There are a lot of factors which are to be considered before while investing even in the right kind of investment. More than rules, these are principles by which you can secure your future and celebrating your present. These principles are not susceptible to time and will nourish you to become a better investor.
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You must know where to start before reaching the finish line of the race. You need to figure out your net worth by charting your list of assets and liabilities. Before you plan to invest, it is always better to sit down and take a fresh look at your current assets and liabilities. Many times your attitude towards investing also determines the kind of investment you are looking for. The ability to take risks determines the options you should opt. If you always had the impression that stock markets are very volatile then equity is not for you. The safe bet would be to go for mutual funds.
But if you are the kind where even if there is a 20% fall, you won’t be bothered much. Equity is great option to build wealth. Some people also have the keenness to do a research before investing. Factors such as risk taking, attitude towards investment and your current financial condition determine the scope of your investment. It is always a good way to start assessing and then investing.
Always understand the product before investing in it
Don’t invest in a product that your don’t understand. It is a wise thing to understand and know the product before putting your money in it. A lot of people realize this later as they do not have any awareness about insurance or investment and end up paying more than they actually have to. Increase your investment by just 1% every year and you will end up having sufficient funds during your retirement.
Also, remember to diversify your investments as putting your money only on one single form of investment can lead to a sense of insecurity. This happened when people believed that investing in real estate was the safest asset, but when there was an economy crash in 2008. People realized the diversifying is the best way to secure you financially.
Keep track of what you are investing
You will need to monitor and review your investment plans every year. This was you can keep your financial portfolio healthy and active. Well, the things you need to check and review are your assets, liabilities. Another thing to be looked at is your individual investments and its performance.
Always keep your goal in mind when you do the review of your own portfolio and how closer you are to your goal there by encouraging you to do better. In case of extra-ordinary circumstances, you may have to take a re-look for occasions like marriage, birth of a child, salary hike, loans etc.
Inflation – Keep in mind while calculating your returns
Don’t plan your future based on today’s values as the matured amount will be given say 15 or 20 years later and that money’s worth will be less then. What you think is 5 lakhs worth now may not be 5 lakhs worth 15 or 20 years down the lane. Its worth would have gone down.
It is a wise way to calculate your returns by taking inflation rate into consideration. Some of the things that inflation can affect you are household budget, insurance, education of children etc.
Buy insurance to guard you against unforeseen circumstances
Be it a medical emergency or death of a families’ bread winner, the only way you can protect yourself and your dependents is by insuring yourself for the right amount. Insurance is a cost-effective way to protect you in such unexpected situations. Medical insurance and life insurance are key aspects for any individual’s life.
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