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Beware of these financial tips

Beware of these financial tips

When it comes to financial advice, we tend to find ample information on the internet, in newspapers, magazines, and even news channels. To add to that, our very own friends and family tend to fill us up with a lot of information on the kind of stocks we should buy, the places to invest in, etc. Amidst so many pieces of information, it can become difficult to distinguish good and bad financial advice. This gets even more tricky as what works for one person may or may not work for the other.

Let’s say, that you have just received your first paycheque and your financial priorities could be to pay off your educational loan and to start saving up for building your emergency funds. It would be foolish for someone at this stage to maker high-risk investments and opt for high credit. On the other hand, someone with considerable experience and savings can consider opting for high-risk investments. This again depends on the risk tolerance of the person and the funds available. Therefore, defining good financial advice can be tricky. Having said that, there are a few common pieces of financial advice that a majority people fall for and end up regretting later on.

  1. Buying an investment linked insurance policy is a good retirement plan

A lot of people fall for the possibilities of getting positive returns along with insurance when they buy the investment linked insurance policy. But, how viable is the investment component in this investment linked insurance policies? According to a post by Money Smart, the main reason so many Singaporeans buy investment-linked insurance is not because they’re a surefire way to a comfortable retirement. Rather, these plans are pushed very aggressively by insurance agents due to the high commissions they yield. But, in reality, these policies are not a sure shot formula to success. In fact, the investment returns from these policies are not very high as compared to what you would get in a Central Provident Fund  (CPF). It is, therefore, a good idea to get rid of the preconceived notions you have about investment linked insurance policies.

  1. Beating the market is possible through xyz strategies

The moment a financial broker, advisor, or friend tells you that you can easily beat the market by purchasing these stocks or by opting for a particular group of funds, understand that it is a tall claim. When it comes to the financial markets, there is no guaranteed way of achieving success. Even the biggest investment gurus have their share of losses that they don’t discuss with the public. So be sure to not buy into unbelievable claims.

  1. The rental income will pay for the property

Singaporeans have always stayed ahead when it comes to investing in real estate. They are very optimistic when it comes to their financial capacity to purchase properties. In 2013, an estimated 5% to 10% were over-stretching themselves. This may not always be a financially wise move. Nonetheless, many people purchase property with the hope of being able to pay off the loan with the help of the rental income they earn. But, rental markets are also unreliable. Especially, if the landlord is picky and choosy about the tenants, then it leads to the property being unused for months together with no rental income being generated. Another reason why relying on rental income can backfire is if the tenant fails to regularly pay the rent. Hence, thinking that rental income will pay for the property you purchase may not be the financial advice for you to rely on.

  1. Forex trading will make you a millionaire

According to Ryan Ong of Money Smart, the majority of the forex trading accounts close in the first year. And, most investors either break even or end up losing all the funds they invest. Many brokers claim that forex trading is the easiest way to make a lot of money.  Most people who earn a fortune on forex start with a huge sum of money sometimes even millions. These people have the capacity to lose a significant sum of money and the profit they make is also in large sums. Therefore, making millions through forex trading is not everyone’s cup of tea.

  1. You can take risks when you are young

Firstly, age has got to do nothing with your risk tolerance or, for that matter, even your earning capacity. No doubt being young has some advantages on the financial front, but it certainly is no license to blindly opt for high-risk investments. Moreover, when you are young, the funds you have are lesser compared to someone older. For example, as a fresher, you might just have $ 5000 in your bank account, but a 45 years old businessman will have at least 5 times the amount in his bank account. Hence, risk tolerance has nothing to do with age.

These are some of the most commonly followed bad financial advice that is seldom useful for those aiming at financial success and financial freedom.


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