Topic 3: What Sets Smart Investor Apart From Regular One?
Investors should have proper knowledge of product before investing in these kinds of funds
A six-digit salary is desired by most people since it can land you in the top 1-2% of earners. But, will you remain rich in future as well or be able to maintain the same standard of living for the rest of your life? Well, it totally depends on your money habits. We dream of a happy life like owning a house, car, funds for children’s education and marriages. But, are we taking enough steps to turn it into a reality? If you look at the amount that one will earn over a lifetime and figure out the number of one’s working years, most of us will be millionaires over the working life. However, in reality, very few become millionaires.
One cannot confront the possibility of his or her own demise. However, any person will aim to keep his family debt free, financially strong and independent, in his absence. By proper financial planning, you can definitely improve the economic and financial stability of the family. What changes will take you to the road of prosperity? It’s all about selecting an experienced financial planner, who can understand your current position and life goals, suggesting a customized plan with the right mix of products.
The core idea is to start saving and build a saving behavior. That is, even if one has invested a small amount, once we see progress, we tend to repeat the behavior. For instance, a person can retire with a corpus of Rs 1 crore at the age of 60, if they start investing at the age of 25 in equity mutual funds, with a sum of no more than Rs 1,500 per month.
Over the last decade, the role of an ‘advisor’ has changed to that of a ‘portfolio manager’ and now to a ‘life planner’. Customers have understood that financial planning is not just investing; it’s a process that manages your finances and links it to your goals. Simply buying a financial product will not fulfill any goals. For instance, investing in a fixed deposit at 8% per annum and earning a post-tax return of 7% per annum is not enough, given an inflation of 7.5%. If we do so, we incur a loss of 0.5%. It’s a fact: imagine the same event to continue for the next 25 years! Big wealth is destroyed by that time.
In simple terms, one should start investing and first with mutual funds, which are one of the best ways to start participating in the equity/debt market through various schemes. Customers should closely look at the risk-return perspective while choosing funds. If a customer wants safe investment, he can go ahead with liquid / debt funds or else with equities for higher returns. There are various types of funds that have different levels of risks like sectoral funds, precious metal funds, cross country funds, commodity funds etc. Investors should have proper knowledge of product before investing in these kinds of funds.
For beginners, systematic investment plans (SIPs) are ideal that invest consistently and ride easily through market volatility. By rightly identifying the risk one is willing to take, in conjunction with liquidity requirement and return expectation, one can match a fund to suit their investment objective. Not only are they cost efficient, but are tax efficient as well.
Everyone should start with these kinds of products for their investment needs and migrate slowly and steadily towards other high-end products. Apart from mutual funds, one can invest in a bouquet of products such as structured products, tax-free bonds, etc. It is vital to have the right mix of products in one’s portfolio, to diversify the risk and generate healthy returns. Since direct equity is a high-risk high-return product, investors should look at this product at an advanced stage of investing. It is important to invest in products you understand, and more importantly, to stick to funds that have an established record, experienced professionals and years of presence in the industry.
Source: DNA
A six-digit salary is desired by most people since it can land you in the top 1-2% of earners. But, will you remain rich in future as well or be able to maintain the same standard of living for the rest of your life? Well, it totally depends on your money habits. We dream of a happy life like owning a house, car, funds for children’s education and marriages. But, are we taking enough steps to turn it into a reality? If you look at the amount that one will earn over a lifetime and figure out the number of one’s working years, most of us will be millionaires over the working life. However, in reality, very few become millionaires.
One cannot confront the possibility of his or her own demise. However, any person will aim to keep his family debt free, financially strong and independent, in his absence. By proper financial planning, you can definitely improve the economic and financial stability of the family. What changes will take you to the road of prosperity? It’s all about selecting an experienced financial planner, who can understand your current position and life goals, suggesting a customized plan with the right mix of products.
The core idea is to start saving and build a saving behavior. That is, even if one has invested a small amount, once we see progress, we tend to repeat the behavior. For instance, a person can retire with a corpus of Rs 1 crore at the age of 60, if they start investing at the age of 25 in equity mutual funds, with a sum of no more than Rs 1,500 per month.
Over the last decade, the role of an ‘advisor’ has changed to that of a ‘portfolio manager’ and now to a ‘life planner’. Customers have understood that financial planning is not just investing; it’s a process that manages your finances and links it to your goals. Simply buying a financial product will not fulfill any goals. For instance, investing in a fixed deposit at 8% per annum and earning a post-tax return of 7% per annum is not enough, given an inflation of 7.5%. If we do so, we incur a loss of 0.5%. It’s a fact: imagine the same event to continue for the next 25 years! Big wealth is destroyed by that time.
In simple terms, one should start investing and first with mutual funds, which are one of the best ways to start participating in the equity/debt market through various schemes. Customers should closely look at the risk-return perspective while choosing funds. If a customer wants safe investment, he can go ahead with liquid / debt funds or else with equities for higher returns. There are various types of funds that have different levels of risks like sectoral funds, precious metal funds, cross country funds, commodity funds etc. Investors should have proper knowledge of product before investing in these kinds of funds.
For beginners, systematic investment plans (SIPs) are ideal that invest consistently and ride easily through market volatility. By rightly identifying the risk one is willing to take, in conjunction with liquidity requirement and return expectation, one can match a fund to suit their investment objective. Not only are they cost efficient, but are tax efficient as well.
Everyone should start with these kinds of products for their investment needs and migrate slowly and steadily towards other high-end products. Apart from mutual funds, one can invest in a bouquet of products such as structured products, tax-free bonds, etc. It is vital to have the right mix of products in one’s portfolio, to diversify the risk and generate healthy returns. Since direct equity is a high-risk high-return product, investors should look at this product at an advanced stage of investing. It is important to invest in products you understand, and more importantly, to stick to funds that have an established record, experienced professionals and years of presence in the industry.
Source: DNA