7 Secrets to Getting Better Returns On Your Investments
‘Never depend on a single income. Make investments to create a second source’. These are the words of Warren Buffett, one of the world’s top businessmen and investment gurus.
Investments are a good way to deal with your idle funds. Some return on your money is usually better than no return at all. And you get returns only if you invest.
Here are seven secrets to help you get better returns on investments:
Know Your Motive:
Firstly, ask– Why do I need to invest? The motive behind investing varies from person to person. A 20-year-old may want to invest to afford a fancy bike. But a 40-year-old woold look to invest for their child’s education or marriage. Clear objectives and goals help you decide between short-term and long-term options.
Know Your Risk Appetite:
You must figure out your risk-taking capacity. This can keep you away from ventures that you cannot handle. If you are a risk-averse investor, choose safe options like fixed deposits (FDs). These give guaranteed returns. An alternative can be debt mutual funds (MFs). If you are a risk-taker, consider aggressive investing options like equity MFs. Such options are risky but they help in capital appreciation.
Know Your Spending Capacity:
There is a popular saying: You must not save what is left after spending, but spend what is left after saving. Make sure you have a complete understanding of your income and expenditure. Know your disposable income. This helps you narrow down your investment options. Even if you cannot invest at regular intervals, you can make one-time investments in an FD as when you have the money.
Know the Tax Roles:
While choosing your investment, look beyond direct returns. Consider the taxation aspect too. For example, a tax-saving FD will give you fixed returns at the end of the tenure. It will also get you tax benefits. An equity-linked savings scheme is yet another option. This also gives you the dual benefits of capital appreciation and tax savings. But what if you invest in debt mutual funds? Then you will have to pay tax on short-term and long-term capital gains. Some investment options are taxed at lower rates than others. The net returns may then be lower. So, don’t forget to take this point into consideration.
Do not Panic:
Successful investing takes time. Avoid making hasty decisions. Say, your mutual fund investments are not performing well at a particular point of time. Do not succumb to these temporary lows and withdraw your money. You might end up spending it on something more unfruitful.
If you are starting to invest, you must know about the power of compounding. When you invest a certain amount, you earn returns on it. If you reinvest this amount, you earn interest on the principal as well as the previous interest amount. Compound interest helps you convert a small investment into a larger sum of money over a period of time.
Get into a Habit:
You may have sound financial plans. But they make sense only when you put them in place. A human mind is never stable. Your priorities can change often. You might start spending on unnecessary things. This would affect your savings and investments. Thus, you must build a habit. Make sure you invest a fixed sum of money every month. You can automate this habit. Opt for recurring deposits or systematic investment plans.
While you look for ways to improve your returns, don’t forget to look for mistakes. These could nollify all the good work you put in. Here’s a look at some common mistakes investors make.
Investment is not about putting your idle money to use. It requires careful planning. Before investing, you must invest your time in analysing your situation. Next, you must look out for options to maximise your wealth.
A number of banks and non-banking financial companies (NBFCs), including Bajaj Finserv, offer investors avenues to meet their financial goals. Learn more about it here: https://www.bajajfinserv.in/investment/