Increase Your Risk Appetite To see Fruitful Growth In Your Returns!

By | May 23, 2012

Investors need to realize that if wealth creation is their motto then this can be achieved by increasing their risk appetite and investing in funds that provide more equity exposure. Your rate of return will depend on your exposure toward equities much more than debt. Although investing in equities involve risk towards your investments, but it is worth the risk!

As your income level increases make sure you increase your level of savings as well. Always follow the thumb rule of saving 40-50% of you income. Cutting down on all unwanted expanses now will enable you to enjoy your much deserved high returns in future by increasing your investments. Wealth creation also eliminates the possibility of you opting for debts like a home loan or a personal loan in order to complete your financial requirements. Even though you may have a loan, don’t fret much about it. In due course of time when you have accumulated enough wealth alongside and are paying your EMIs on time, you can also use this investment to pay off such debts.

All you need to do is to invest regularly and systematically into equities. Systematic Investment Plans (SIPs) will just serve you right. Do not have more than 5 Mutual Funds in your portfolio. If you may require funds for financing your requirements in less than 3 years, invest in much more stable funds so that they are not affected by the market volatility. If the plan is long term investments, make sure you diversify your investments. Opt for balanced funds which provide an equity exposure of 65% and invest the rest of your funds into debt. Mid cap funds and diversified funds are also good options which invest a major portion of your income into equities and a part in debt to provide good protection to safeguard your investments from severe market shocks.

If you do not have dependents, then there is no need to have any insurance policies. But if you do have, consider taking an insurance policy, mainly a pure term life cover and make sure that the cover is at least 5 times your annual income. Getting a health insurance policy which will provide you ample critical illness cover and a general medical cover is also recommended.

If you are an investor who wishes to invest in equities linked mutual fund but are not willing to take as much risk as normal investors, you can choose to invest in a balanced fund, which as mentioned above, invests 65% of your funds into equities. But a slight twist instead of investing using the SIP route, opt for STP (Systematic Transfer Plan) which functions similarly to that of an SIP but it transfers funds from a particular debt fund to another scheme automatically in intervals such as weekly, fortnightly or monthly. Apart from the responsibility on your part of investing, it is also equally important for you to review your portfolio at least once in 6 months in order to review the performance of your fund since an early detection can save you from any kind of credit risk in future. If in case you do not want to take any kind of risk it is best to in traditional plans like fixed deposits (FDs) or recurring deposits (RDs). Banks are providing good interest rates. And it is important for you to know that the higher you invest, greater will be you return. But what you should know is that the interest part on those funds is taxable on an accrual basis. But it is quite a marginal amount, so it will not be a great deal if your investments are parked in profitable avenues.

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