Saving & investing for your retirement is essential while you are in that nascent stage of your career. However, people end up making small mistakes that later amplify their losses or their realized gains.
Most of the time, people don’t realize the importance of saving & investing. They push it back and worry about their retirement kitty for later. However, the sorry news is that this is, quite honestly, not the right approach. Here are 5 mistakes one should avoid while saving up for their golden years.
Mistake 1: Improper Plan/Calculations for Your Retirement Dream
You must start estimating your retirement corpus requirement with a Retirement Calculator. Start by sharing your future plans with your spouse by asking each other how much of the present income is required to maintain a comfortable life during retirement? Are there any plans to see the world? Figure out your costs. Calculate your current expenses and find out the future value of your expenses by the time you retire, assuming a realistic rate of inflation. Once you know your answer, use the Retirement Calculator to serve a rough guide as to what this figure can be.
Mistake 2: Not Increasing Your Investments through SIPs
A Systematic Investment Plan (SIP) could be your first step to happy retirement life. SIP is one of the preferred ways of investing in a mutual fund. In an SIP, you can invest every month with a minimum amount of Rs. 500. An SIP makes you a disciplined investor. It also helps you achieve your goal of retirement planning. Let’s say you save 5% of your income, for instance, Rs. 2,083/- a month on a yearly income of Rs. 5,00,000 Gradually increase that amount to 10-12% every year. The additional increase will substantially add to the future value of your corpus.
Mistake 3: Starting late & losing on Compounding
The tool that you need to grow your investment over time is the power of compounding. In simpler words, it is earning returns which gets reinvested – a snowball effect that could effectively increase your savings much more over time. Thus, the sooner you start saving, you get more time on your hands, thereby letting compounding work for you in the long run.
Thus achieve your financial goal of saving up for retirement by investing as soon as possible. consult your financial advisor before making any investment-related decisions.
Mistake 4: Improper Asset Allocation
Asset allocation is based on the premise that the different asset classes have varying performance cycles.,.
A good asset allocation plan develops an investment portfolio that will help you reach your financial objectives with minimal amount of risk. However, if you are young and not investing in equity, you are missing out on gains that equities have to offer. A portfolio heavily tilted towards debt at a young age might keep your principal at lesser risk, but it will fail to generate more significant returns. Similarly, if one ends up investing heavily into equities when they are reaching a senior age, they are risking their capital. – a move that could prove disastrous.
So a prudent asset allocation is always advised based on one’s risk-taking capacities.
Mistake 5: Not having a Plan at all
It may sound funny, but if we open our eyes, we will notice that saving habits among youngsters are at an all-time low. Many fancy that they will end up running some successful business that will generate enough cash flow to meet their needs. But pandemic has taught us that some of the most reliable ideas have miserably failed and have bought people to poverty. So it’s not just wise but equally important to have a retirement plan for ourselves no matter how we are faring in our lives.
Disclaimer: The views expressed here in this Article / Video are for general information and reading purpose only and do not constitute any guidelines and recommendations on any course of action to be followed by the reader. Quantum AMC / Quantum Mutual Fund is not guaranteeing / offering / communicating any indicative yield on investments made in the scheme(s). The views are not meant to serve as a professional guide / investment advice / intended to be an offer or solicitation for the purchase or sale of any financial product or instrument or mutual fund units for the reader. The Article / Video has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. Whilst no action has been solicited based upon the information provided herein, due care has been taken to ensure that the facts are accurate and views given are fair and reasonable as on date. Readers of the Article / Video should rely on information/data arising out of their own investigations and advised to seek independent professional advice and arrive at an informed decision before making any investments. None of the Quantum Advisors, Quantum AMC, Quantum Trustee or Quantum Mutual Fund, their Affiliates or Representative shall be liable for any direct, indirect, special, incidental, consequential, punitive or exemplary losses or damages including lost profits arising in any way on account of any action taken basis the data / information / views provided in the Article / video.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.