How Lack Of Financial Education Impacts Your Wellbeing - Outside View by PersonalFN

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks


Login Failure
(Please do not use this option on a public machine)
  Sign Up | Forgot Password?  

How Lack Of Financial Education Impacts Your Wellbeing
Aug 26, 2019

"The single biggest difference between financial success and financial failure is how well you manage your money. It's simple: to master money, you must manage money." - T. Harv Eker (author, entrepreneur, and motivational speaker)

Being in a finance profession, I fully understand the importance of the proper utilisation of my money - regularly saving and investing it in wealth-creating assets for my present and future wellbeing. But many people lack the knowledge required to make the right financial decisions.

To prove this point, I had to look no further than my own family and neighbours. Most of them, irrespective of their age, formal education, and what they do for a living, have rarely ventured beyond bank deposits and provident funds for wealth accumulation.

--- Advertisement ---
[Alert] Sell These 3 Stocks Immediately

These 3 stocks are ticking time bombs in your portfolio.

It is very likely that you could be owning these 3 overvalued... fundamentally weak... ready to crash stocks... in your portfolio today.

Because many stock brokers have painted rosy pictures of these stocks.

But the reality is starkly different.

If the market crashes, then these stocks could wipe out your wealth.

You should get rid of these stocks as soon as possible.

We are going to reveal details of these 3 landmines at our upcoming special event.

You can click here to sign-up in 1-click. It's free.

Their reasons pointed to the fear of capital erosion. Plus, it was the lack of knowledge about basic financial concepts like risk diversification, inflation, and compound interest that made them stick to traditional investment avenues.

Though this trend is slowly changing, there is still lot to catch up.

While the people today are more aware about the various investment products available, behavioural biases, and preconceived notions about certain products may prevent them from exploring those options.

Often due to lack of financial literacy, people end up parking their money in low yield investment or take on high interest loans to fulfil their needs. Sometimes, they even fall for investment traps, all of which puts their wellbeing in jeopardy.

So, a lack of financial education impacts your wealth-building capacity and you end up with a lower corpus for your goals or incur losses.

[Read: Are You Paying Attention To Your Financial Fitness?]

To financially secure yourself you need to learn to manage your money smartly. This way you can meet your short-term needs, achieve future goals, and be prepared for emergencies. In other words, you need to be financially literate.

India's Revival: A Once-in-a-Generation Wealth Making Opportunity

For this, you need to first get into the habit of saving and budgeting to avoid unnecessary spending. This will instil financial discipline in you and ensure that you are left with a higher amount for investment.

Before you proceed to invest, you need to set S.M.A.R.T goals to give direction to your savings and classify your targets as short, medium, and long-term.

Then evaluate your risk profile to choose a suitable investment option based on your goals and investment horizon.

Bank deposits and provident fund are relatively safer and aid in capital protection and therefore these should form a part of your investment portfolio. But if you wish to multiply your wealth, diversify risk and counter inflation, you will have to undertake a higher risk and invest in mutual funds. This is especially true if you are younger and have long-term goals.

[Read: Here's What Could Make Or Break Your Financial Goals]

With its potential to generate higher returns and the option to choose from various categories and investment styles, mutual funds can be your best bet for various goals. However, make sure to select the right scheme based on your needs after assessing on quantitative and qualitative parameters.

--- Advertisement ---
[Watch Now] 3 Little-known Stocks We are Super Bullish On

Click Here to Watch Now

To save yourself from unnecessary risk, make sure you fully understand the features, terms and conditions of the investment product before investing. If you are unsure about the product, you may consult a financial adviser. Having said that, don't be ignorant or do not blindly trust an adviser and conduct your own basic research.

It is important that you ask legitimate questions to your adviser to clear all your doubts. At the same time, be open to questions that your adviser may ask you relating to your income, debt, and insurance, among others so that they can design an appropriate investment plan.

Apart from wealth creation, another vital aspect of financial wellbeing is to adequately insure the life and health of yourself and your family. Furthermore, to be prepared for emergencies such as job loss, unexpected expenses, etc. you need to create a reserve in liquid investment avenues worth at least 6-12 months of expenses.

Patience is the key to successful investing. So stick to your investment plan till your goal/s is achieved and avoid making any hasty decisions. Review your portfolio periodically to track its performance.

[Read: Why Patience Is The Key To Successful Investing]

Remember that when it comes to an investment plan, there is no 'one size fits all'; it differs from person to person based on their age, financial circumstances, goals, time horizon to each goal, and risk-taking ability. Therefore, do not imitate the investment style or strategy that your friend/relative may be following.

PS: If you are looking for funds to invest that can create wealth for you but aren't sure of them.

Consider PersonalFN's flagship Unbiased Mutual Fund Research service- Fundselect.

It is a credible research service that provides insightful guidance and recommendations on equity funds and debt schemes.

Currently, we are offering this through our Special Pre-Anniversary Offer, only for our esteemed readers like yourself.

So, Hurry & Subscribe Now to invest in some of the most reliable schemes available for your long-term wealth creation.

Author: Divya Grover

This article first appeared on PersonalFN here.

PersonalFN is a Mumbai based personal finance firm offering Financial Planning and Mutual Fund Research services.


The views mentioned above are of the author only. Data and charts, if used, in the article have been sourced from available information and have not been authenticated by any statutory authority. The author and Equitymaster do not claim it to be accurate nor accept any responsibility for the same. The views constitute only the opinions and do not constitute any guidelines or recommendation on any course of action to be followed by the reader. Please read the detailed Terms of Use of the web site.

Equitymaster requests your view! Post a comment on "How Lack Of Financial Education Impacts Your Wellbeing". Click here!


More Views on News

Best Banking & PSU Debt Funds to Invest in 2021 (Outside View)

Apr 13, 2021

PersonalFN explains the outlook for Banking & PSU Debt funds and the best Banking & PSU Debt funds that can be considered for investment in 2021.

India: Recovery Stalled by Vaccine Games? (The Honest Truth)

Apr 13, 2021

Ajit Dayal on how India's vaccine strategy will impact the markets.

Why Did the Market Crash on Monday? (Fast Profits Daily)

Apr 13, 2021

In this video, I'll you what I think is the real reason behind yesterday's market crash.

The Next Set of Smallcap Winners (Profit Hunter)

Apr 13, 2021

Price is the only due diligence one might require to buy this business.

Should Mutual Fund Investors Worry About Partial Lockdown? (Outside View)

Apr 12, 2021

PersonalFN explains whether the second wave of COVID-19 infections impact your mutual fund investments.

More Views on News

Most Popular

My Recent Recommendation Will Profit from the Global Supply Chain Crisis (Profit Hunter)

Mar 31, 2021

A tiny chemical company, started in the Licence Raj era, is a great example of a new wealth creating opportunity.

My Stock Trading Strategy (Fast Profits Daily)

Mar 31, 2021

In this video I'll show you exactly how I go about picking stocks for trading.

4 Stocks to Make Your Portfolio Immune to the Second Covid Wave (Profit Hunter)

Apr 6, 2021

Rather than predicting the market, successful investing is more about preparing well and placing your bets accordingly.

If the Market Falls, I Will Do This... (Fast Profits Daily)

Apr 1, 2021

What should you do if the market falls? In this video, I'll tell you what I will do.

India: Recovery Stalled by Vaccine Games? (The Honest Truth)

Apr 13, 2021

Ajit Dayal on how India's vaccine strategy will impact the markets.


India's #1 Trader
Reveals His Secrets

Secret To Increasing Your Trading Profits Today
Get this Special Report,
The Secret to Increasing Your Trading Profits Today, Now!
We will never sell or rent your email id.
Please read our Terms


Apr 13, 2021 (Close)