4) Focusing too much on fixed income
In continuation with the thought above, to beat inflation, investors must look at equity. It's all very well to park your money in fixed-return instruments such as fixed deposits, National Savings Certificate and the likes. But once you take inflation and taxes into account, your real return drops. You have to make up the shortfall and equity helps in doing just that and building wealth. Don't shy away from maintaining an equity exposure in your portfolio. If you choose to do so, you could be jeopardising your entire financial plan.
If you look at the category average of large-cap funds, according to Morningstar's categorisation, the annualised return is 17% over 10 years. If you hold your units for over a year, then long-term capital gains is nil. If you invest in an equity linked savings plan, or ELSS, you also get a tax break under Section 80C.