The Indian festival season has approached, which means a host of things for Indians to look forward to. Good food, shopping sprees, exquisite parties! Diwali is basically that time of the year when you do not look at your wallet before spending.
By now you must be busy getting ready to welcome the festival of light, hope and prosperity! And I am no different from any other Indian. Just like you, I too spend rather lavishly on expensive gifts for family and friends, jewellery, gold coins and even household equipment (Because, discount offers!)
However, have you ever wondered how this unplanned spending can take a toll on your financial health? Well, for starters most people spend money on festivals without having an actual plan. Not good. You must always approach these situations with a proper scheme. For many years I spent money on all the associated practices of Diwali, until I decided to make my Diwali worthwhile for the future. I decided to start investing in financial instruments. I just had to add a few financial products like IPO, mutual funds, equities, etc. to my Diwali shopping list and I was all set.
You obviously must be aware that people spend a lot during Diwali. Now for a minute, think rationally. If you spend half that amount investing in financial instruments, you can make profitable returns in a few years’ time.
In this article I will throw some light on how you can brighten up your Diwali by investing in financial instruments. And no, I am not asking you to stop celebrating Diwali in its full glory. I’m just asking you to take a step back to invest your money in something that can be profitable for you in the future.
Well, yes, you can buy gold, but don’t you think your profit in the long run will be much more if you invest in a long-term financial instrument? No, there is no harm in buying jewelry, but you, as an investor, should always look at the long-term prospect.
Let me talk about the other side of the coin. Most companies wait for this season to launch new products or announce a positive news about the company. This news usually increases the company’s value of investment in the future. If you choose to invest money during this season, there is a higher possibility of you earning a profit in even just a month’s time. The best part is, you don’t have to shell out all your money to start saving up! You merely need to allocate your resources smartly.
I have spoken to you about financial instruments and how investing can be beneficial to you. Now let me tell you how you can do so. You don’t need to have a stupendous fund to start with. You can start investing a small amount every month in an equity mutual fund scheme from next month. And you can retire to the hills after ten years.
Sounds like a good plan? Mutual funds in the past and present have shown amazing capacity to generate wealth, when invested according to your risk appetite and investment duration. Retail investors these days do not need to rely on stocks to see their hard-earned money work harder for them.
As Indians, gold has always caught our attention since ages. Although it may add more charm to the festivity, it can also be a good investment option.
As Jeffrey A. Franks once said: ‘Holding gold has often in history served, from France to India, as the only way the peasant can protect themselves against inflation.’ Unless and until you want to hoard gold for your child’s marriage, you can instead think of buying gold funds.
Here are the major advantages of investing in mutual funds.
1. Risk diversification
The first advantage is obviously that it diversifies your risk, because it invests in a diverse portfolio of stocks across different sectors and different investment instruments.
2. Smaller capital outlay
You need a large capital outlay to build a diversified portfolio of stocks. On the other hand, mutual funds work on the basis of pooling in money and therefore investors can have the ownership of a diversified portfolio of stocks with a much smaller capital outlay.
3. Investment expertise
An amazing thing about mutual funds is that your investments are looked after by professionals. The fund managers and their teams analyse every small detail before investing in the stock of a company. And, therefore, if you are one of those people who does not have the time to review individual stocks, mutual funds are your best options. Also, investing in direct stocks is extremely risky.
4. Variety of products
Think of it this way. Mutual funds is that ice-cream store where there is a flavor for everyone! There are various categories of funds based on risk appetite and investment duration that you can choose from.
Mutual funds are quite literally a shopping mall!
5. Disciplined investing
You must have heard about Systematic investment plans (SIPs). These plans encourage in systematic deduction of money every month/quarter for investors who do not have a large corpus to invest at one go.
You may wait for Diwali to buy things for personal use, but if you’d like to be financially successful, you would think about investing as well. Our world is dynamic and ever-changing. You never know what may hit you on the financial front. So use up that bonus for something worthwhile. Something which will help you in the future.
Happy Investing! Happy Diwali!
(By Harsh Jain, Co-founder & COO, Groww.in)