While worries of recession and the cut-throat job market may plague us almost every single day, investments in the money market seem to offer us some respite in the form of a steady income over and above our investments. While most of us may see the money market as an inconsistent forum to earn profits, it is this inconsistency which also brings us an exemplary percentage of profits, when the fund outperforms its benchmark indices. As the common man is not adept to understand the functioning of the money market, we will help you chalk out a clear financial strategy or plan, that will help you make investments in consistent funds to gain a steady flow of income. Although many of us tend to earn, spend and invest too, we lack a clear picture on how actually are our finances utilized. As an investor we must question ourselves on why we have chosen to invest in a particular investment, what should we expect out of it, and how will it contribute towards conquering our financial goals. Do we actually have a plan for this? If your answer to the above question is ‘no’ then you have some reason to worry as your finances are likely to spiral out-of-control. But fret no more, as we offer a few basics on how you can understand the concept of financial planning, thereby using it to the best of your financial interests.
Financial planning refers to a series of financial steps that help an individual achieve his financial goals within a specified period of time. These financial goals can vary from one individual to another, and can differ from saving money for your child’s higher education, buying your dream house, or saving some cash for that far-fetched holiday; everything is possible with the right financial planning and strategy, as it will ensure that you have the right amount of money at the right place and the at the right time. While financial planning may ask you to show some dedication and discipline in the matter of patient savings, it will help you create wealth over a period of time. You must also be wary of the risk you will have to take while making an investment in these financial tools, as the trend often belies that greater the risk involved in an investment; higher will be its profitability. Its vice-versa statement also holds true as the lower the risk involved in an investment, lower will be the amount of profits you are expected to earn. While many of you may now be tempted towards high risk investment tools, it is important to remember that these instruments do not always guarantee high returns; potential high returns are only expected. If the market experiences a downfall, then high losses can also be incurred by an investor.
While high risk investments have the capability to double your investments, negative returns can also be expected over this period. While gold is often viewed as a safe investment bet, your investments may be rendered stagnant or flat if the economy performs relatively well. Investments in real estate, although offer the double delightful prospects of both rental income and price appreciation, getting rid of the property for an immediate financial emergency is almost impossible. Thus, as an investor, select an investment based on the risk profile, the amount of time you are willing to make the investment, and the liquidity of the fund. Once you have considered these aspects, you can thrust yourself in the world of investments, keeping a close watch on the behavior of your fund and the market.