1. 7 simple steps to becoming your own financial planner

7 simple steps to becoming your own financial planner

In India, investing has always meant buying a physical asset like gold or a piece of land. However, with changing times, investing patterns are shifting. Indian investors are now moving towards sophisticated financial assets like stocks, bonds & mutual funds.

Published: April 10, 2017 6:44 PM
Financial literacy is scarce even among the educated literate. Reading a few simple books on the concept of investing should give you clarity on what you are getting into.

By Ashish Shanker

In India, investing has always meant buying a physical asset like gold or a piece of land. However, with changing times, investing patterns are shifting. Indian investors are now moving towards sophisticated financial assets like stocks, bonds & mutual funds. Driving this change is the youth of our nation. Having said that, we should be mindful of the fact that they are still in their learning phase and need guidance.

Conceptual Clarity: Financial literacy is scarce even among the educated literate. Reading a few simple books on the concept of investing should give you clarity on what you are getting into. This does not imply that you need to make it your profession, but complex jargons can be decoded and financial myths are debunked. After some basic research one will realize that smart investing is the only way to beat the inflation rate. Although fixed deposits are considered to be a safe option, one must realize that inflation and taxation cause a major dent in their returns, leaving behind very little real return.

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Start Early: Investing early means taking advantage of the power of compounding. Starting earlier will give your investments time to grow and recover from any market volatility. Procrastination seldom helps in any field of life and investing is one of them. Investing in fundamentally good stocks/mutual funds with a long term view is the right way to go.

Ensure Savings: Barring the ones who own a house or are staying with their family, the young workforce generally has high basic expenditure. This can seem like a challenge when it comes to saving for investments. Systematic Investment Plans (SIPs) are a sensible way to get around this issue. It is important to shuffle the formula from “Income-Expenses = Savings” to “Income- Savings = Expenses”. Setting aside a part of your monthly income for a couple of SIPs will help stagger your investments, finally growing into a large holding over a period of time.

Goals: Whatever you goals in life – traveling, starting a business, marriage, buying a house, charity or retirement – financially backing these goals is essential to make them come true.

For the near term goals it is sensible to pick an SIP into balanced funds (mix of debt and equity investments). For long term goals like a child’s education, retirement or any other expenses which are in the 7-8 year time horizon, one can choose equity funds. This is because equity funds tend to be more volatile in the short term but the returns tend to stabilize over the long term. Apart from this, investing in an emergency fund (Ultra Short Term) for any sudden short term liquidity requirement is important.

Risk: There is always going to be an element of risk when it comes to investments and failure in some cases is imminent. But remember that everyday news does not concern your investments when you have a long term investment mindset. Checking up on your portfolio and making changes once in a while is good enough. Minimize these risks by learning about the fund manager and understanding the fund.

Professional Help: Seeking advice from trusted, quality financial advisors can go a long way. The fees charged will be worth it in the long run as the decisions will be based on a strong knowledge base. Funds that promise high returns or have given high returns in the past may not continue that momentum into the future. A financial advisor can help in finding long term, quality mutual funds through strong research.

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Keep it Simple: Invest only in funds that you understand or that are suggested by a trusted advisor. Investing in too many funds at once can cause confusion and may make tracking your investments hard. Invest in not more than 2-3 quality mutual funds in one category.

(The author is Head-Investment Advisory, Motilal Oswal Private Wealth Management)

  1. P
    Pat Rozendaal
    Apr 10, 2017 at 11:11 pm
    Gold & Silver are important ets in an investor’s portfolio, especially now because of the huge, worldwide, debt bubble that Billionaire experts say will pop in the next 5-15 years… Leaving behind destruction on one side and wealth for Gold & Silver owners… In-fact this cycle is SO “normal” that it’s been happening, like clockwork, since 1671… When it does, wealth is transferred from paper currency back to Gold & Silver and all those who prepared for it, receive a tremendous increase in wealth… And those that didn’t, lose out… So, Gold & Silver are vital ets to collapse-proof and hedge a portfolio long term… read more.. : GoldAndSilverForLife /partner?p romeoicq&w webinar
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