Quite often we come across investors who display the following mindset relating to their investment planning:
This is the classic case of flawed thinking that is disastrous to one's wealth!!
Investors make wrong choices when they confuse volatility with Risk. Stock markets are volatile but not risky if one has an investment horizon of 15-20 or 30 years. In fact, it is the most suitable vehicle to create huge wealth over such time horizons.
On the other hand, 'Safe' instruments like bank deposits & debt funds are the best choice for wealth preservation over 1-3 years horizon but extremely unsuitable for wealth creation due to taxation & inflation.
The correct plan for the above investor is: