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Common Mistakes Made By the Rich

IndianMoney.com Research Team | Posted On Thursday, January 09,2020, 02:45 PM

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Common Mistakes Made By the Rich

 

 

Nobody is perfect. You definitely make mistakes in life. This is because life does not come with rules and regulations. When you earn, every rupee is important. So, as far as the rich are concerned, it is important to avoid mistakes and secure wealth.

It is always good to take precautions where the money is concerned. A little bit of planning and research goes a long way in avoiding big mistakes in life. In this article, let’s take a look at the common mistakes made by the rich.

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Common Mistakes Made By the Rich

  • No Advisors: Wealthy people tend to depend on themselves. They believe they are the best in a particular area and do not seek professional assistance. Wealth managers learn about investments, risk management, asset allocation and much more. They have in-depth knowledge of every aspect of finance. It is always good to have a wealth manager to look after financial management. Besides having knowledge, they stay updated on current financial topics at the National and International level. Many wealthy people manage money themselves; which can be catastrophic if wrong decisions are made.

Many of the rich avail financial instruments from financial product sellers. They introduce investment products to the rich, as part of their sales job. Product sellers are often misunderstood as financial advisors. These product sellers don’t care about financial goals, time horizon or risk tolerance. They only care about the commissions earned by selling these products.

See Also: Basics of Financial Planning

  • Over Diversification: According to financial research, it is good to have a diversified portfolio. Diversification reduces the risk involved in investments by investing across sectors. This protects the portfolio.

But sometimes, people tend to over diversify their portfolios. They would invest in risky products without doing proper research. They could be problems managing a huge portfolio. This can result in the erosion of wealth.

  • Wrong Investment Decisions:  At times, investment product sellers, tend to trick wealthy people. They introduce certain products to the clients and give them an indirect message that only the well-off sections of society invest in them. People fall for this and lose money. These products could have high commissions, and the agents sell them to fill their pockets.
  • No Background Research: No matter how wealthy you are or how many successful investments you have made, do your homework. Do research on the company, investment product, returns and much more. Thorough research helps understand the hidden costs involved in an investment.
  • Obsession with Returns: It is important to have a clear realization of wealth. Wealth or money is a means to lead a comfortable and prosperous life. Most of the rich people make their life all about wealth. They are in a continuous process of extracting returns. This can affect the physical and mental health of a person.

See Also: 6 Reasons Why People Fail in Financial Planning! How to Overcome?

They forget to live life as they chase wealth. Everything around them is centered on earning. They must instead work on realizing their true passion. These are things that will make them happy and contented. This could be traveling, reading, painting and so on. Invest time and energy in these areas and enjoy a fruitful life. Lead a meaningful life. Have a clear separation between office and personal life. When you are going through a crisis, it is always good to have the backup of your family.

See Also: Review Your Financial Plans With IndianMoney

  • Ignorant on Investing: Having a great income or salary is a good sign. This has to be utilized to grow wealth. Earning alone doesn’t make you rich. Most of the rich people often ignore this. During your initial years, make sure to invest. This will result in fixed and high returns over the coming years. This is the basic trick of growing your wealth. Money left idle in a bank account won’t make you rich. Invest wisely and grow rich. Make your money work for you even when you are sleeping. Do look at passive income as a second source of income. Only this can make you rich.

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