7 Common Banking Mistakes Even Savvy Professionals Make

Are you wondering where you’re going wrong with your savings and investments? You’re putting a lot of money into your investments, but somehow, the gains just aren’t adding up?

Some factors that affect your savings and investments are uncontrollable, but for most investors, there are a lot of things you can actually do to minimize your exposure by watching out for these common banking mistakes:

  1. Having unhealthy saving habits
  2. When you have a steady source of income, you tend to think that it’s all right to spend. Relying on a regular paycheck could foster the illusion that money is a limitless resource.

    This is not the case. National economic and financial crises can cause people to lose not just their jobs, but also their homes.

    Learn to save as early as possible. Take note that having quick access to your savings account can be detrimental to your long-term financial goals. The goal is to understand your spending habits as this dictates how much cash on hand you need. The secret to being ready for any financial emergency is to consistently manage your liquidity ratio, or the balance of your liquid assets like cash on hand and your longer-term investments that are not easily converted into cash.

    The goal is to never touch your investments prematurely. If it’s meant for the future, don’t spend it today.

  3. Investing without a clear goal
  4. Never invest without a clear goal in mind. Why? You may end up adopting the wrong strategy for your goals.

    Not having a clear financial goal with your investments can tempt you to sell your shares easily when the market is down. Constant trading can mean the loss of possible growth.

    Define your investment’s purpose: Is it for retirement, a new home, your children’s education, or something else? Each purpose dictates a different approach to your investments. Longer-term goals let you take more risks, while short time-horizons, such as those approaching retirement, should aim for more secure investments.

  5. Neglecting to study risks
  6. Every investment comes with risks. Many investors make safe investments to avoid high risks, but they forgo the potential for exponential growth. On the other hand, there are those who invest aggressively, forgetting to keep their financial goals in mind.

    Study the potential risks involved in every investment. Banks have tests that analyze your risk profile and investment professionals that can educate you on your options. Take advantage of these tools and align your goals accordingly.

  7. Lacking diversification
  8. Many people keep their savings and their emergency funds in the same account. This is great for efficiency, but keeping everything in the same place also exposes it to more risk, and the biggest risk of all is you.

    Having access to all investment, savings, retirement, and other accounts can leave your finances exposed to irrational decision-making and other decisions you may end up regretting.

    Diversify your accounts and separate them. Have one for personal savings, another for emergencies, and one for daily expenditures.

    This goes for your investments as well. Smart investors know to keep their money spread across different instruments and accounts. The advantage of a diversified portfolio is that your accounts are insulated from market forces that can affect one industry or type of investment. When the market is down, your fixed-income securities can prop up your portfolio.

  9. Letting emotions get the better of you
  10. When you’re happy, you spend to celebrate. When you’re sad, you spend to be happy. But you should always make purchases with a logic and strategy. Only spend money allocated for your expenditures, and never touch your emergency or savings funds. 

    Moreover, you need to make your investments as emotionally detached as possible. When you invest, stay invested. Don’t exit your positions out of fear or panic. Even in the most severe of market recessions, such as the one experienced by the United States in 2008, the market always recovers.

  11. Striking while the iron is hot
  12. At some point, a friend or a family member will fill you in about their latest gains and the hottest new investment scheme. What they almost never talk about is their losses.

    Joining investments, even ones that have a friend or family member’s seal of approval is still a risk. For one, when a stock or investment takes off and you hear about it, that usually means it’s too late. Another thing to watch out for: When an investment looks to good to be true, that probably means it is. This is not to say that a large gain in a short amount of time isn’t possible — it certainly is. But large returns come to those who invest smartly, study their options, and weigh various options.

    Consult with an investment advisor before jumping in. Take the extra mile with your research — first to see if the instrument is legitimate, and second to see if the much bragged about returns are indeed real.

  13. Forgetting the little things
  14. No one really likes paying extra fees and taxes. The small charge for withdrawing from third party ATMs can easily add up to over a thousand pesos in one year’s time.

    When you buy or sell your shares, withdraw from your fund, or take out from a money market or retirement account — these may have corresponding fees and taxes. Before committing to a type of investment, fully understand the schedule of fees and penalties, along with the kinds of tax associated with the account. Prematurely drawing from an investment can incur penalties from some institutions, so it helps to compare, too.

    While fees may be relatively minimal compared to how much your investment has grown, remember that small things tend to accumulate, especially for tax delinquencies. Consult with a professional on how to minimize administrative fees by properly timing and declaring your investments.


This material, which is strictly for information purposes only, is for your sole use, and does not constitute a recommendation or an offer to sell or a solicitation to buy any financial product. Any information is subject to change without notice and BPI is not under any obligation to update or keep current the information contained herein. You are advised to make your own independent judgment with respect to the matter contained in this document. No liability whatsoever is accepted for any loss that may arise (whether direct or consequential) from any use of the information contained herein. Past performance is not a guarantee of future results.

The views expressed in this report reflect the writer's personal views and not necessarily the Bank of the Philippine Islands'. Furthermore, no part of any of the writer's compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed by the writer in this report.