Young Investors – Do’s and Don’ts

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A thread in Quora asked for a list of worst financial mistakes that a person in 20’s can make. The brief answer lists 4 such mistakes. The source of the list is the classic article in ValueResearch Online.

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  • Buying products only for “saving tax”
  • Waiting for the “right time” to invest
  • Getting high on debt, early in life
  • Over relying on relatives, friends and parents for your financial decisions

In this short article we would look at how these mistakes get made and possible ways to avoid them.

Errors Why they happen How to avoid
Tax Saving Bias Focus on tax-savings without a proper plan Choose investments aligned to your plan
From that, choose tax-saving options
Market Timing Focusing on short term volatility
Indecisiveness
Develop a long horizon for investments
Ignore short term volatility and build discipline in investing
Excessive Debt Desire for immediate gratification
Aggressive selling of loan products
Avoid loans for depreciating assets
Build up savings to purchase gadgets, take trips, etc
Biased/Incorrect advice Relying on ‘free’ advice
Inability to detect bias in advice
Don’t take advice from sellers/agents
Invest in professional advice

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