Improve The Habit Of Saving!

By | May 24, 2012

It is not a difficult task to accumulate a corpus worth Rs 1 crore or even Rs 5 crore unless you religiously stick to the habit of setting aside a major portion of your funds for the purpose of investing. Many times it has been observed that like most New Year resolutions, the habit of investing is also broken.

Financial advisors make sure to advise investors of one basic rule – start investing early! Only then you will be able to meet your financial goals on time without any kind of hassles. What should be understood is that markets do not generate over night fortunes. Unless you inculcate confidence and develop a key factor – patience, you will not be able to see a rise in your investment. If you are a person who is employed or has a source of monthly income generation, whatever may be the asset like a Savings Bank Account or a Fixed Deposit, save it!

If in case you have a loan like a home loan on your finances, fear not, you can set aside certain portion of your income for repaying the debt without having to give up investing. An easier way to get rid off the debt is by liquidating your assets so that you can ease your finances. Loans are not a very dangerous form of debt, however, if you are not able to prudently utilize your income and your requirements. With good returns on your investments you can plan to buy another house if your family has expanded or for any other purpose. Consider buying a ready-to-move property as this will help save you some rent.

Apart from all these luxurious benefits that come along, your other general priorities like accumulating wealth for your child’s higher education, for your child’s marriage, for your post retirement etc, you can comfortably complete all these tasks resting on your easy chair. A key for all of this to happen is to ensure that you set aside at least 40-50% of your income towards investing. If you have gained a superior position in your job or have recorded good profits this month in your business make sure that you increase your savings according to the growth in your income. Factor in inflation rate as you proceed further down your investment lane. The returns that you earn o your investment will not be useful if you have not factored in the rate of inflation and invested in funds that provide returns in relation to the Rate of Inflation. Even if in a particular year your rate of return does not match up to the rate of inflation, you need not panic since in the subsequent years your returns will balance out.

If you have or are planning to structure your portfolio, make sure that you do not invest in more than 5 Mutual Funds. Having more than this required number will only reduce your returns since a lot of your money will be deducted in the name of processing fees and other related fund charges.  Instead if you have decided to invest more, consider reviewing your portfolio with your fund manager and invest in those funds that you already hold and which are profitable. Investing in Debt funds like Public Provident Fund (PPF) or/and National Pension System (NPS) will balance your portfolio in along with your equity exposure.

If your portfolio has enjoyed a fair amount of time in the market, you need not opt for trading as this requires a person’s mental dedication. This task can be borne by your fund manager if required. If you really are interested in trading make sure that you trade only a minimal amount of your income. Apart from all the growth related products, investing in a pure term life cover along with a medical insurance cover is also advised.

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