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We understand that financial planning can be an overwhelming experience and before embarking on your journey, it is important to know about all the common pitfalls and successfully avoid them. This will not only help you save time, effort but will also ensure that you invest most optimally to build the required corpus.

We have put together a list of common mistakes which you should be aware of for efficient financial planning. 

Don't put off until tomorrow what you can do today

This famous quote by Benjamin Franklin is excellent advice for investors. Often people live by the misconception that there is a right age/ time to start investing, in this bargain, they prefer to not invest in the first few years of their earning life. Procrastinating is seen in tax-saving investments as well, while many people do not realise this during the initial years, procrastination of important life decisions is often regretted at a later stage in life. 

Takeaway: It is always the right time to start investing. For your tax-saving investments, plan them at the start of the financial year. Similarly, for your comprehensive financial planning, the sooner you start investing, the longer you are invested, and be the benefit of compounding works in your favor! 

High exposure towards a single asset class that you are most comfortable with

While it may not be intentional, it has often been seen that individuals choose to invest substantial amounts in fixed deposits. This is primarily due to the convenience of moving funds from an existing savings bank account to a fixed deposit with the same bank. This results in a very skewed portfolio with excessive exposure to a debt instrument that is neither tax-efficient nor high-yielding. Another reason for choosing to invest within your comfort zone is the lack of knowledge, it is important to educate oneself about other financial options and choose one which aligns with your risk-return profile. If you do not have the required expertise, then you should consult an expert. Diversification can reduce your risk substantially, this aspect should not be ignored. 

Takeaway: We must spend ample time to develop a portfolio that aligns with our risk-return profile. The portfolio should be designed per your long-term financial goals. 

Haphazard investments

Haphazard investments often occur when an investor does not systematically follow the financial planning process. Investments made on a whim or an impromptu basis without being backed by sufficient research can lead to a fragmented portfolio. There is no greater mistake than investing at random, financial planning is a systematic process that begins by assessing your financial goals. Adhering to a financial plan will ensure that the entire portfolio is designed systematically and aligned to your risk-return profile. 

Takeaway: Follow the process or a financial planning checklist to plan your finances, as a first step assess your financial goals, arrive at the timeline and corpus after considering rate escalation and inflation. 

Lack of discipline 

It is important to invest right, but what is more important is to invest consistently. If you discontinue your investments for any reason, you may fall short of your financial goal. Often, as a knee-jerk reaction to market trends, individuals discontinue their equity investments. This may result in not being able to fulfil your financial milestone at a later date.

Takeaway: Discipline and commitment are two virtues in investing which will hold you in good stead. Choose a systematic investment route for investment, which not only ensures a disciplined approach but will also reduce risk.

Lack of patience

Just like Rome was not built in a day, your financial corpus will not be built over a short period. Patience is the name of the game in the investing world. While monitoring is an important aspect of investing, many individuals indulge in checking their portfolio (returns) every other day. This is unnecessary and will only cause anxiety.

Takeaway: Invest over the long haul, the magic of compounding unfolds only in the last few years of your long-term commitment. 

Hope this article helps you in planning your finances efficiently without making any of these epic investment mistakes!