Another day comes to an end, and we move into the beginning of a new dawn. A new calendar year where new resolutions will be made. Or is it really like that? While most of us commit to ourselves that they will change the way they lived live till now by taking a new health regime, going to a gym, some will make new money management resolutions, I won’t invest in the last 10 days before submitting the investment proofs to the employer !!
If that’s the case I have not seen any such change on the kind of questions being posed by majority of the investors everywhere – which is the best fund? Which is the best insurance plan? Which is better PPF or NPS? But then merely answering such vague questions on a social media platform – will it really help you. I am afraid not.
The point I am trying to bring forth is there is a strong need to have a structured approach even before you start investing your money. This approach is sadly missing in most of the investors or is often a quite a boring topic. But believe it or not this is the most important element when it comes to the field of “Personal Finance.”
Once you have prioritized your goals you will have clarity and a purpose to channelize your investments in such a manner that you meet your financial goals accordingly. Put your goals into a time basket (short term, medium term, long term and very long term) meaning each of your financial goals has to have a definite time period in which you would want to achieve it right. If that’s done understand your risk taking ability. Are you an aggressive, moderate or a conservative investor? These all such multiple factors play a key role in investing your hard earned money. Do not simply rely on a social media platform to take your money decisions.
For example if you are planning in the new year to investing for your child’s education remember this is the only financial goal in which the date by which you need to attain this goal is absolutely fixed. You just cannot negotiate with this goal by the time the child turns 18 you need to have a sizeable investment amount for further studies. Having said this here is a 4 step process – a) Education cost inflation rate is higher compared to the normal inflation rate.
b) In order to meet such inflation rate of 10% around the only asset class that stays is equities so an early start is quite imperative. An early start into this goal can help you compound your money.
c) if you started really early let’s say you have 14 years start with 2 to 3 multi cap funds, if you have a higher risk appetite use 2 multi cap fund and 1 mid cap fund
d) if you are too late to start this goal and have just 4 to 5 years you can try hybrid funds, if you still want a safer route stick to debt funds in that case.
So now you got a little hang of it. This is just an illustrative example for you, you may or may not stick to it. Remember – “Money making is not that easy like tossing a coin and getting your answers but if you have a structured approach and have a clear goal in sight you can start your financial journey quite well.
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