This Diwali, you must commit to make bright investment decisions to ensure a great financial future for your loved ones. Here’s how you can do this:
• If you are an existing investor, the top most priority should to analyze your asset allocation. Asset allocation is the key to investment success in the long run. It helps in determining the kind of risk you are likely to take and the kind of returns you can expect from your portfolio. If your asset allocation is too aggressive, you must rebalance it in line with your risk profile and time horizon. On the other hand, if your long-term asset allocation is too conservative, it’s time to either start investing in an asset class like equity or increase exposure to it to give your money a chance to earn positive real rate of return.
It is equally important to have well diversified holdings within an asset class too, more so, when you invest in an asset class like equity. In reality, not much attention is paid to having the right exposure to different market segments such as large cap, mid-cap and small cap stocks. There can’t be a standard combination applicable to all kinds of investors as every investor has a different risk profile, time horizon and investment objectives.
If you are one of those investors who haven’t yet started investing to achieve your goals, you must begin immediately. Remember, investing early is a simple yet powerful method of achieving your goals. The earlier you start, the longer your investments have the time to grow. In other words, investing early ensures that there are no shortfalls when you need money the most.
• Review your insurance portfolio. Make sure, you have adequate risk cover in the form of life insurance and health insurance. If you have been following a strategy of mixing your investments with insurance and have accumulated a number of policies, it’s time to change that. A term insurance plan is an ideal product to reduce your costs and to ensure adequate risk cover. For a young family, a family floater health insurance policy would be ideal.
• If you have been investing haphazardly to save taxes, it’s time to change that. The right way to do so would be to make tax savings an integral part of your overall investment plan. Besides, while planning your investments under section 80 C, ascertain how much you have to invest in compulsory options such as PF, Insurance premium, housing loan repayment and then decide the amount for other options such as PPF, ELSS and NSC etc. Remember, tax benefit limit under Section 80 is Rs.1.50 lacs now.
• While there are investment strategies for equity investors to tackle different market conditions, the un-predictable nature of the stock market, especially in short and medium term, makes it quite difficult to practice these with a reasonable degree of success. Therefore, you must opt for continuity in your -investment approach on a long-term basis rather than following haphazard short term strategies. Remember, a disciplined investment approach takes care of most of the imperfections in the market.
If you have been investing in equity funds through SIP on and off, it’s time to invest with a clearly defined time horizon. Besides, the more time you give your equity investments to grow, the more you benefit from power of compounding.
• If you are an existing investor, the top most priority should to analyze your asset allocation. Asset allocation is the key to investment success in the long run. It helps in determining the kind of risk you are likely to take and the kind of returns you can expect from your portfolio. If your asset allocation is too aggressive, you must rebalance it in line with your risk profile and time horizon. On the other hand, if your long-term asset allocation is too conservative, it’s time to either start investing in an asset class like equity or increase exposure to it to give your money a chance to earn positive real rate of return.
It is equally important to have well diversified holdings within an asset class too, more so, when you invest in an asset class like equity. In reality, not much attention is paid to having the right exposure to different market segments such as large cap, mid-cap and small cap stocks. There can’t be a standard combination applicable to all kinds of investors as every investor has a different risk profile, time horizon and investment objectives.
If you are one of those investors who haven’t yet started investing to achieve your goals, you must begin immediately. Remember, investing early is a simple yet powerful method of achieving your goals. The earlier you start, the longer your investments have the time to grow. In other words, investing early ensures that there are no shortfalls when you need money the most.
• Review your insurance portfolio. Make sure, you have adequate risk cover in the form of life insurance and health insurance. If you have been following a strategy of mixing your investments with insurance and have accumulated a number of policies, it’s time to change that. A term insurance plan is an ideal product to reduce your costs and to ensure adequate risk cover. For a young family, a family floater health insurance policy would be ideal.
• If you have been investing haphazardly to save taxes, it’s time to change that. The right way to do so would be to make tax savings an integral part of your overall investment plan. Besides, while planning your investments under section 80 C, ascertain how much you have to invest in compulsory options such as PF, Insurance premium, housing loan repayment and then decide the amount for other options such as PPF, ELSS and NSC etc. Remember, tax benefit limit under Section 80 is Rs.1.50 lacs now.
• While there are investment strategies for equity investors to tackle different market conditions, the un-predictable nature of the stock market, especially in short and medium term, makes it quite difficult to practice these with a reasonable degree of success. Therefore, you must opt for continuity in your -investment approach on a long-term basis rather than following haphazard short term strategies. Remember, a disciplined investment approach takes care of most of the imperfections in the market.
If you have been investing in equity funds through SIP on and off, it’s time to invest with a clearly defined time horizon. Besides, the more time you give your equity investments to grow, the more you benefit from power of compounding.