Too Many Investments, Bank Accounts, And Loans—Excesses Can Be Harmful To Personal Finance!
Investment can help you achieve your goals, but investing in too many instruments which you can’t track could result in undesired results.
Investment can help you achieve your goals, but investing in too many instruments which you can’t track could result in undesired results.
Balancing Income And Investments
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Whether it’s an investment, bank account or a loan, you must use them in sync with your financial goals. Using too many financial instruments without planning can result in losses or financial indiscipline. Let’s check out why you must avoid an unplanned investment, loans or bank account and what should be your step if you already have too many of them.
Investments should be strictly linked to your financial goals. Depending on your financial goals, risk appetite and return requirement, you can choose the right type of investment products. Having multiple investment products can help you diversify the portfolio and thus reduce the risk; however, extreme diversification can reduce the return on your portfolio. So, try to establish the right balance between your risk appetite and diversification requirement so that you can generate the required return on investment for achieving your financial goals.
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Also Read: Start Retirement Planning Early For Financial Security In Old Age, Says V. Vaidyanathan
Why do you take a loan? People usually take loans to achieve their goals such as buying a home, buying a car or to arrange the funds for running their businesses. Having too many loans can adversely affect the borrower’s credit score and damage their borrowing capacity in the long term. So, before applying for a loan, make sure to plan it. If you already have too many loans, you may try to consolidate them into two or three loans. Loan consolidation can help you in improving your credit score and also lower the applicable rate of interest.
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Also Read: Tax-Saver Fixed Deposits (FDs): Should Seniors Invest In Them?
People usually open several bank accounts due to their attractive financial offers and features. However, in doing so they end up with an obligation to keep money in each account as minimum balances that often add up to a huge amount. Also, it is not easy to keep track of all the bank accounts. Ensuring the security of all the accounts can be another big issue when you keep too many bank accounts. So, try to keep only up to two or three bank accounts, so that you can manage them easily and use your funds efficiently.
While having too many financial instruments can be bad for your financial health, having less than what’s required can also be adverse. It’s essential to notice your financial requirements from time to time and make adjustments to the number of financial instruments like investments, loans, etc. according to your financial needs at different ages in your life.
The author is an independent financial journalist
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