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We belong to a conservative culture where savings habits are embedded in our DNA. As a country, we prefer to save than spend, unlike developed economies which are driven by the expenditure driven demand of their domestic economies. Saving comes naturally and we all save for the future in our own ways. Whether it is putting our savings in a bank FD or contributing to PPF or cutting down on expenses to manage home loan EMIs, we save. but what about your money is growing Something beyond savings that can give you an 8% – 9% return, half of which is swallowed up by inflation anyhow?
only then savings and investment Come together to help you build wealth and have a sense of financial security. Having a job is not enough to feel financially secure because what is left from your salary after paying all the monthly expenses is not enough to pay for the future one-time expenses that will come over time. Savings from salary and wages cannot provide for the big tickets in life like children’s higher education, their marriages, health expenses in old age and the expenses of your long, retired phase of life when the salary will no longer support you. It is imperative to channelize your savings into investment avenues where they can grow manifold in the long run.
You need to understand the difference between short term and long term investment decisions so that you can take a holistic approach towards financial security and wealth creation.
- Secure short term goals
- Don’t let your money lie idle in the bank
- Invest in Balanced Mutual Funds for medium term goals
- Invest in equity oriented options for long term
- Be flexible, monitor and rebalance your portfolio from time to time
- seek professional advice
Short-term goals are generally defined as milestones that you want to achieve in the next 1-3 years. If there are some short term goals that you do not want to miss, then go for savings options like bank FDs or still invest in suitable debt mutual funds if you are comfortable with mutual funds. Fixed income mutual funds or debt funds are safer than equity oriented mutual funds and have the potential to give you higher returns than bank FDs. But you should research well or take help from someone investment advisor To choose the right fund that suits your financial goals and risk appetite.
Most people keep their money in their savings bank account even when the amount is much more than what is needed to manage day-to-day expenses. Do not let surplus cash lie in savings deposits. rather invest it in a liquid mutual funds Which can potentially offer you higher returns than what the bank can offer. Liquid funds are convenient to operate as they do not have entry and exit loads and the redemption money is available to you on the next business day when you wish to sell your holdings in the fund. Liquid funds are best suited for investing surplus cash for a tenure of 1-90 days and are the least volatile among all mutual funds.
If there are certain requirements that you expect to be met in the next 3-5 years, then choosing a balanced mutual fund or a suitable hybrid mutual fund can be a good option. Balanced Funds which are a type of Hybrid Mutual Fund Invest in a mix equity and debt securities. They capture the characteristics of both equity and debt funds while offering a moderate risk-reward proposition to their investors which is suitable for those who prefer to play it safe while looking for some upside potential of equities.
when one financial goals Say your retirement life will start in 15 years or your daughter’s higher education is due in 7 years, then the best option would be a well-diversified equity fund. Equity funds are best suited for long term investment Equities since more than 5 years are prone to high volatility in short term but can give good returns in long term. Invest wisely in some equity funds that suit your personality i.e. your risk appetite. You can also consider investing directly in equities, but mutual funds are more suitable for those who do not like to take risks with stocks. always try to understand everything mutual fund risk before investing in them.
Once you invest your money in various mutual funds, FDs, stocks, ULIPs, PPF etc., the work becomes half. You need to monitor your portfolio regularly and make changes as and when required. Rebalancing is necessary to reflect any changes in your life circumstances. For example, you change jobs from a multinational company to a start-up where the risks are high. In such a situation, your portfolio exposure to equity should be reduced as your human capital is now invested in higher risk equity. Working for start-ups is as good as owning high-risk equity.
It is best to seek professional advice or assistance from an investment advisor mutual fund distributor To get through the paperwork and transaction requirements. investment advisor Will do its risk profiling and suitability analysis before recommending any investment plan. When you’re investing your hard-earned money in a long-haul plan, this type of help can be worthwhile. take the time to understand
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