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Suffice it to say that time is loyal to no one. The investment decision has to be taken after careful analysis in the current market scenario. At the end of the day, your decisions should not let you down when you are in dire need of your invested money. A thorough understanding of financial strategies will help you deal with difficult situations.
Investment rules to grow your wealth:
know your propertyFirst of all, you must know your net worth. Whether you have assets or liabilities, estimating your worth is important for creating the right kind of financial planning. A look at your current fiscal position will help you decide on new investments.
Factors to consider when you do a risk analysis: Your age plays an important role and the number of years left in your working calendar will help you understand the level of risk that can be taken. Income variability will tell you the amount you need to keep in buffer for all your emergency expenses. A self-employed or business person has to keep a good amount of deposits during emergency situations. Your short term and long term commitments should influence your investment decisions.
Invest in a product you understand well: A golden rule to be followed is never to invest in a product that you do not fully understand. There are a lot of ULIPs, ELSS and other insurance products that promise skyrocketing returns year after year. However, understanding them is very complex. If you feel that understanding such intricacies is not your cup of tea, then it would be better to go with PPF or FD options.
For example, PPF gives 8.5% return and if you earn 10 lakhs per year and assuming you save 10% of your income, thereby increasing your savings by 10% every year, then in 20 years your total The assets will increase to 1.16 crores (Courtesy: Financial Times Magazine). Isn’t that amazing to know?
Diversify your funds to reduce the risk of losing it all: A one-time drop in your dedicated portfolio could send you down the drain. No one can predict a sudden outage and many investors cannot cope with such unexpected losses overnight. Therefore, it is always safe to diversify your portfolio so that losses or gains are mixed results. This will help you recover from losses in some funds.
Current Liabilities: Suppose if you have home loan or vehicle loan and you want to invest money in equity, then it does not make any sense. By default, you end up paying more money towards your home loan or personal loan. Pay off your existing debt before investing the money. Invest when you have extra cash.
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