The year 2022 did put the financial markets across the globe to several tests with a brooding recession predicted for the US, Russia’s continuous war with Ukraine affecting their respective
economies as well as the global growth as both of them account for approximately 30% of the global exports for wheat, food prices, etc. As a result, different economies of the world felt the effect of slower growth and higher inflation.
India is still a good investment destination which offers not only macro-economic stability amidst various policy reforms taken by the government but also offers one of the highest economic growth in the world. So, we know that no one can predict Mr Market and its Ups or Downs.
However, a few investment strategies can be the safest bet at all times.
● Start Early
Starting to invest early gives you the most powerful tool that will enable your investment to grow multi-fold. It is the “Power of Compounding” that gives an upward push to your investment over
a period of time and creates wealth out of your money. Therefore, the sooner you begin in life, the better the corpus can be kept over a long period of time and become bigger.
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● Diversification in Portfolio
The right diversification to the Portfolio is a crucial step in your investment journey needed to ensure a balance of growth as well as stability of one’s investment corpus. A well-diversified portfolio allows your money to be distributed in various avenues giving the needed balance to one’s Portfolio. In other words, “Do not put your eggs in one basket.”
● Choose an approach that suits you
While long-term investing is a highly preferable practice, one can opt to choose the most suitable course of action for one’s investment needs. For example, long-term investments in SIP have the capacity to yield good results. However, whether to invest in high-risk investments like stocks or low-risk investments like traditional insurance depends on your nature and thought process.
● Regular, Review and Re-balance
For your investment to beat inflation constantly and simultaneously grow, three ‘R’ need to be implemented periodically. The three ‘R’ are Regularity in your investment, Timely Reviewing and Periodical Re-balancing of the Portfolio. Regularity in investing develops the habit of saving and lets you plan for the future. Timely Reviewing is necessary to analyze the diversification as per the times, while Re-balancing is needed to ensure the Portfolio is in the right funds at the right time.
● Create a Budget
Keeping track of your investments and how you will achieve those with the given income can be technically called Budget making. Making a budget can be instrumental in tracking where your
money is moving and how to boost your savings. As for various rules of thumb prevalent for budget making, 50/30/20 is a common rule that is widely used. It simply means 50% of your money should go to Essentials, 30% to Non-essentials and 20% should be put in savings.
The most effective results from an investment can be achieved when you keep these types of investment strategies in mind. So, invest wisely and make prudent financial decisions.
(By Sanjiv Bajaj, Jt. Chairman & MD, Bajaj Capital Ltd)