BANGALORE: Are you a diligent saver, a careful investor and a meticulous planner? Yes, but still you have not been able to build wealth even as everyone around makes. If you really want to get to the root of the problem, you need to assess where you are going wrong in your investments reports Economic Times. It could be the lure of penny stocks or the tantalizing potential of the futures and options segment.

Buy low and sell high is the ultimate winning strategy in the stock market. But some investors take this literally and buy very low-priced stocks. Since the market cap is low, these penny stocks are easily manipulated by operators who lure unsuspecting investors and dump worthless shares on them. They first create a buzz around a stock, indulge in circular trading to push up the price, and then nudge investors to buy at high prices.

A penny stock is never a good investment, because you are buying it only in the hope of 'finding a bigger fool' who will buy it at a higher price. If a share is priced low, it is because the market does not see value. Study the fundamentals of the company. That will give you enough reasons to avoid the junk shares.

People may drive a hard bargain when buying fruits and vegetables but ignore the expense ratios of their mutual fund investments. The expense ratio of equity funds typically ranges between 2.5 percent and 3 percent. Over the long term, even a small difference in cost can make a considerable difference to your returns (see graphic). Check the fund expenses before you invest. There are enough good quality funds with low expense ratios. Another option is to buy direct plans that charge a lower expense ratio.

Many of these hurdles are really self made. They can be done away with by changing your approach to investing. This can happen if you treat the yellow metal less as an investment and more as a hedging tool.

Instead, a combination of a term plan and Public Provident Fund works better than an insurance policy. If you have a higher risk appetite, you could invest the savings on the premium in mutual funds which have the potential to give higher returns—though they carry some level of risk.