Making the right investment requires a sound understanding of various financial instruments, realising one’s risk-appetite, knowing the investment horizon and most importantly aligning them to one’s financial goals. For couples on the brink of writing a new chapter of their lives, it’s essential to make prudent investment choices to address common goals.
While there are several investment options for couples, they end up making wrong choices as they let emotions cloud their judgement. For most, money matters are more emotional rather than financial. Here are some of the fatal investment mistakes couples make:
Adopting a herd mentality
When it comes to investment, adopting a herd mentality can be dangerous. It’s important to remember that life goals and risk-appetite are different for each individual. Couples take a plunge into the world of investment without testing waters and most of their investment decisions are heavily influenced based on the rewards and perks enjoyed by their peers.
Ideally, to start on a secure footing, the first priority should be fixed-return instruments that are latent to market volatility over market-linked products that can generate double-digit returns. Nothing beats fixed deposits (FDs) when it comes to offering assured returns. New-age FDs for couple such as Bajaj Finance Fixed Deposit offer higher returns (8.40%) than the market average with flexible tenor ranging from 12-60 months.
Additionally, Bajaj Finserv also offers pre-approved offers for personal loans, home loans, EMI finance on different products, and other financial services. Doing so simplifies the process of availing financing and helps them save time. All one needs to do is share a few basic details and check out the pre-approved offer.
Not setting up an emergency corpus
Setting up an emergency corpus to shield against sudden job loss, medical exigency, etc., is of utmost importance. Financial planners advise setting up an emergency corpus of at least 6-8 months. Here again, FDs are the best bet as they not only offer assured returns but can provide instant liquidity.
Couples can easily break their FDs before maturity when needed to get the desired funds. Though it comes with a little penalty, yet it best serves the needs when required. Being latent to market volatility, FDs ensure that the corpus is large enough to take care of day-to-day needs of running a family. By comparing FD interest rates from different financial institutions and using this online FD calculator, couples can find out the maturity amount of their investment.
Making investments without realising financial goals
On most occasions, the tax-saving attributes of a financial instrument guide investment decisions made by couples. However, investments should align with financial goals and not be guided by their tax-saving abilities. For instance, most couples end up investing in financial instruments that incur long-term liabilities in form of hefty premiums for 10-15 years. Financial goals should ideally be divided into two buckets – short and long-term.
FDs are a prudent investment option to invest for short-term goals like going on a vacation, purchasing a car, making a down payment for a house, etc. On the other hand, equity mutual funds are ideal investment avenues to accumulate wealth for long-term goals such as higher education of children.
Not buying life and health insurance
Due to its protection, savings and investment qualities, life insurance is one of the most robust financial instruments. Couples, especially in single-income households, often ignore the importance of life insurance. Ideally, couples must have a term insurance policy as it offers a large cover at affordable premiums.
It’s equally important to have a health insurance policy as healthcare expenses are rising, with medical inflation further pushing up costs. A family floater plan is ideal as it covers all the members of a family.
Also, couples must discuss matters related to finances among themselves before zeroing on any decision. A healthy discussion on money matters goes a long way in making an intelligent choice.