I was searching the web to know the ways to properly invest my earnings for my future life style.The interesting facts that really helped me to identify the possible mistakes that i may do while planning my finance are shared here. I highlighted the facts that influence most of us.
This information will be helpful for the people who are in the age of 22 to 35 that is early stage in planning investments.
Investing in Property (House)
The thought that property always appreciates & living on rent is “poor”: This ill advised “wisdom” is “sold” by real estate brokers/developers & further fueled by none other than our parents. Many of us believe that property prices are a guaranteed way to make money & it never fails. The fact that our own parents indirectly sell this idea to us makes it very compelling. Somehow, the sentiment in the society is such that one gets a feeling of having arrived in life by owning a house, especially as parents feel proud of it. Staying on rent is the sign of a loser!
This has driven the housing prices to far higher levels than their fair value. My simple question is this: If you have a 85% debt on the property in times when they are “not appreciating”, do you actually “own the house”? Try selling a house the next day of purchase & you shall discover that you overpaid by 20% when you bought it! Fact is that loans cause property bubbles across the world & India is no exception. Just that lack of a transparent market makes us believe that the prices are good.
No research needed. Broker says so, parents say so, everybody else is buying, I need to save tax so, let me buy one under my affordability most of the times little more than the affordability!! An overpriced asset is sold. Now repay that loan for life & restrict your freedom.
In most cities in the country, the cost of renting is lower than the cost of EMI (adjusted for any appreciation). As an investment instrument, you are looking at 4–6% return including rentals (if any).
LIC Policy
Number one mistake Indian makes in their financial life is they consider Insurance as Investment
The proud feeling of buying an LIC policy: This is the first of the financial mistakes you make very early in the career. Remember, our parents also “sell us” the LIC policy as soon as we start earning. The sequence of making financial mistakes starts from LIC & carries on to the housing loan. Silently, everybody feels that they have found a gem of an investment in their special “Jeevan ABCD” policy that will make them rich & provide protection to their family. Sadly, it does neither & great Indian stupidity continues. You will find that out after 25 yrs. If LIC policy made money, India would be among the richest nations of the world. I think we are still quite far from that point.
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