1. Higher Equity Exposure Doesn’t Always Mean Higher Returns
Investing in equities is often touted as a high-return option, but relying solely on bull markets is a risky game. Bull markets are cyclical and won’t last forever. Overexposure to equities, especially during volatile periods, can erode wealth significantly. Instead of chasing high returns blindly, focus on disciplined, well-researched investing.
2. Balance is Key: Diversify Your Investments
Diversification is the cornerstone of financial planning. While equities offer growth, balancing them with fixed-income assets like bonds, fixed deposits, and government schemes can act as a safety net during downturns. A diversified portfolio mitigates risk and ensures stability, even in turbulent financial markets.
3. The Alarming Rise of Household Debt in India
Indian households are increasingly relying on loans for lifestyle upgrades, including white goods, personal loans, and home financing. While credit can be a tool for growth, over-leveraging poses significant risks. The household debt-to-GDP ratio has risen to 42% in Q1 FY25, signaling a worrying trend. Excessive debt, coupled with risky investments, could lead to financial stress and long-term instability.
4. Don’t Chase Returns: Avoid the Performance Trap
Switching funds or investments based on past performance is a common mistake among investors. High past returns don’t guarantee future success, especially in volatile markets. Frequent switching not only increases transaction costs but also exposes your portfolio to greater risk.
5. Equity Should Be Part of the Plan, Not the Whole Plan
Equities are vital for wealth creation, but they should be complemented by other investment vehicles. Dr. Pattabiraman advises keeping 50-60% of your portfolio in equities and allocating the rest to fixed-income assets, real estate, or gold to build a well-rounded financial strategy.
6. Plan for the Long-Term: Smart Investing for Sustained Growth
Financial planning is not a sprint; it’s a marathon. Avoid the lure of quick profits and focus on sustainable, long-term growth. A disciplined approach reduces risks and helps weather market fluctuations. Ensure your investments align with your life goals, such as buying a home, children’s education, or retirement planning.