Top personal financial planning mistakes 6 – Only debt investments

I can see lots of people saying that they are investors and agree they are doing the same in a much disciplined manner. Most of in this case, I have found that people interested to purchase or invest only in debt instruments such as bank FD’s, Bonds or traditional insurance policies, the instruments backed by government for security. I agree this is also an investment but below thoughts are good before investing the entire amount only to debt instruments.

It is a must to have quality debt instruments to your portfolio. But that should have limitation upon your age, risk profile and goals. Debt investment instruments can enhance your portfolio to meet mid term and short term goals because of its capital guarantee nature.

Adding your entire investment amount into the debt instrument is just like you are getting a bonsai tree instead of a huge teak wood after a period of time. Debt instruments have its limitation because of the limited return yield. Long term debt investments never help you to meet your future requirements considering the inflation adjusted return.

A proper financial plan should not have the entire investment in debt instruments. Generally low risk profile people have this habit because of fear on losing capital or ignorance on investing in equity or equity related instruments for long term can yield them 10 to 100 times of profit than there present debt investments.Come out from this big mistake. Have a portfolio of proper investment instruments in the proper proportion is the solution.For people who are only interested to have debt investments required well guidance from qualified financial planners to come out of the circle and expand there knowledge and huge profit possibility by adding money to proper place at proper time.

This is Part 6 and the final article in a series on Top personal financial planning mistakes. The full series is Part 1, Part 2, Part 3, Part 4, Part 5 and Part 6