People with low salaries should avoid certain investment schemes to avoid losing money. Let's learn about them.
Everyone wants to invest to secure their future. While this is a good habit, investing without thinking or simply following others can be costly. Especially for those with low monthly salaries. Investing in the wrong place can not only ruin your budget but also cause your money to be stuck in a time of need.
In such a situation, it's important to be aware of these plans. Today's article is devoted to this topic. Through this article, we'll tell you about two investment plans that low-income earners should avoid investing in.
Traditional Life Insurance Plans
People with low salaries are often advised by insurance agents to invest in endowment or money-back insurance policies, but this can be a bad decision. These policies typically require a fixed premium every year or every month for 15 to 20 years. With a low salary, it can be difficult to pay premiums on time.
If you decide to terminate your policy mid-term due to financial constraints, you face significant losses. Surrendering your policy within the first two to three years can result in losing more than half of your deposit, locking your money away for a long time.
These schemes offer very low returns, around 4% to 6%, which is not useful in the face of rising inflation. Furthermore, the life insurance coverage they offer is also very low. Instead, if your salary is low, you should consider purchasing a low-cost term insurance plan and investing the remaining money in mutual funds or PPF.
Real estate or long-term illiquid assets
Investing in real estate typically requires a large loan. Consequently, a significant portion of a meager salary is spent on home loan EMIs, leaving no money for daily expenses or an emergency fund. It's worth noting that property is an asset that you can't sell in two hours or two days if needed. In the event of a medical emergency, it's impossible to immediately sell the land or house and obtain cash.
In this situation, your money is completely blocked. Furthermore, after purchasing a property, many other expenses such as maintenance, property taxes, and registration also arise.
