To have a smart investment plan, you’ll have to follow certain simple rules. They can be more rewarding than you could ever imagine in your wildest dreams. However, factors like your age, the size of your investment or your knowledge about the financial markets doesn’t hold any water as far as being a successful investor is concerned.
Also read: Best Investment plans to grow your money
3 Basic rules of creating a smart investment plan
Here is an outline of the three most important rules of investment:
Know your risk tolerance – This is referred to the amount of investment risk that you can take with respect to your income and financial needs. Like every other human being, your risk tolerance will be different too and that’ll define your own risk profile. Basically, risk tolerance is more to do with psychological framework, than practical investment ideas. For that reason, you need to find out your risk tolerance and have an investment plan for yourself suitably.
Locate your financial goals – As a part of your investment plan, it is crucial for you to identify your goals and the reason for which you are raising a savings fund. Moreover, you need to earmark your plans to buy a house or pay for your child’s education while at the same time fulfill your retirement objectives too. However, amongst all these things you’ll also have to keep a separate fund for merry-making or to go for holidays as well. So, you’ll have to quantify your long-term goals along with the money needed to realize them as well as the time required for the same.
Strategize your asset allocation – Finally, you’ll have to plan your asset allocation very carefully. Here, at this juncture you just can’t always expect higher returns on investments because doing so may compel you to take more risk than what you can afford at any given moment. This holds true both financially as well as psychologically. It is a lot better to seek an expert’s advice in this regard so that you get to create a portfolio that has got the right mix of all the asset classes. Through proper asset allocations you can minimize the risk to your investments.
What is the most opportune time to invest?
Actually, you can start investing from any age and the only thing that isn’t preferable here in this regard is not invest at all as compared to investing late. You need to understand the power of compounding which is the best reason to start off with your investments early in your life.
Also read: Learn from your mother how to manager your finances.
However, make sure that you invest as per your long-term as well as short-term needs. So, if you need cash money in the near future, then it’ll be best for you to invest in a low capital, shorter-term investment option that also entails reduced level of risk to your portfolio.
This is a guest article from Zinaida who loves writing articles.
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I was just browsing through the site and I found the information on the site very informative, I am 22 years old and I have a job currently in private MNC, I earn 20k monthly I want to know any good investment plan which I can opt so that 4-5 years down the line I can buy a house of my own,
Please suggest me what needs to be one in this matter , really need your advise.
Jatish, If your time period of investment is 5 years, invest in hybrid mutual funds like ICICI Pru balanced fund or HDFC balanced fund. You can also invest in ICICI Prui focussed blue chip fund for 6 to 8 years and expect good returns of 11% to 15% per annum.
Hello Suresh Sir,
Thanks so much for the advise surely will consider it, I would like to know whether this ICICI Prui focussed blue chip fund will give me fixed rate return or it can change..?? I would really like to invest in it.
Please advise ??
Hi Jatish, None of the MF’s give fixed returns as they invest in debt instruments, equity funds etc.,
My husband and I are in our early thirties. We dont have any kids yet. My total income is 14 lacs. Since my husband takes care of the day to day expenses, most of my salary is surplus money. We stay in a house of our own and my husband has invested in an apartment for which he has to pay monthly instalments of INR 30 K.
I already have three Fixed deposits and three recurring LIC policies. Could you please suggest options for investment to ensure that we can maintain our standard of living in ten years from now.
Prachi. You should invest in various options to diversify. e.g. Invest in mutual funds like Franklin India blue chip fund or ICICI Pru blue chip fund or HDFC Prudence fund. Part of the investments, should be debt category like SBI Dynamic bond fund or Bank FD. Since you are already investing in bank FD, don’t load that for any further surplus. Invest in debt funds. Invest some money in PPF or tax free bonds. Once your tax bracket is increasing, it would be difficult to get good returns post tax. Currently REC tax free bonds are on. You can consider them.
i am nagesh, i don't have own house in hyderabad, i am a private employe and earning 15000 rs for monthly, i would like to purchase a flat or open land with EMI based, present i have only 50000 rs. could you please suggest me for have a own house. and i can able pay 5000 per monthly instalment.
please mail or call me . PH.9000498577.
Nagesh, It would be difficult to get a flat or open land (where you can construct a house) with EMI Rs 5,000 per month. You can still try and get a single bed-room flat of second sale. But I am not sure whether you can get within this budget. If I am in your place I would do any of the following 1) Comprimise on small flat and go for second sale and try to get loan and pay EMI of Rs 5,000 2) Wait for some more time say 1-2 years and create some money of Rs 2 to 3 L for initial deposit. Similarly increase my income and create passive income so that I can pay up to Rs 15K per month EMI. Second option is very much possible. Looking at political issues in Hyd, you can expect some correction in real estate prices in next 1 year.