Friday, April 04 2020, Contributed By: NJ Publications

Investing Obstacles to Conquer:

The beauty lies in the eyes of the beholder. The measure of anyone's personal or financial success is also a very subjective term. Similarly, the obstacles on the journey to financial success also differ from person to person. What may be challenging for one person may not seem so for the other person. In this article, we will talk about the common obstacles that keep you away from being a successful investor and from fully realising your financial goals.

Getting driven by emotions:

There are many emotions at play when it comes to money. The most prominent and commonly observed emotions are greed, herd mentality, fear, overconfidence, biases and ego. Each of these emotions may play a role in decision making and force you subconsciously to make bad financial decisions. Let us see how.

Greed drives a person to make decisions anticipating quick money. Unfortunately, such things often end up burning your money. Herd mentality is where you follow the market or others even though logic may point you to go in another direction. Fear is where you are trapped in a negative mindset and believe that the worst is yet to come when the markets are going through a bad phase. You will likely give up when things are going bad when in fact, an opposite action may be required. Overconfidence is where you believe that your understanding or knowledge is superior to others and you are 'right'. With overconfidence, you may not listen to sane advice or be open to contradictory info. Biasness is where you establish an emotional bond with any particular investment or product either positively or negatively. This positive or negative emotion will not let you evaluate any investment objectively and you may end up taking biased decisions. Ego is where you take a stand to protect your word and not accept any mistake or failure on your part. Ego in financial matters may even force you to take decisions which are clearly risky.

Over-monitoring your equity investments:

Financial assets and investments are perhaps the only long term investment which we tend to measure almost on a daily basis. We never measure the value of our property or the second home we bought. We never evaluate the value of jewellery or gold we have saved for our daughter. We even do not care to see the value of almost every traditional investment product like bank fixed deposit, ULIP policy, PPF, NSC, NPS, etc. The only thing we are interested in knowing on a daily basis is the value of your equity portfolio, irrespective of how much share it has in your total portfolio. Why are we doing that?

Your equity investments, especially those in mutual fund equity schemes are your long term investment assets. It would be just ok if you looked at their value – say on a monthly frequency. The evaluation of the portfolio should be done on a yearly basis or half-yearly basis at most. Over monitoring your portfolio will force you to see short term performance which may not be the right thing to do. It will also only increase your anxiety and give needless stress to you.

Being unclear about your goals:

For any target to be achieved, you need a plan. Without a plan, a goal, nothing worthwhile can be achieved. An average person's life can be seen as a long list of personal and financial goals. On this list are things like the purchase of a car, home, child's tuition and education fees, marriage planning, holidays, second home, retirement kitty, starting a business, and so on. However, we have limited resources in our hands in the form of our salary or business income.

The need to define goals can never be underestimated. The big mistake that people do is to not really plan for their financial goals and the primary obstacle to achieving the same.

Ignoring real financial problems:

There are many around us who are earning well but often find very little money to save. There are also many others who have loan EMIs almost equal to their income. We often find that people in their early career having much more expensive mobile phones compared to their bosses! But there are also others who may not look to be rich but still have quietly built properties and amassed wealth slowly over time. The conclusion is that it is not really about how much you earn but about how you manage your finances that will decide how much you will save. Spending behaviour, your lifestyle, tax and insurance planning, investment planning, debt management, etc will together decide how much wealth you will create. Ignoring the fact that you are not going through any financial challenges is an obstacle to achieving investing success.

Over-emphasising certain risks:

Many investors see only one type of risk – the risk of investing in equity asset class. True, an equity asset class does carry some risks. However, there is a risk in virtually everything. The biggest risk is of inflation – the risk of losing the real value of money. If we are too careful with our money for far too long, that is a perfect recipe for wealth destruction. Compare between two child – one who is allowed to play, go out, take risks and make mistakes and one who is overprotected and not allowed to even go out. Which child do you think will be more successful? Similarly, with wealth too, we need to give it some space, diversification and risks in order to grow. We must realise that the traditional saving avenues, bank deposits, etc. do carry some unseen risks, especially in the long term. This may perhaps far out-weigh the visible risks of investing in equities through mutual funds.


The obstacles to successful investing and enjoying financial well-being has a lot to do with how we think, feel, react and behave with our money. Self-introspection within ourselves will perhaps unravel much more insights and challenges or obstacles than we could ever imagine. Realising and accepting these obstacles would be the first step towards ensuring investing success and also financial well-being in our lives.

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