The right steps to financial security
Beyond health, the pandemic has had another huge impact on people: Careers and job security have been disrupted. Many jobs lost when the economy took a hit, because companies downsized due to losses, or because working from home wasn’t feasible. Others kept their jobs, but without the assurance of keeping those jobs in the future.
This era of financial instability has highlighted the importance of investing at the right time and in the right way to ensure tax access when needed. Investing a small amount of money regularly can provide you with additional income when your regular income is not stable or is at risk. “Having the right asset allocation suited to your risk profile can do wonders for your wealth-building journey,” says CA Rishabh Parakh, founder of Money Plant Consultancy and author of Financial Spirituality.
Keep liquid funds
“Always maintain a minimum of three months of income or salary in a liquid or short-term debt fund for a rainy day,” says Saloni Parikh, expert at Miss Piggy Banks, a user-centric financial platform. This gives you easy access to money for medical or other emergencies if you cannot access your invested money for a period of time.
Go slow and steady
“Invest gradually; never invest all at once, especially at this market level, unless there is a huge opportunity in terms of a stock market crash,” advises Parakh. “Otherwise, always invest in slices (i.e. portions).” It also reduces risk. “Invest in direct actions,” adds Parikh. She also notes that market volatility gives you plenty of opportunities to build a strong portfolio and steadily grow your wealth. “Go for a SIP (Systematic Investment Plan) approach and be cautious and a bit conservative.” A SIP is an investment option that works for the long term. Investing small amounts in low-risk mutual funds can help you earn assured returns at the end of the term.
Start small, start young
“Start an SIP in an equity mutual fund that matches your financial goals and risk profile,” advises Rushika Sabnis, also an expert at Miss Piggy Banks. “There is no minimum age to start your SIP. You can start by investing small amounts and increase them as your income increases.
Insure yourself for the future
“Use up to 5% of your savings for term and health insurance premiums,” says Parakh. “Make sure you have good coverage that matches your financial goals.” This ensures that you get a decent sum at the end of the term when it comes to term insurance or, in the event of your death, your nominee will receive the death benefit. Health insurance helps you when you need immediate financial assistance for medical reasons.
Be regular and careful
“First save, then invest regularly and prudently each month; try not to push it off to the next month,” advises Parikh. And don’t dive headfirst into investing. Start by saving enough money for a while. When you have saved a decent amount, you can use some of it for investments. Study the types of investments available and see which ones are best for you. You can also seek professional help. Once you start investing, usually do so without missing any months, to ensure guaranteed returns.
“Plan your asset allocation, especially when it comes to equity investments,” says Parakh. “If you’re in your 30s, a minimum of 50-60% can be invested in the stock market through a combination of blue chip stocks and mutual funds.” He also adds that you can use mutual funds for diversification. “Invest 10-15% of your savings in fixed instruments like the Provident Fund, the State Provident Fund, the National Pension Scheme or mutual funds,” he advises. Building a good portfolio is essential for good returns. Don’t put all your eggs in one basket and make sure you follow a systematic approach to investing instead of pooling everything at once.
Go the golden way
“Invest 10% of your investable funds in online exchange-traded funds (ETFs). They are safe and act as a hedge against other asset classes,” informs Sabnis. Gold ETFs track the price of physical gold, so you get an equivalent number of ETF units based on the current price of gold. When you sell them, the rate is the same as the price in effect at the time of the sale. “Avoid buying physical jewelry for investment purposes,” warns Parakh.
For the best return on investment, you should do the research yourself or with the help of a professional. Develop a strategy – plan and implement an appropriate investment plan. Keep the above points in mind when doing this. If you invest at the right time and with the right amount in the right investment option, you will get the best results.
Keep in mind…
Where and how much to invest is subjective. Don’t trust what you read ahead and on social media unless you can verify the facts. It also depends on how much you have in savings and how much you can use to invest. Start with small amounts of money, until you settle into a regular investment pattern. Once you have more ready funds in place, you can increase the investment amount. Don’t put all your investment into one option; look at the different ones that may work for you. It is ideal to do your research on your own, and also to seek professional help if necessary, to make the right financial decisions.
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