The only pursuit for a good financial future is to invest. The more you invest the better are your chances for getting higher returns. But not all fund types are suitable for all types of investors. The returns on investment depend upon your level of risk appetite and up to what extent are you willing to expose your funds towards risk.
Traditionally, most risk averse investors prefer to invest in Fixed Deposits (FDs), Recurring Deposits (RDs), Post Office Savings Scheme etc. But with RBI’s intervention to strengthen the financial structure of the country and improve investor confidence, the number of investment avenues has increased enabling investors to expect better quality information and reliable market information.
As is suggested if you wish to invest into the market, more than the direct stocks, investing in equities through Mutual Funds ( MFs) opting the Systematic Investment Plan (SIP) route, is considered to be quite beneficial. The investors can choose from a wide variety of funds like small cap, small – mid cap, mid cap, mid-large cap, large cap, diversified funds, sectoral funds. You as a prudent investor need to analyze your risk appetite and invest accordingly. If you are an investor who has a good equity exposure, you can choose to invest in market indices, large caps, sectoral funds etc. But if you do not sport a good risk appetite, then balanced funds will be advised as they provide limited equity exposure. Apart from the balanced funds, you also can choose to invest in MIPs (Monthly Investment Plan) as they invest your funds only in those funds which provide 10-25% risk exposure by investing in mutual funds. Try choosing those funds that have performed consistently over a period of time along with your fund manager.
It is important to note that, if you already have a loan on your finances, prior to your investing decision, there is nothing you need to fret about. Try to liquidate some of your assets that you have managed to invest in after some time so that they can be used to clear your loan. If the loan in question is a home loan you are benefitted with a tax benefit so you can take some time before zeroing on your decision of liquidating any assets for repaying the same. But if the loan in question is a personal loan or a credit card, it is best that you do not delay in its repayment since they have a massive interest rate that chop off a major portion of your finances. Although some banks charge a prepayment penalty, try speaking to your banking authorities so that you can arrive at a decision where it is a win win situation.
As far as investment for retirement is considered, this first step will be to exhaust your saving limit of Rs 70000 in the Public Provident Fund (PPF) account so that you can ensure a tax free benefit at the end of the fund tenor. Investing into RDs or FDs just a few years before your retirement can give you the benefit of using the interest amount as your monthly income if you are not entitled to a pension.
As far as your investment linked goals are concerned; see to that you decide the tenors of your funds depending on as and when required by you. Once that is done, make sure that you set aside a certain percentage as liquid cash in the form of emergency fund. This fund can be utilized, as the name suggests in case of any emergencies without the need for you to liquidate any assets before they mature. If you plan to save for the long term it is important that you have an adequate medical health cover that can provide you with all the financial aid required in case of emergencies.