FOLLOW THESE 5 TIPS TO CREATE WEALTH…
Are you very careful while spending a small amount of money but when it comes to invest big amount you do not exercise such caution?
Do you invest only to save taxes, while ignoring the question you are investing at the right time?
Do you consider whether your investments have a liquid component that can come handy at the time of need?
A good portfolio is created when all such questions are taken into consideration. Here are 5 things you should know before making your investments.
Set your financial goals
Before investing in any of the assets one should always try to link the invested money towards a particular financial goal. Mostly, people at young age have goals like buying a house, a super bike or a car, etc. As they grow, goals like supporting the family, planning child’s education and retirement become equally important.
Decide the time frame
Once you have decided your financial goal, it becomes very important to decide the timeframe for achieving that different – different goals. Deciding time frame helps identify the exact amount required to make investments today.
Calculate the target amount
It becomes very necessary to decide the amount required to create wealth for financial goals and for that one needs to know how much money is needed to start saving.
For example: If you need Rs 50 lakh after 20 years for your child’s marriage. Therefore, to fulfill this financial goal you need to invest around Rs 3,300 per month for next 20 years from today (assuming a rate of return at 15%). You can even invest a lump sum of Rs 2.5 lakh for 20 years to generate a corpus of Rs 50 lakh assuming the same rate of return.
Follow proper asset allocation strategy
As the general saying ‘do not put all eggs in one basket’ goes do not invest your money in one financial product or in one particular scheme. Proper asset allocation helps in diversifying your portfolio through which you can minimise the risk associated with several investment avenues.
Strategic asset allocation helps in averaging the right mix of debt and equity while tactical asset allocation helps in long term goal planning where the timing of market plays an important role from time to time. To maintain proper asset allocation, you should have the habit of reviewing your portfolio at every regular interval of time.
Also, the right mix of assets in your portfolio should depend on the risk taking the capacity of the investor. It may be possible that a senior citizen may have a high-risk appetite. In that case, the equity component of the portfolio can go at an aggressive or moderate level rather than keeping it just at a conservative level.
If you have dependents, life insurance should be a top priority as it will help you in securing your financial liabilities. A term insurance can be a most desirable one if you have taken too many long-term liabilities like a home loan, car loan, etc.
Every investment you make should have a purpose attached to it. While investing towards a particular financial goal, you should also take help from an investment adviser. They can assist you in doing proper investments in a right way and also, they can help you in generating good wealth over a period of time.