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Posts Tagged ‘savings’

Compounding (1)

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In recent months, there has been a sense of euphoria about India and Indian financial markets. The current highs that the Indian equity market is witnessing, is on one hand creating elation and on the other hand causing regret, making many investors feel that they lost the opportunity.

Many investors may believe that those who are invested in the equity markets, turned out to be ‘better’ investors. One year ago, investors who did not invest in equities were looked upon as better investors.  So how can one truly be a better investor? I would like to say that all of us can strive to be better at investing by following a few simple steps:

  1. Save and Invest:

All of us do understand that we need to invest but very few of us understand that we can invest only if we first save. Know how much you earn and spend to arrive at what you can save.

  1. Understand where you are investing your money:

Today investors have a plethora of options to choose from – Equities, Fixed income, Commodities, Gold, International Funds, Real Estate. Each of these asset classes comes with associated risks and benefits. Know these details when you are investing. Understand the risks you are signing up for and resultant return expectations.

  1. Understand why you are investing your money

Many a time when we make the investment we do have the reason or goal in mind. But over time, especially when markets go down, we forget these goals. We forget that we were investing for a goal which was many years away, and therefore there is no reason to panic.

  1. Systematize your investing

Being busy individuals, handling paperwork, cheques, banking errands are the last thing on our minds. Hence the need to systematize. By this I mean, automate investments to selected avenues on monthly, quarterly yearly basis by using technology, available systematic investment plans (SIPs), triggers, alerts, ECS and such facilities available today.

  1. Consistency pays

As we all know from the current scenario, emotions do interfere with investing, sometimes they work for us and sometimes against. As we usually decide with our hearts and not our heads, create a discipline to invest a certain amount every month and systematize it.  There are many examples of SIPs in diversified equity mutual fund schemes generating sizeable corpuses, where investors have consistently run SIPs.

  1. Discipline is key

Discipline yourself to refrain from wavering from an agreed asset allocation and investment strategy. It is easy to get swayed, just because someone else invested and made a short term profit and his investment option seems superior. Look at your agreed investment strategy periodically. Portfolio churn is not necessary value adding to your portfolio.

  1. Take professional help

As is the case where we need dieticians, doctors, lawyers, etc. sometimes we need professional help to nudge us into an investing habit. Hire a SEBI Registered Investment Advisor to help you with your financial life.

  1. Monitor and Review

After the effort of making a investment strategy and implementing it, comes the time to check whether the plan is working for you. Review if you were able to stick to the savings plan and investments plan. Were you able to maintain consistency? Review whether improvements are possible to the savings plan. Control what you can control i.e. items such as saving and investing. Review your investment products every six months to see how they are performing against an appropriate benchmark.

  1. Correct and Act

Make corrections if you have swayed away from agreed savings/investments plan, asset mix and exit underperforming investments, even at a loss. Here is where a professional nudge would help. A professional could provide that much needed nudge as she is not emotionally connected with your investments.

  1. Repeat the Loop

Repeat this loop consistently and religiously to better your investing experience.

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Fin resolutions that can change your life - The times of India - 30.12.2014-page-001

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How to ensure that your kitty is big enough

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