returns marginally higher than inflation in the decade between March 2010 to March 2020 which was 9.8% p.a. Currently, gold prices are at a peak which is ₹ 55,000 per 10gm of 22k gold. But, the future is unpredictable and you don’t know how much it will cost 10 years later. So, investment in gold is a good option to mitigate risks and be safe but if you want to grow fast you need to diversify your investment portfolio.

Real Estate help grow the wealth best

Investment in real estate is best, it’s one of the most common myths persisting among Indian investors. But the fact is over a few years, investment in real estate has witnessed only 3-4% per returns when calculated on an annual basis. Investment in real estate only yields best returns when you wait for a long time and sell your property. The price of real estate is skyrocketing, but it’s also true that you need a huge amount to invest in real estate. 

Fixed deposits are the safest and hence the best

This is true that FDs are safe and it gives us a fixed return. But it doesn’t make sense to invest only in FDs. This is because the returns which we get from FDs are not much as most of the FDs give a maximum of 7-8% of interest p.a. But it’s also true that the post-tax return of it will hardly beat inflation. FDs are safe but not always the best option. If you invest in mutual funds or some other tax-exempted portfolios you can surely make more money than what you will be making through your FDs.