A Guide To Approaching Planned Investments For Your Future Security
Most of us believe that earning money is the most important part of our life. But what good is earning money if you’re going to keep it tucked away in a savings bank account for decades? It does not make sense to let your hard-earned money sit idle, especially when you can safely invest it to make more with just a little planning and foresight. If you’re prepared to dedicate just a little amount of time into deciding a viable investment option for your savings, you are sure to reap rich rewards.
“The worst investment you can make over time: cash.”—Warren Buffet
Warren Buffet’s quote highlights an important aspect of investment: Keeping your money lying around is extremely counterproductive for you and your family, especially in today’s age where all financial organizations are vying for your attention.
Here’s a Few Ways You Can Plan The Right Investment For Your Future Security:
Just Like Any Other Major Decision, It’s Important To Determine Your Objectives First
Figure out what you’re going to do with the money earned from investments—are you planning on buying a house or a vehicle or any other asset? Are you investing in preparation for your marriage? Or for your child’s education? Decide this first so you know what you can risk and how much your portfolio needs to grow.
Choose when you want to cash out your investment
Different investments have different maturity periods. That’s why it’s important to know at what point you’ll be needing your invested money in order to facilitate your needs efficiently.
Determine how much of a risk-taker you are
All investments can be differentiated on the basis of the level of risk involved. FD’s are the least risky, while Equity mutual funds are a high-risk endeavour. Figure out which side you’re on and plan your investments taking this into consideration.
Depending on your risk-taking tendencies, choose the most suitable option
It is advisable to invest into high growth assets including equity mutual funds and stocks if you’re young (since they deliver greater returns, but over a longer period of time), and into fixed income assets like Fixed Deposits and debt funds if you’re about to retire. Generally, a mix of these helps prudent investors make the most of their money.
Always remember that high risk = high reward
While fixed deposits are low risk, the rewards from them are also low and, if the maturity period is more than 5 years, the rewards can also turn into losses. Conversely, investing in equity funds is highly profitable, but only in the longer run and under the appropriate market conditions.
Consider the tax factor
Fixed deposits attract an income that is taxable by the Income Tax department, while equity diversified funds and balanced funds are entirely tax-free investments. Check the formats of your investments as they some investors can opt for tax-free FDs or tax saving mutual funds too.
Get your priorities straight
If you’re part of a family or have dependents relying on you, remember to acquire both health and life insurance to make their lives easier. And if you’re in the market for a new home, remember that the interest rates on home loans are lower than they’ve ever been for almost a decade!
After the responsibilities comes the fun
Once you’ve set aside the EMI required for your home loan and the money for health and life insurance, it’s time to decide whether you want to take the risks that could considerably multiply your finances. You can choose the portfolio that suits your risk preference and advice for your tax planner for the best way to make your money work for you.
One important thing to remember is that India is undergoing an incredible growth among the world’s emerging markets. This means that investment in equity, mutual funds and FDs will benefit you in the longer run as long as you are aware of things like inflation and maturity.