It is good enough to say that time is not loyal to anyone. Investment decisions in the current market scenario have to be taken after a careful analysis. Your decisions should not leave you red faced at the end of the day when you need your invested money so importantly. An acute perception of the financial strategies will help you to tide through the tough waters.
Rules of Investing To Grow Your Wealth:
Know Your Assets: To begin with, you should know your net worth. Let it be your assets or liabilities, it is important to estimate your worth to draw the right kind of financial plan. A look at your current fiscal position will help you to make a decision regarding new investment.
Factors Considered When You Perform Risk Analysis: Your age plays a vital role and the number of years left in your working calendar will help you to understand the level of risk that can be taken. The variability in the income will tell you the amount required to keep in buffer for all your emergency expenses. A self employed or business person has to have to good chunk of money in deposits during emergency situations. Your short term and long term commitments should influence your investment decisions.
Invest In A Product That You Understand Well: A golden rule to be followed is not to invest in a product that you do not completely understand. There are lots and lots of ULIPs, ELSS and other insurance products promising sky high returns year on year. However, they are very complicated to understand. If you feel that understanding such complexities is not your cup of tea, it is well and good to go with the PPF or FD options.
For example, PPF gives 8.5% returns and if you earn 10 Lakhs per year and assuming you save 10% of your income thereby incrementing your savings by 10% every year, your net worth will grow to 1.16 Crore in 20 years (Courtesy: Financial Times Magazine). Isn’t it amazing to know?
Diversify Your Funds To Reduce Risk Of Losing All: A one time crash in your dedicated portfolio can make you to fall deep in the pit. No one can predict a sudden outage and not many investors can withstand such a windfall loss overnight. Hence, it is always safe to diversify your portfolio so that the loss or profit will be a mixed bag of results. It will help you to tide over the losses incurred in some funds.
Existing Liabilities: Suppose if you have a home loan or vehicle loan and you want to invest money in the equity, it does not make any sense. By default, you end up paying more amount of money for your home loan or personal loans. Clear off your existing debts before you invest the money. Investments should be made when you have a surplus cash.