Our last investment education contribution focused on keeping financially fit by budgeting, avoiding impulse spending, saving and investing. A lot is always said about what you should do with your money.
However, it is also important to be aware of what you should not do with your money. The following don’ts will help you in managing your money and keeping financially fit:
Don’t leave large sums in your current account uninvested: Liquidity is very important to help you deal with your regular expenses. However, do not leave large sums in your bank account. Instead, invest a sizeable portion after you have determined a reasonable cash balance that will meet your expenses and cater for emergencies.
The average return on your bank account, say a savings account may range between 4-8% per annum and earning such an interest on large sums especially if you don’t have immediate need for the funds, is not a smart investment move.
Don’t invest your money based on what you hear: A lot of people invest because everyone else is investing. You need to understand your risk profile and determine your investment objective before you start investing. Every investment decision must stem from a good understanding of your needs and assessment of your risk tolerance.
The caveat, “for investment decisions, consult your financial adviser or stockbroker for guidance” should be taken even more seriously.
However, you must avoid advisors who rely heavily on brokerage or commission. Ensure that you speak to credible and qualified investment advisors who understand your objective and will be willing to provide good financial advise.
Don’t lose track of your money: You must monitor your cash flow and investment portfolio to meet your investment goal. For example, if you intend to lose weight, you need to know where you are at every point in time. This will help you make better decisions aimed at achieving your goal. Market conditions such as inflation and interest rates have an impact on the value of your money.
