Hello Readers!
People save money, invest it in different investment instruments so that they don’t have to make any kind of financial compromises in accomplishing the big goals in their lives. This makes processes like planning of saving and plotting of investment to be done more efficiently and effectively.
When we plan to invest, we make many compromises, sometimes with our needs, sometimes with our wants, this is because what we save is not enough for all our financial goals. However, no matter which goal we are investing for, here are three things you shouldn’t compromise on:
Know the Objective for Which You Are Making the Investment in The First Place
There is a key difference between saving and investing. Saving can be carried out without any specific goal, however investing does need a reason, to be carried out, as the reason will decide how long you can invest for and what you should invest in.
In case if you compromise with the objective of investment, you might end up choosing the wrong investment instrument which is not suitable for your goal.
Know What You Will Be Investing in And What Are the Risks Involved
People often ignore this very thing; they choose a fund to invest without knowing the nature of the fund. If you have also done it in this way, then it is a red flag for you. You may end up losing your capital or may get disappointed with the returns you get while investing.
Here it is suggested, before you start investing, invest some of your time researching and understanding the basic nature of what you are investing in. For example, if you invest in Equity mutual funds, then you must be aware of the investment strategy and return offered by the fund. You must be also aware of the risk and volatilities associated with the fund that might occur while your investment journey.
In case if you invest in a fund without having any knowledge about what you are investing in, then it is suggested don’t. The smart investors openly research and enquire about the funds and their related details, if they don’t know or understand something. This will help you choose the right instrument for your goals.
Know-How Much Time It Will Take to Get to Your Investment Goal
Reaching your goal, short-term or long-term, takes time to get complete, some less some more, but in case if you don’t know the actual time, then it is a big problem for you.
Our big financial goals, like retirement, child’s education require a good amount of our savings to be invested in a good place for a good time.
A crore retirement fund requires decades of saving and investing, unless you earn a lot more than the average, while a travel fund will take much lesser. This may seem logical, however many of us plan for goals without considering how much time our investments will take.
It is suggested when you plan for your big goals like retirement, do not base it on an instrument like Fixed Deposits, because the rate of return offered, will struggle to keep pace with inflation.
It is a must for an investor to know that for goals that need many years of investment, choosing an instrument that is appropriate for such a timeline is right. Equity mutual fund is ideal for a retirement fund, but for your travel fund that needs a couple of years of investment, it is not.
For your goal that requires a couple of years of investment, it is better if you fixed income funds like debt mutual funds for them. You don’t want or need the volatility of equity in this case.
If you understand the above-mentioned points that you must not compromise while planning your investment, now you can effectively let your investment work for you and your goals.
For any kind of query, you can contact us at Shri Ashutosh Securities Pvt Ltd., we are here to help you in any way possible.
Happy Investing!
(Mutual Fund investments are subject to market risk Illustrations are for example only, there is no guarantee of returns. Past performance is not an indicator/guarantee to future returns).