Posted by: Arti Bhargava on Jun 05, 2017, 06.30 AM IST
Sagar will retire in six months. His investments in fixed deposits, PPF and mutual funds have grown to a sizeable amount. However, Sagar wants to reinvest 80% of this corpus to maximise his returns before he settles down to a retired life. He has been seeking advice from friends and relatives.
One of his friends has asked him to invest in a mobile app startup that promises to double his money in six months. Another has suggested a couple of 'hot stocks' to invest in.
A relative has told him about a financing scheme he could borrow from, invest the money, pay off his loan and pocket the difference. All these sound like wonderful investment advice to Sagar. He wonders who he should listen to.
Sagar should be wary of anyone trying to secure his investment for a startup. It is as good as speculation, because in most cases it is almost impossible to find out what one is getting into. Be particularly wary of those who promise to make your money grow year-on-year at a certain percentage!
He should steer clear of such ventures if he wants to lead a peaceful retired life and avoid several years of hassle over attorney fees and court cases in order to get his money back.
Sagar should also avoid any 'hot' stock tips that he may have heard about on the news, the radio or from a friend with little or no investing experience. Wherever possible, he must perform his own due diligence or check with an expert.
Also, he must avoid investing with borrowed money. Typically, interest rates on such schemes tend to be high. Imagine the loss that he would incur if the investment doesn't perform according to expectations.
The last tip sounds simple, but it's incredibly important. Successful investing is all about time and patience. It is a slow and boring process. When it comes to investing, anything that sounds too good to be true probably is.
There are no shortcuts to building wealth. Instead of trying to make a quick buck barely six months before retirement, Sagar should avoid taking any risks with his corpus. This is the time he should secure his corpus, rather than take unnecessary risks.