5 Personal Financial Mistakes that I have committed…!

My article on ‘The 6 most common Personal Finance Mistakes’ have become very popular among my blog readers. After reading this article, one of my blog readers has suggested me to publish an article on the ‘personal financial mistakes that I have committed ’.

In this post, I have shared about my personal financial mistakes and some of the investment or personal finance lessons that I have learnt over the past 10 years.

I got my first job in 2003. As soon as I completed my MBA, I got selected in a campus placement. It was with one of the top Job Portals in India.

In 2004, I had joined Infosys BPO. The salary which I used to get was sufficient to meet my monthly living expenses. So, no major savings or investments were done during this period.

Later in 2005, I had joined an US Mortgage Processing company in Bangalore with a good hike in my salary. This had resulted in good amount of monthly savings. Like any other employee, I too started worrying about my TDS (tax deducted at source).

I had started thinking – how to save taxes? Where to invest my savings? Which are best investment options? How to make quick bucks by investing my monthly savings? 🙂

In the same year (2005), I got married and my wife too was employed in the IT field. So, double income, more savings, more thoughts about investment planning..

I believe that I have committed most of my Personal Finance mistakes between 2005 to 2007 and took corrective action during 2008 to 2010. Below are the details;

Related latest article : “A comprehensive list of the most common MONEY mistakes!

My Personal Financial Mistakes

Mixing Insurance & Investment

I believe that this is the most and very common personal finance mistake that many of us commit. I invested in an ULIP (Unit Linked Plan) in 2005 for two reasons – i) to claim life insurance premium as tax deduction under section 80c & ii) one of my good friends was a Life insurance agent and wanted to help him achieve his business target 🙂

The ULIPs which were issued before Sep 2010 had very high cost structure. The charges (such as premium allocation, policy administration in ULIPs) are usually front-loaded, which means only a smaller proportion of my premiums were invested in the initial years. So, I was very disappointed looking at the returns generated by my ULIP. Finally, I had surrendered this policy in 2010.

I had also bought one Traditional Life insurance policy (Endowment plan) in my name in 2006. The reasons for buying this plan are same as with the case of ULIP. In 2010, I had realized that all I need is one Term insurance plan and there is no requirement to have high cost – low yielding Endowment plan. I had surrendered this policy in 2010.

(Read : Traditional Life Insurance Plan – a terrible Investment option?)

Short Term Trading & Intra-day trading

My first investment in stock markets was in Ashok Leyland scrip in 2004. I remained invested in this stock for just 3 days only. I would have monitored the price of this stock for atleast 100 times over those 3 days 🙂 . My aim was to get atleast 5% returns on this investment. I had lost patience and sold it for loss on the fourth day.

I lost huge amount of money by doing day-trading also. I have lost money trying to make a quick buck. I used to trade in stocks purely based on tips and recommendations given by the analysts. All this happened during 2004 to 2007.  I played short-term investing game without knowing the rules of the game.

I had incurred a total loss of Rs 3,08,129 because of Intra-day trading (during 2005-2007 period).

Intra day trading short term trading losses in stock market margin trading Personal Financial Mistakes

Invested in lot of Mutual Fund NFOs (New Fund Offers)

I used to buy and sell Mutual fund units very frequently during 2005 to 2008. I had invested in way too many Mutual fund schemes (in total 15 MF Schemes) without any proper research. Also, I had invested in many New Fund offers (NFOs) when I had an option to invest in well performing funds with good long track record.

During 2009-10, I started tagging my financial goals with the investments and redeemed all the unwanted mutual fund investments.

In 2009, I had requested for a consolidated mutual fund account statement from my distributor to understand and quantify the loss that I had incurred. Yesterday, I had spent almost one hour to trace this statement and finally succeeded in finding it. Below are some of the screenshots of my NFO MF investments in 2005-2006.

Mutual fun new fund offer 3 NFO pic
Mutual fun new fund offer 1 NFO pic
Mutual fun new fund offer 2 NFO pic

Not claimed the speculative losses in Income Tax Returns

As shown in one of the above pics, I had incurred huge losses because of intra-day trading. This is categorized as speculative loss. The loss from speculative business can be set off against profit from another speculative business income. Also, un-absorbed speculation business loss can be carried forward for a period of 4 years. I had not set off my speculative losses against speculative profits (had a chance in one of the FYs).

Lent money to a Friend

A friend in need is a friend indeed. We generally approach our friends or close family members when we are in need of any financial help.

In 2005, one of my office colleagues (my immediate boss) had requested me to lend him money. He had told me that his mother was seriously ill (kidney related disease) and borrowed Rs 85,000 from me (I later came to know that it was a lie).

All I could get back is Rs 12,000 only. I tried all possible ways to get back my money but all proved to be in-vain.

post dated Cheques
Money to friend informal pro note format not on stamp paper pic

Below are his hand-written agreement (got it in 2007) on plain paper and post-dated cheques (which I couldn’t en-cash)

I might have lost money doing share-trading but this mistake of mine has hurt me the most till date. He is now working for an Indian IT Company as a Senior level manager.

You can find similar cases like mine in the comments section of my article ‘What is Promissory Note?‘.

Lent money to a friend - case 1
Lent money to a friend - case 2

As Shakespeare wrote, “For loan oft loses both itself and friend.” If you lend money to a friend or family member, beware that you may not get your money back and your relationship may never go back to normal. So, you lose both friendship and money. Think twice before lending money to a friend. Sometimes its better not to lend money to a friend keeping their best interests in mind.

Below are some of the Investment or personal finance lessons that I have learnt over the last few years;

  • Most of the Personal Finance or investment lessons can be learnt only by experience. Once you learn, try your best not to repeat the same mistakes again. Write down the mistakes that you have committed and don’t repeat them.
  • Don’t start your investment planning by identifying a product first. Instead, create your investment plan by identifying your financial goals first and then shortlist the investment options that are suitable to you. (Read : ‘How to create a solid investment plan?‘ & ‘List of best Investment options‘)
  • Learn to say a firm NO to unwanted financial products even if they are being sold by your near and dear ones.
  • Try not to take or not to give money to friends/relatives. If you do not want to lend money, gently refuse the loan and identify the best alternate to help your friend or loved ones.
  • Don’t gamble with investments. Avoid short term trading and/or Intra-day trading in Stock markets. (Read : ‘10 reasons to avoid Short-term Trading in Stock Markets‘)
  • We invest in a Time Deposit (Fixed Deposit) and wait for 365 days to get 8% returns. So, lets’ implement the same strategy with respect to stock market investments (if any). Invest for long-term.
  • Understand the power of compounding. (Read : ‘What is Time Value of Money?‘)
  • Invest as early as possible, as much as possible and as frequently as possible in suitable investment avenues.
  • It is prudent to invest in investment options that you can understand.
  • The day when you feel happy and excited to invest more in stock markets for your long-term goals, that day you can consider yourself as a balanced and matured investor 🙂
  • Sometimes, booking losses or surrendering unwanted life insurance policies can be beneficial. It’s ok to make mistakes but don’t wait unnecessarily and compound your mistakes.
  • Following tips blindly and having heard mentality is very dangerous to your financial life.
  • Know what is ‘conflict of interest‘ when buying financial products from banks / advisers / agents / distributors.
  • Keep your investment plan as simple as possible.
  • Tag your financial goals with your investments.
  • Kindly understand what is diversification. Over diversification or under diversification, both may not be beneficial.
  • Have realistic expectations from your investments.
  • Live within your means.
  • Don’t take financial advice from too many people.
  • Take professional help to prepare and file income tax return.
  • Generally most of us tend to make investments based on the tax treatment or the tax benefits available at the investment stage only. However, we need to be aware of the taxation rules applicable in all the three stages i.e., investment, accumulation and withdrawal. (Read : ‘Tax treatment of various Financial Investments)

Did you make any personal finance mistake(s)? What are the Investment lessons that you have learnt in your financial life? Kindly share your views. Cheers!

(Image courtesy of Sira Anamwong at FreeDigitalPhotos.net) (Post published on : 12-Aug-2016)

  • Venkatesh says:

    Dear Sreekanth,
    i brought land with home loan in my name and full owner as my wife, now due to personal issue we are going for divorce. so i asked her to sell the land and pay the amount i spent till now, she asked me some time, so i am planning to put one bond or loan agreement for six month. if not paid i have the rights to find buyer and she need to sign it, is that possible?..can you please suggest me which is best for me. Thank you in advance

    • Sreekanth Reddy says:

      Dear Venkatesh,
      Do you mean to say that home loan is only on your name whereas the owner of the property is your wife alone?

      Anything is possible as long as it is mutually agreeable! You may kindly consult a civil lawyer and get the agreement drafted!

  • jsureshkumarreddy says:

    Excellent narration about the financial mistakes. Thank you so much.

  • Umesh says:

    Dear Sir,
    I want to know which ITR I should fill? I am a resident Indian having income from salary. I have two houses, one is rented and other is self occupied. I also have some mutual fund and shares transactions. I think I should fill ITR 1 but there is no provision for second house and also capital gain/loss. Please guide.

  • Kumar says:

    Dear Sreekanth,

    Wish to get your advice on this issue.

    1) One of My dear friend wish to purchase a flat , he require some financial assistance, which will around some lakh, shall I get promissory note signed by him or unsecured Loan Agreement, for this friendly loan.
    2) I do not wish to take any interest on loan amount,is it permissible under Govt. Rules.
    3) what are the provisions in Income Tax Dept.
    4) what is the maximum period to recover the loan.

    Thanks in advance

    • Sreekanth Reddy says:

      Dear Kumar,
      Just because I had bad experience, I will definitely not advise everyone to stay away from helping friends.
      Each of one us have some genuine friends and they may be in need of genuine help.

      As this requirement is to buy a flat (not an emergency according to me), advisable to get a Promissory note / Loan agreement done, period can be maximum 3 years.

      It can be an interest free loan, no issues.

  • Jayant Kadge says:

    Very simple and practical but intelligent suggestions

  • JAGADISH K says:

    Hi Srikanth,

    Can you please publish TOP 10 Mutual funds that have out performed in last 10 years? Information avialable across is only for 1- 5 years .

  • Rank My Hub says:

    Hello Sreekanth, This post will be an eye opener for many people who does investments without proper research and knowledge. You are doing the best job, by creating this blog and educating everyone about investments and financial planning. I appreciate your efforts put into this blog. Thanks a lot for sharing your views.

  • bhavanisingh says:

    hi sreekant
    i have lendmoney of 50000 to a friend in2012 and i have got promissory note signed from him and ablank cheque also,
    but not he refuse to pay my money back says he will pay money but right now i dont have,
    i am asking him from last 3yrs and also not picking phone
    what to do for recovery of my money
    suggest legal terms.

  • Umesh says:

    I have invested in a debt fund dividend plan. The dividend is declared monthly. Since my dividend amount is less than Rs. 200/- the fund reinvest it instead of giving cash. My query is if this dividend declared should be treated as my income? If the exit load will be applicable for the reinvested dividend when I decide to redeem it?

    • Sreekanth Reddy says:

      Dear Umesh,
      Since it is re-invested into the fund, it is not an income. Even if you receive it, the dividend income received by a debt fund unit holder is also tax free.
      I believe that generally no exit load will be levied on Bonus Units and Units allotted on Dividend Re-investment.

  • kamal says:

    dear sreekanth,
    i m searching for plot to buy, anytime between next one month to 1.5 years i will buy, until where i can keep my amount for better return
    1. RBL bank SB account(7% interest rate, may be changed to 6.5 from 2017)
    2. FD (pls suggest which bank gives highest rate)
    3. Debt. mutual fund
    4. any other better option?

    Kindly suggest

  • Tara says:

    Hi Shrikanth

    I have invested in SBI-LIFE smart performer ULIP . paid a premium of 50k for 5years from 2011 – 2015.. Sum assured is Rs.5 lakh on maturity or Highest NAV (10years).
    Current fund value is nearly Rs.325000
    would you suggest to continue it or surrender? I have read many articles suggesting ULIP is a poor option for investment. please advice


  • Pradeep Sharma says:

    Hi Sreekanth,

    Keep up the good work. I am a chartered accountant by profession and very much interested in financial planning.

    I want to start investing around Rs.10,000/- per month in SIPs so can you suggest some good funds to choose from..

    This would be a long term investment of around 15 to 20 years for my son’s higher education.

  • Vivek says:

    Hi Sreekanth,

    I had taken an endowment plan from a neighbor who is an LIC agent when he had visited my house casually. I was looking for some investments and totally blank on products available in market.

    I took this endowment plan for which premium was Rs.55,000/- per year & this would go on for 30 years or so.
    When time came to pay premium for 2nd year, I kept away. My instinct said don’t go with this plan. I know there is no option of policy surrender too.

    Can you confirm if by any chance I could get some money. Was my decision wrong by not continuing? I feel too guilty for having made this bad decision to start endowment policy.

    FYI, I started PPF with about Rs.40,000 per year.

    I must say you are doing an excellent work through this site by educating youngsters. Kudos SREEKANTH!



  • Sagar says:

    Dear Sreekanth,

    Really impressed by your blog . All your articles are written with so much research and personal expiriences.
    I would like to know how do i start investing in mutual funds.
    I want to start through elss first with around 2-3 k investment and then build portfolio going forward as per growth in my career.

  • Loyd says:

    Dear Sreekanth,

    I hold a Whole Life Participating Plan from Max Life. I have paid 5 annual premiums as on date. Is it advisable to surrender this policy ? I have a Term plan to cover life risk.
    The policy details are as below:
    Start date: 27.03.2012
    Premium : Rs. 10,154/-

  • Deepak says:

    Hi Srikanth,

    I am investing in SBI Pension Plan “Retire Smart” for Past two years @ 37.5k quarterly. PPT is 10 years and Maturity is after 20 yrs. Not sure if this is a good product to invest. Kindly advice

    Also i am investing in the following SIP

    1. Franklin India Smaller Companies Fund – Direct – Growth (5k Monthly for 5 yrs)
    2. ICICI Pru Value Discovery Fund – Direct – Growth (5k Monthly for 5 yrs)

    I am planning to leave the SIP for 18 yrs untouched.

    Kindly advice if this is a good investment plan.


  • Asha Bansal says:

    Hi, very informative article.
    I am 28 years old and I am searching for good investment options. I just came to know about peer to peer lending as an emerging platform in India and wanted your views on that.

  • Bhagwan Murthy says:

    Sometimes we make mistakes due to ignorance, laziness, poor planning or haste! Here are some of my mistakes:
    1. I put a few lakhs of rupees in an FD in my own name. I had to pay 30% of the interest as tax. My major son is studying. If I had transferred the money to his account through net banking and made the FD in his name, I could have saved that money as the interest was less than 2.5 lakhs.
    2. I made a single e-STD for 6 lakhs. When I had to send my son 1 lakh for his fees, I had to break the entire FD. There was a penalty for breaking the FD prematurely. But more important, when I tried to reinvest the remaining 5 lakhs in FD, I found that the interest rates had been reduced by 0.5%! I should have made 6 FDs of 1 lakh each and avoided breaking the remaining 5 FDs.
    3. Instead of breaking the 6 lakh FD, I could have simply requested the bank to give me a 1 lakh OVERDRAFT, keeping the FD as security. This is possible in net banking itself with a few clicks of the mouse!
    4. I transferred 1.5 lakhs from my SB account to my online PPF account on 8th April. If I had transferred it before 5th I would have got 8.7% interest for one month. Not only that. I lost SB interest from 8th Apr to 1st May also. If I had DELAYED the transfer till 1st of May, I would have earned at least 4% SB interest for that period. The net loss would have been 4.7% instead of 8.7%.
    5. To transfer 1.5 lakh to the PPF account, I had to break a 1year eSTDR prematurely since its maturity date was beyond 1st April. Suppose I had initially selected the maturity date as 1st April, I could have avoided the penalty for breaking the FD since it would have matured naturally.

  • Bhagwan Murthy says:

    Friends sometimes ask me this question: Is it wise to apply for home loan in order to avail tax benefit even when one has sufficient money to buy the house directly? What is the answer?

  • sunny k cherian says:

    Very informative and transparent article. Thanks for sharing your investing experience which identifies with my own blunders in life. Today I am 65 years of age. Main concern is surviving on interest when Govt is reducing interest on FD without bothering for the senior citizens. This is enabling banks to dole out loans to interested parties like Mallaya’s of this country on soft terms.

    Kindly advice how and where to invest to receive an amount of Rs.50k per month without risk and also to take care of inflation @ minimum 8% per annum (to take care of medical needs and inflation). (1) The investible amount is Rs.20 lacs besides a rental receipt of Rs.30k per month. (2) Alternatively disposing a property which will give any investible amount of Rs.100lacs + plus Rs.20 lacs = Rs.120 lacs
    Question 1 : Kindly suggest which of the model is better ( 1) or (2)
    Question 2 : Where and how to invest.
    Regds / sunny

    • Dear sunny Ji,
      Kindly note that to beat inflation, one has to take some amount of risk.
      Is this property self-occupied cum let-out property? Do you have any family member who is financially dependent on you? (or) have an financial commitments?
      May I know if you have Health insurance cover & maintain Emergency Fund?

      • Sunny K Cherian says:

        Dear Sreekanth ji,

        Tks for your immediate response. This is currently self occupied and I have the choice of renting or selling it as I have an alternate arrangement for stay at a measly cost of Rs.30k per annum with wife. Both Children are currently independent . A Ulip for 10 lac has an outflow of Rs.1.01 lac per annum and a mediclaim for us for 10lac at 30k premia is also in vogue. Thus the 50k per month I am seeking currently is to cover all this ( Rs.8500k + 2500k +2500k + 36500 ) . Emergency fund of about 3 lacs can also be available. Looking forward to an early reply.

        Regards / Sunny

  • NarasimhaReddy says:

    Nice one Sreekanth. I did the same mistake of playing with the stocks for Short Term. Later realized the fault.

    The basic things are

    1) Term Insurance which every one needs ( Many still feel why do we need to take Term Insurance)
    2) Health Insurance for your Family even oif you have one with the compmy
    3) Health Insurance for your Parents
    4) Short Term and Long Term Goals and how to achieve them.

  • prasanna says:

    I am a regular reader of your blogs and inspired with your investment ideas. I was not having any tracker or any investment goals. After reading your articles I am getting organised my personal finance. Could you please review my portfolio and suggest me an investment options? I have very generic goal for my daughter marriage and retirement plan.

    Age 33
    Child 1 daughter, Age 1
    Annual Income 16 Lakhs
    FD 70 Lakhs
    House 35 Lakhs
    NPS 1 Lakh
    PPF 5 Lakhs
    EPF 17 Lakhs
    LIC (Profit Plus Tno:188) 1.5 Lakhs
    investment on shares 1 Lakh
    Mutual Fund 20,000 INR
    Medical Insurance with Employer 7 lakhs family flotter
    Loans/EMI zero

    • Dear prasanna,
      Thank you for following my blog posts and glad that my articles have helped you to plan your personal finances 🙂
      1 – May I know the reason for holding Rs 70 Lakh in FDs?
      2 – Do you have term insurance plan?
      Meanwhile, kindly read below articles;
      List of articles on key aspects of Personal Financial Planning.
      How to create a SOLID investment plan?
      If life is unpredictable, insurance can’t be optional.

      • prasanna says:

        Dear Sreekanth,

        Thank you very much for your response and valuable links.

        1. Looking forwarded to buy a house for the price of around 80 Lakhs in 2 years. Hence keeping this fund in FD.
        2. My employer have term insurance on me for 1 crore. This is valid as long as I work with same employer.
        3. I invest every year on PPF 3 Lakhs (mine+my spouse) — for my retirement. Opened recently SSY account on my daughters name for her education. I am hoping to continue this investment for at least next 10 years

        Awaiting with curiosity for your response.

        • Dear prasanna,
          1 – You may invest a portion of this corpus in an Arbitrage fund. But kindly understand what is an Arbitrage fund before investing.
          Read: Best Arbitrage funds.
          2 – Suggest you to buy a stand-alone Term insurance cover.
          3 – Also, consider buying a personal accident cover.
          Read : Best Personal Accident insurance plans.

          • prasanna says:

            Hi Sreekanth,

            I am reading your comments again after 2 years to review my investment.

            1. I didn’t buy a house because of my job nature to travel abroad. The fixed deposit increased to 95 lakhs.
            2. The exposure to equity market increased to 4 lakhs only through mutual funds and equity shares trading.

            I want to invest about 65 lakhs from my FD in better place for about 7 years period where I can get more returns with moderate risk. Please suggest.

          • Sreekanth Reddy says:

            Dear prasanna,
            Are your investments in Equities for long-term or is it short term trading….??

            My suggestion would be to invest in balanced fund (Hybrid funds) through STP route.

            Rs 65 lakh is a huge corpus. My suggestion to consult a fee-only planner and get your comprehensive financial plan done on one-to-one basis.

            You may kindly go through this article @ My List of popular Fee-only Financial Planners | Based on my interactions & observations

          • prasanna says:

            Hi Sreekanth,

            Thanks for your response. I am investing in equities for the time period of 7 years. I will go through if I can take fee-only financial planners.



  • GAURAV says:

    HI NICE ARTICLE, I HAVE ALSO MADE ALL THESE mistakes except lending money to a friend and not getting back, but i was forced to buy a ULIP plan by HDFC bank because i needed a locker facility, now i think bank did a very unfair practice. i have two questions :
    1. my 5 installments are completed but in policy it is written for 20 years, but i don want to invest further my present fund value is good, can i redeem the entire sum , if i choose to remain and not invest further, would it be good?
    2 in lic jeevan anand plan if i decide not to invest further after 4 installments , will my remaining money grow?

    • Dear GAURAV,
      Banks generally suggest for opening of FDs/RDs to allot a Locker facility (though it is not mandatory).
      Selling unwanted life insurance plan (as per your requirement) to you is indeed an ‘unfair practice’ by your banker.
      1 – Yes, you can redeem.
      2 – It will become PAID-UP policy.
      Read: What is PAID-UP policy?

  • sandeep b says:

    Hi Sreekanth,

    I have one query here.

    My LIC premium outgo for 2 policies (money back and jeevan anand) is Rs. 3304 and Rs. 4240 respectively.
    I dont want to continue with LIC as i have Term plan in place.
    should i surrender or continue LIC?

    pls guide

  • MadanKumar says:

    Hi Sreekanth,

    I appreciate your articles and they are very informative. This article is especially very good and eye opening mistakes that you shared and many of us still doing/continuing those mistakes . I also did those mistakes like investing in ULIP plan(Insurance+Investment ) for 6 years which incurred huge losses and tried to earn quick money by investing in share market hoping to get good return in days without having the patience to wait.

    Now i got rid of those mistakes and never tried any investments again.
    Currently i have been in overseas for last few months and want to start investments freshly.
    Could you please let me know which MF’s i can invest and what implications for NRI’s have while doing investments in India?

  • Umesh says:

    Hi Shreekanth,
    It is nice to read informative blog which gives lot of info. I want to ask if a tenant is paying some part for society charges and rest as rent then whether the money paid towards society charges should be included in the income from property?

    • Dear Umesh,
      Ideally you can include your share of expenses towards Society charges and ignore the amount paid by your tenant when calculating the ‘income from house property’.
      You may inform your tenant to claim HRA (if any) net off society charges only.

      • Umesh says:

        My doubt is whether the amount received towards society charges need to be included in the income from property? Because it will increase my tax liability. What does the rule say?

        • Dear Umesh ..Ideally society charges as a separate item can not be deducted. If standard deduction @ 30% is allowed, one cannot seek another deduction towards society’s maintenance charges.
          Every month if you receive the entire amount(rent+charges) in cheque, then there is no option even if you state in a rental agreement that,part amount goes to society from me. So you may request your tenant to give separate cheques” one is to you (towards rent) & another one is to society”.

  • Manja says:

    I would like to share another mistake that I realised it late. Some years earlier, I had a home loan with 10.25% interest rates, I was just happy paying ONLY the EMIs even though I have huge money on Savings Account (more than what I need as emergency) and I was also not putting surplus it in any real investments. It was a tea party of my friend which he had organised as he closed a Home loan within 7 years, I realised i need to do the same. I understood that my surplus money can be put to offset the principal. I made a lumpsump principal payment and then every month regularly took out a %age of salary as a Principal payment over and above my EMI. Everytime I paid more, I reduce the EMI payment (increased the duration) and increased my principal. So each month the interest portion of the EMI was getting reduced. I am glad to say through this regular and planned “investment” my 2 home loans are already cleared. I have more surplus now to make investment for my long term goals.

    • Dear Manja,
      May be you could have continued the home loan and taking tax benefits and instead concentrated on building wealth for your long-term goals.
      Of course there is no right or wrong answer here..just my view 🙂
      If you are happy and confident enough that you can achieve your goal values then its fine. You are the best person to plan your Financial Life.

      • Manja says:

        Hi Sreekanth,
        Appreciate your view. If the situation was today, yes, I think I would have judged higher %age from Mutual Funds. However, the situation that time was that neither I was investing nor closing home loan faster. As you would have known, any new potential investor have second thoughts about investment in MF. Hence closing a debt was seen more reasonable approach. After couple of years, when I continuously read and started investing full time during the end of the closure of Home Loan, I was doing it with more risk aggressive profile. So yes, looking back now, don’t think I have regrets but certainly could have done better. I hope others reading this case discussion will make a better judgement.

        I think your article combined with your responses is what make this forum great!

  • Jeyaraj says:

    Hi Sreekanth,

    I also did same mistake, took ULIP in 2009-24k-20 years , lic policy in 2010-12k-20 years, one more insurance policy in 2011-10k-15 years, just for 80c. Later I came to know that insurance is not an investment and i took pure term insurance last year and this year. But i didn’t surrender those policies as more commission was already deducted in first 3 years. so i continue paying it. Are you suggesting me to surrender now?

  • Rajesh says:


    I’m following your website from quite some time.
    Very good insights from all the financial related stuff.
    My question is -when you say monitor a mutual fund for 3 years or above and when its not performing then stop and switch to new fund, what to do with the accumulated units of the old MF ? If you say redeem them and where to invest that lump sum amount in? or one should just stop doing SIP to that particular fund and keep those units as long as your goal reaches like 5-10-15 years long period?
    please suggest me with this.


    • Dear Rajesh,
      It depends on the track record of the fund and how consistent have the returns been.
      For example : A fund like HDFC Top 200 has been not performing well offlate, but it can be counted as a consistent fund if you look at long track record.
      In my case, I have been investing in UTI mid-cap for the last few years, it is not in the top performers list and also the fund manager has been changed, but still I have been investing in it as I am satisfied with the fund’s returns.
      If the fund does not perform well say in next 2 years or so, I prefer to retain my units with the fund and invest future SIPs in some other Consistent mid-cap fund.
      I will keep an eye on UTI mid-cap and check the performance of it with the new fund that I may buy and then take a final call to move the total existing units.

  • Bharat says:

    Real good advice.If your readers also give briefly the financial mistakes they commited in their life, it will benefit all to avoid such mistakes in future.

  • Manja says:

    Sreekanth – hats off to you for revealing your own mistakes, you really took time & pain to educate us all. I am sure most of us have done similar or more and often dug it deep in our memories rather than learning from it. Your article spurs us to take it out and learn. Should I say that mistakes are our investments for better learning 🙂

    My 2 important takeaways:

    The day when you feel happy and excited to invest more in stock markets for your long-term goals, that day you can consider yourself as a balanced and matured investor

    It’s ok to make mistakes but don’t wait unnecessarily and compound your mistakes.

    There are few quotes that I have heard worth mentioning:
    1. Do not buy things (including investments, insurances, etc) that you DO NOT need, otherwise you will be forced to sell what you need (& love it so much)
    2. Be fearful when others are greedy and be greedy when other are fearful

  • hello sreekanth,
    i have been reading your articles on mutual funds and tax saving.
    this recent article is very enlightning.
    i have a few queries.
    recently my FD have matured around 23lakhs.
    now i want to invest in ELSS, MF MIP(as suggested by u earlier) and few amt to be kept for emergency fund.
    also i want to tell that my 3 kids i’m planning to split the amt.

    a] youngest son is studying and plans to go for MBA this year so i would need money for that in 1 year. 12LAKHS I’M INVESTING FOR YOUNGEST SON.
    for him i’m doing a FD of 6 lakhs. 1.5lakhs in ELSS AXIS LONG TERM EQUITY FUND


    PLZ REPLY FOR a), 1), 2) and 3)

    • Dear shashi Ji,
      Thank you so much for following my Blog.
      If time horizon is 1 to 2 years, kindly stick to FD and/or Short-term debt funds / Arbitrage funds only. Suggest you not to invest in ELSS and other equity oriented schemes. Kindly note that ELSS funds have a lock-in period of 3 years.
      Best Debt funds.
      Best Arbitrage funds.
      2) & 3)
      Funds are fine but let her know that these are for long-term and needs to be monitored atleast once in 2 years.

  • Dr.janardan panday says:

    Thanks to shreekanth for such a practical experiences with Advice .I have suffered a lot like you but now after many years i am able to make my self strong.I am encouraged with the blog reading first time

  • Arun says:

    Hi Sree,

    Whatever you said is correct. While lending money to others we have to think without any emotion. If the loss is minimal we can come out of that. If its big who will bail out us. I would recommend you to tag the boss’s social media id in your post with his photo. 🙂 Just like loan defaulters announcement in bank notice board / news papers.

    There are people who just spend lavishly without any second thought. During the month end they will go for a collection with near and dears. If anybody is serious about lending money then get a collateral and put an agreement in a stamp paper (not in blank paper). At least it will mitigate some risks.

  • Raman says:

    Hi Sreekanth,

    Nice article again. I have also committed 2-3 mistakes from this last the biggest one are given loan to someone and taking an insurance product from someone who was very close to me.

    Any way learning is a continuous process

    Thanks for the advice

  • suresh says:

    Nice article Sreekant. Many of us learnt lot of lessons and sharing through these finance blogs which are really useful for investors not to burn fingers with such issues

  • Jay says:

    Interesting and well written. Am sure this will prove useful to many.
    Have committed 2 of your mistakes. Giving loans to supposed friends – many a time. Earlier used to loan as much as I could. Later on only lent a small amount, an amount I was ready to forget about. The good thing of having lent is the friends am left with. are genuine ones. So one could use this “mistake” to weed out the bad ones.
    Have taken a couple of policies to help others out, even though was aware of it’s limitations. Was tempted to ask how is the commission the agent was making; so that I could pay him the commission and not pay for the whole policy.

  • Ashish Shrivastava says:

    Dear Sir,

    Thank you very much for eye opener article. Out of 5 I committed 2-3 for sure.

    Thank you very much for bringing this up to us.

    I request you to kindly put a article for best financial habit like where how much money we should invest in which type of fund.

    I did following
    A) Taking Term plan of 1 cr.
    B) Contributing to E.P.F like 10K/month
    C) Having RD of 15K in SBI
    D) Started SIP of 1100 in L&T Equity fund.

    Will be lending loan for Home nearly 30 Lac by end of this year

    I am very reluctant towards SIP and MF but also know I need to invest there for good return.

    Could you please suggest good portfolio for salaried person.


    • Dear Ashish,
      Glad to know that you have liked this blog post.
      How much money we should invest/allocate depends on many factors, so it is not fair to generalize this.
      RD of Rs 15,000 – Is it per month? Any specific reason for this? Is this towards your emergency fund accumulation?

      Yes, one needs to invest in investment options like equity mutual funds to get decent real rate of return.

      • Ashish Shrivastava says:

        Dear Sir,

        Thank you for reply

        Yes 15K RD in SIP is monthly also it has started in 2012 (5K) and 2013 ( 10K). Initially it was for investment purpose because Rate of return was 9.25 and 8.75 respectively. RD is of 10 year of term.

        Also I am deducting 30% of my basic as E.P.F.

        What can I do to get better return.


  • saravanakumar says:

    Pakka… Learnt from Mistakes, that’s the key for Success. Especially, on Financial Life.
    That’s the way i liked your blog, how you had described here


  • ashok says:

    Fantastic article srikanth.good lessons taught..especially lending money to friends must be avoided nowadays..i also had very bad experiences.

  • Surya says:

    Hi Sri,

    I used to read your blog every week, and i found this article really a very close to my past experience. But anyways i cant change what happened, but i must commit myself not to go into same mistake again , and today your article reminds me my commitment. THANK YOU

    • Dear Surya ..Thank you for following my Blogs. Yes, committing mistakes are ok, but should not repeat them.
      Kindly share the articles with your friends and do keep visiting 🙂

  • Rupali R. Mithbaokar says:

    Nice article about common mistakes committed by majority of people.

    It reminded me of couple of mistakes committed when I started earning and within couple of months my “family friend” convinced me to invest in LIC money-back plans.Even after paying premiums for 10 years, I am still at loss. I have completely lost trust in LIC and its pathetic products. But then I have to blame myself. Now I am trying to get rid of those plans.

    Similarly, I invested in ULIP in 2009. However, when I received communication from HDFC Life, I was shocked to see 40% of premium amount was deducted as “Premium Allocation Charges” along with many other myriad charges. However, I could get out of this ULIP after lock-in period of 5 years at profit.

    Today, the situation has improved though with cap on ULIP charges and it has become a much better product after Sept 2010. There are many ULIPs which have given return in the range of 12% to 16% over the last 5 years. No doubt, it will smooth over to 10% to 12% over a period of 18 – 20 years. But my point is present ULIP plans are much better compared to earlier ULIPs and definitely better than Traditional Insurance plans on any given day.


    • Dear Rupali,
      Are you still holding the unwanted life insurance policies? (Money-back)
      After the cost restructure, the new ULIPs are far better than the ones which were issued before 2010.

      • Rupali R. Mithbaokar says:

        I surrendered one LIC money-back plan last year. However, still holding one more money-back plan which I will surrender for sure in near future and hopefully, I would have learnt my lesson.

        There was no one to guide me when I started to earn. This is the case with almost every Indian youngster whose financial advisers are either their parents who believe in LIC policies (thinking of their generation) without paying heed to inflation or “family friends” as mentioned above who themselves have half knowledge about insurance and investment.

        The situation is improving with blogs like yours.

        Keep up the good work


  • sriknath says:

    Based on my research seems like PPF seems to be best investment option for employed class who are risk averse. Better than FD these days. It will earn better income and completely tax free on three stages you mentioned

  • Shrikant Kakade says:

    Hi Shree….. That’s a really candid article n really appreciate the same. The fact that you have reached where you are today after your initial blunders speaks volumes about your will to learn n deserves a compliment for the same.I would also like to share my mistakes. I started earning at an age of 21 n also started investing in a sip in 2006… However got insecure during the 2008 downturn n stopped the sip…. Have realised my mistake n started again. I also started two LIC policies with an annual premium of close to 70000…. Still trying to get rid of them. .

  • Peddareddy Rajasekhar says:

    Lending to friends/relatives within limits is a way of helping genuine emergencies of friends/relatives. The limit should be comfortable to you so that you feel good about helping them rather than thinking about recovery of it. Even if it is not repaid, you should be able to write-off gracefully! Without helping each other in such emergencies, there is no meaning for friendships and relationships!

    • Dear Rajasekhar,
      With the same reason (to help a friend) I have lent the money but unfortunately I later came to know that my friend was lying to me and had used the money for his own personal needs.
      Won’t you get hurt if the samething happens to you and would you try to recover the money or not? 🙂

      • Peddareddy Rajasekhar says:

        As I said, within limits (keep them easily affordable to you), you should write off at the time of lending itself. So, if they repay you, your friendship/relationship will become further stronger. You know that these relationships are beyond money!

        • Dear Rajasekhar,
          If a friend tries to cheat you then there is no meaning/value to such RELATIONSHIP.
          In such a scenario, there is nothing wrong in trying our best to recover the money lent, whether affordable or not, whether it is one rupee or Rs 1 crore.
          What say?

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