Optimising Your Investments 101

By | February 11, 2019

Do you think you aren’t a pro at investing? Once you’ve set your goals, all you need to do is match them with the right type of investment strategies. This way, you can balance your financial portfolio and stay financially fit.

Are you a novice at investing? We understand that for starters, investing wisely can be quite a challenge. With a range of investment choices and varying degrees of market risk associated with each, putting your money into financial schemes can turn into a nightmare. So, we’ve brought you this guide to help you kick-start your way to investing.

Everyone looks for good investment instruments but only a few take the necessary steps before getting started. We’ve compiled a list of factors that, if followed closely, will help you make sound financial decisions related to investments.

Step 1: Covering the bases correctly

Before you begin your journey as a seasoned investor, here are five things that you must know to inculcate financial discipline in your investments.

  • Setting investment goals:

Your investments can be categorized into short-, mid-, and long-term investments depending on the time frame in which you want to remain invested in the schemes.

Drawing a blueprint of your financial goals will help you map your investments and time them accordingly to accrue benefits and timely returns. 

Additional Reading: Ridiculously Easy Investment Plans For Every Budget

  • Defining a time frame:

Having a time frame in mind with respect to your investments have multi-faceted benefits. This helps you keep abreast of your invested money, track the returns on time, and stay focused and invested for a long time.

  • Figuring out you risk appetite:

Not everyone has the same risk tolerance. As investments are subjected to market risk and volatility, it’s important that you figure out the level of risk you are willing to deal with.

Approaching investments blindly, without calculating the risk is a habit investors should steer clear of.

  • Allocating your assets judiciously:

Just like having all your eggs in one basket can prove a fool-hardy mistake, parking all your savings in one investment scheme can be a bad idea.

Begin by diversifying your investments across multiple channels. This way, the loss suffered in one scheme can be made up for by the rewards gained from another.

  • Choosing the right investment apparatus:

Well, this is based on all four points mentioned above. After considering the various options you have at hand, try zeroing in on a product that is well-suited for your investment goal, the period for which you wish to stay invested, and your risk appetite.

Consider this, if you’re on the lookout to deposit a small sum of money each month, then you certainly can’t go wrong with Systematic Investment Plans (SIP).

Additional Reading: Understanding ‘Systematic Investment Plan’ (SIP)!

Pro tip: If the prospect of market volatility and risks give you sleepless nights, here’s something for you to consider. Mutual Funds are designed in a way to allow diversification of your funds. This way, the risk in one asset can be countered by the rewards earned from another.

Step 2: Fundamentals of goal-based investing

  • Decision-centric model

The first step to goal-driven investing is determining your goals. Your plan of action can include goals such as house renovation or moving to a new apartment, having a baby, starting your own business, or even as simple as getting married.

When you have a goal in mind, you’re sure to be clear in terms of the key aspects of your investment venture. Having a financial goal on the horizon helps you determine which investment instruments will be well-matched to your targets.

These are: How much should you invest? Where should you invest? How risky is it? How long to stay invested?

Determining your goals beforehand will help you tailor your investments accordingly.

Additional Reading: How To Meet Your Goals With Mutual Funds

  • Fine-tuning your investments

Being well-invested doesn’t mean that you can choose to forget about your investments till it’s time for returns. Firstly, you need to consider the effects that inflation has on your finances?

It’s wise to keep checking your investments from time to time to gauge if the returns are enough to counter inflation. If the returns don’t match the rising prices, re-align your finances by investing in a different channel or by scaling your investments wisely.

Additional Reading: All About Life Stages And Investments

Step 3: Optimising your investments

Your investments must depend on the time for which you wish to stay invested. Adopting a goal-based approach towards investments instills financial freedom to help you achieve your targets as you progress in life and in your career.

  • Short-term goals

# Duration spans over 0-3 years.

# Goals include the purchasing of a car, home renovation, or even a wedding in the family.

# The recommended mode of investments include Liquid and Debt Funds.

Additional Reading: Short-Term Investment? Here Are Your Best Options!

  • Mid-term goals

# Duration is in the range of 3-5 years.

# Under this category, goals include family weddings, an international trip with your family, a second-house, or even early retirement. 

# Equity funds are the suggested mode of investments for this category.

  • Long-term goals

# These goals are envisioned for a period over 5 years. 

# Goals such as the education of your children and retirement planning fall under this category.

# ULIPS and Mutual Fund are some of the suggested long-term investment options. 

Additional Reading: A Millennial’s Guide To Tax-Saving Investments

Goal-based investing is a sure recipe for financial discipline. The longer you stay invested, greater will be the benefit of compounding. If you stay invested for a long time, your investments will be subjected to a growth momentum over time. So, the earlier you begin and the longer you save, the more impressive will be your finances!

Setting aside a small amount for investment will not disrupt your daily budget. When backed by your goals, you can select the frequency of your investments as per your convenience.

If you’re on the lookout for more such financial products, we have a horde of options for you to pick from. Happy investing!

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