Financial planning is incomplete without planning enough for life post-retirement. While the world gears up to observe “World Financial Planning Day” on October 04, 2023, experienced investors already realise the need to start investing for a financially secure future synonymous with a retired life
The fear of not having enough post-retirement is real. In a recently released report titled “Quality of Life Report” by HSBC, survey respondents clearly mentioned how the expanded gap between savings and post-retirement expenses has forced many people to consider working even after they retire. The survey findings also reveal that the younger generation expresses a wish to retire sooner than their predecessors. This points to the need to start saving and investing early in life to ensure that there is enough left to secure a post-retirement future. However, many people continue to refrain from commencing their investment journey. There are reasons cited with some excuses so frivolous that it makes one wonder why some people continue to manhandle their savings by relegating them to bank deposits alone. Money invested is money earned, thanks to the compounding effect that underlines well the value of early and continued investment in the long run.
Some of the typical reasons people give for not investing at the appropriate time and in the correct investment opportunities comprise:
Indecisive about financial goals
The absence of well-defined goals, a clear timeline, and a specified corpus stands as the most substantial obstacle to delaying or interrupting the investment process. Lacking a defined goal makes it challenging to maintain motivation and direction. A missing timeline often leads to procrastination and delayed investment decisions. Furthermore, not having a clear understanding of the required investment amount makes it hard to formulate a practical and achievable plan. While investing can present challenges, it can also be highly rewarding when you've established a financial objective and implemented a well-thought-out financial strategy.
Undefined objectives can lead to a lack of discipline. Consequently, even individuals who initiate their investment journey without clear goals run the risk of veering off course and prematurely discontinuing their investments.
Unwarranted fear of losing capital
The fear of financial losses in the stock market is a significant deterrent for many individuals. Given the inherent volatility of the stock market, there is always a potential for loss. Nonetheless, it's crucial to keep in mind that the stock market also offers a powerful means of accumulating wealth over the long run. For those who are apprehensive about the market, it's essential to recognise that investing is more like a marathon than a sprint. Building wealth in the stock market takes time, so it's unrealistic to expect quick riches. Instead, concentrate on consistent, long-term investing.
Zero knowledge of finances
A significant number of individuals in India depend on others to make investment choices instead of conducting their own research. A considerable number of them lack a strong grasp of how the stock market operates and the principles of prudent investing. This lack of knowledge can pose a challenge when it comes to making independent investment choices. Many people harbour apprehensions about making financial mistakes, particularly with their money. Consequently, these fears often compel them to rely on external sources for investment decisions.
Individuals frequently place trust in the counsel of experts, such as financial advisors and stock market analysts, believing that their expertise and experience can lead to more informed investment choices. While seeking advice from others is a common practice, it is imperative to remember that the ultimate responsibility for investment decisions rests with the individual. Conducting personal research and comprehending the associated risks before committing any funds is a crucial step in the investment process.
Modern-day investors should exercise caution when considering advice from investment influencers. It's important to recognise that not all investment influencers possess the necessary qualifications or trustworthiness.
Not saving enough to invest
Saving money is an essential prerequisite to investing it. This also explains why so many people complain that they never accumulate or save enough to invest without realising that investments can be done in small amounts too through regular and systematic investment plans (SIPs) into stocks, mutual funds, and other simple investment options like exchange-traded funds (ETFs).
Mutual funds and ETFs represent diversified collections of stocks, allowing you to access a range of stocks with a single investment. They typically offer low minimum investment requirements, making them suitable choices for investors with limited capital. Nevertheless, it's equally crucial to begin your investment journey cautiously and educate yourself about the stock market before committing funds. Numerous resources, including books, websites, and online courses, are readily available to assist you in acquiring the necessary knowledge about investing.
Fear of market risks
Many individuals hold the belief that they can achieve rapid profits in the stock market, but this notion carries significant risks. The stock market is inherently volatile, and the potential for financial losses is ever-present.
Investors who enter the stock market with hopes of quick gains often end up assuming more risk than they can reasonably handle. This can result in substantial losses, particularly during market downturns.
When engaging in stock market investments, it is crucial to adopt a long-term perspective. Historically, the stock market has shown an upward trajectory over extended periods, though it experiences fluctuations along the way.
Furthermore, it is vital to understand that the stock market is not akin to a casino. It functions as a platform where businesses secure funding for growth. When you invest in the stock market, you are essentially acquiring a share of a business. Therefore, it is prudent to invest only in companies you comprehend and have confidence in.
Unwillingness to approach financial advisors
For novice investors with limited resources, establishing a strong financial plan becomes even more crucial to maximise their available assets. Unfortunately, many investors fall prey to the misconception that financial advisors demand exorbitant fees, which leads them to shy away from seeking their assistance.
While it is true that certain financial advisors impose substantial fees, it's worth noting that there are also numerous financial advisors who offer more reasonable fee structures. Conducting thorough research and comparing fees should be a priority when selecting a financial advisor.
For new investors working with limited resources, it's essential to exercise discretion when selecting a financial advisor. Seek out an advisor with a strong track record of experience, appropriate qualifications, and a fee structure that aligns with your comfort level.
There can be so many reasons to not invest your money and an equal number of reasons to start investing your money right now even as you are reading this article. Not that you must jump into the fray without looking at what lies ahead, but contemplating your coming investment move and deciding how, where and when to put your money will help you amass enough in the long run for a financially secure future.