Deciding to put your money in an investment scheme requires proper understanding of the of how returns on your investments work. It is always advised to consult a financial advisor before investing your valuable money. When you take advices from anyone and everyone, you are bound to come across several investment myths.
While many of these might be partially true, here is list of myths regarding investments debunked:
Stock Market is a Strong Money Magnet
It is most common notion amongst investors that an investment in stock market gives you high returns. While this might be true, it is not an eternal engraving. As the investment in stock is subject to market risk, no definite predictions can be made regarding the returns. It is a general practise that you wait for the market to get down and then you purchase the stocks. On the other hand, investors plan to sell their stocks based on the prediction of market growth.
As much as this idea sounds obvious, it is highly impractical because there are so many other factors that influence the stock market. Economic factors, political and financial shocks, industry performance, inflation and changes in government laws and policies, all together affect the stock prices. Essentially, stock market doesn’t always draw you quick money based on market performance and interest rates. As there are many risk factors affecting the returns in stock you can also look for investments in Mutual Funds through NFBCs.
Excess diversification is important and investment can save tax
It is believed that diversification in investment is necessary to reduce the risk factor. However, too much of diversification can eventually bring down your returns. When you think of initiating investments, it is advised that you should plan for multiple investments in different schemes. In a hope that you dilute your risk factor you invest in diverse schemes.
For example, having 10 stocks, 4 mutual funds and a Fixed Deposit can be termed as a decently diverse investment. But, if you further diversify this portfolio by buying more stocks, funds and other long-term investment schemes you don’t get high returns.
This is because when you buy excess of stocks you don’t essentially buy all the best stocks. Instead, you are investing in stocks across various categories so that even if one does not perform well, the other compensates. As a result, the returns on your investment average out to be the same. Therefore, instead of focusing on excess diversification you should invest in less but high potential stocks along with few fund investments and long-term policies. Bajaj Finance provides exceptionally budget friendly mutual fund schemes that are safe, give flexible returns and diversify your portfolio effectively.
Fixed deposits are obsolete
In an argument about which investment is the safest, FDs get a unanimous vote. However, in the aspirations to gain higher returns in a brief time, people believe that fixed deposits provide considerably low returns. It is true that investing in fixed deposits with banks generate a low return of a mere 4% which staggeringly can reach up to 6%. But this is not the fact when you invest with Non-Financial Banking Companies like Bajaj Finance.
The current FD interest rates provided by Bajaj Finance are 7.25%, which can reach up to 8.20% for senior citizens under various pre-approved schemes. Thus, the notion that fixed deposits are nothing but freezing your investment for a long time to get very low returns is not completely true. Smart investments in fixed deposits at higher FD interest rates helps you keep your money safe and sound while it generates high returns for you.
