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Start early, start young– Start early and always remember that time is the greatest multiplier. If you have not started yet, start investing from today.
Invest regularly– Invest every day, every month, every year. There just cannot be any investment holiday. Even if the amount is small, you must invest a fixed sum regularly. Best way to ensure this is to make maximum investment decisions automated, that a certain amount will be cut from your salary every month for PF or Pension Fund or Home Loan.
Review your portfolio regularly– There is no point looking at stock prices every day, calculating NAVs of mutual funds every week or checking out property prices every month. But it is important that you review your investment decisions and portfolios regularly. Some of them you need to book profit, some of them you need to weed out. Remember in our investment decisions, like life itself, all of us make mistakes, the important thing is to learn the lesson and correct our mistakes in time.
Identify your Goals and Achieve those goals– It is very important to identify your goals. Decide your plans, clearly chalk out what you are planning to do when you will be going for an expensive degree abroad or get married, where to you want to settle down and what sort of apartment you want to buy. Then work on your investment requirement. It is equally important to achieve individual goals. Remember if you identify your goals, start investing early and maintain it regularly, nothing is impossible.
Take Risk– Without risk, there is no reward. Don’t be afraid of risk, but understand what risk you are taking and how you can minimize it. Don’t be afraid of stock market. In our times, you cannot afford to stay away equities. It is better to measure the quantum of risk you can afford. Typically you are advised to put (100- your age) % of your total investment into stocks. So as you grow older you reduce your exposure to equities.
Don’t Put All your eggs in one basket– However sure you are sure about one stock, one particular Fund or that special real estate project, never undermine risk inherent in all investment. Diversify risk, that is the best and most intelligent way to minimize risk. Spread your investment across sectors and across financial instruments.
You are your best financial planner– Do not go by hot tips, you are more likely to lose your money that way. Any investment requires some understanding and some research. And who can match both sides of the story better than you yourself. You know best what you require, another house or good medical insurance cover for the whole family. All most everyone would like to tell you about certain specific products, where they have some vested interest. Your insurance agent will always like to sell you costliest insurance. Even a certified financial planner can give you a general prescription. Before you invest your money, listen to everyone but invest some of your precious time and energy into it, that is the smartest way of doing it.
Don’t Invest in Products You don’t understand– Your best friend may be buying and selling properties or making huge profits in commodity futures, don’t get greedy and jump into water. Invest only where your understanding is clear, you understand the risks of it. If you want to invest in a product you don’t understand then go through professionals. If you are not confident enough about getting into the stock market, go through Mutual Funds, that’s the smart way of doing.
Plan for Rainy Day - Despite your best planning, things may go wrong. Keep enough provision for rainy days. There is no guarantee for anything in this world, what looks most secured today, may crumble tomorrow but you should never be caught on the wrong foot. Always have an extra savings for difficult time.
Get the Basics Right – This is the most difficult part of the game. All the above advises sound simple enough but all of us struggle to follow it on a regular basis. Plan properly, identify your needs, start early, invest regularly, review your portfolio regularly, diversify your risk and achieve your goal, it is as difficult in reality as it sounds simple here. But Try to get the basics right and you will be a winner.
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