Some investors are too greedy on equity investment returns! Though equities outperforms inflation, it is not a good bet to take risk fully on equities! That too if you have huge debt burden never take risk to invest your entire corpus in equities! To now the reason why, read the full story!
Why investing in equities is not a good bet when you have debts?– Some investors ignore debts and invests aggressively in equities often, they assume as equities gives stellar returns they can repay their debts sooner, but this seems to be an impossible task!
Even successful investors warren buffet, ramesh damani, rakesh jhhunjunwala can’t predict the market movements exactly, instead they predict the market trend and identify the right stocks at right time, thus become “share” khans. But this wasn’t possible for every one, infact warren buffet might also suffer huge losses when market went into bear territory! But they can manage their both ends as they have huge financial security, but being a debt person you can’t manage your finances thereby making your financial life more complicated
Even though in stock market bear and bulls faces tough fight frequently for a common investor it is not a safe bet to invest in equities by not repaying their debts first! To avoid this situation you should follow 3 strategies to protect your financial life.
3 Strategies to follow if you have huge debts–
- First focus on your day to day expenses. Try to minimise unnecessary expenses
- By reducing expenses you will be left with some savings. Save them in a higher return products than a bank savings a/c(Don’t take high risk, prefer safer products like fixed deposits, recurring deposits, liquid funds- safety first then higher returns)
- After accumulating sufficient savings “give preference to repay debts with higher interest rates and gradually smaller interest rates and thereby get debt-free sooner”
Only after concluding you are “debt-free” invest in equities then. Don’t over-estimate equities will give huge returns that you can repay your debts. Though equities have the potential to generate huge wealth, it is recommended to “invest your surplus money that you don’t need for 5-7 years”
First try to be debt free and invest only your surplus money. Don’t make your financial life too complicated. It is in your hands to safeguard your family, so don’t let your debts makes impact on your dear and near ones.