The beginning of a new year marks a good time to have a detailed look at your personal and investment finances. Financial planners recommend investors on understanding the importance of investing and reviewing their investment portfolio at least once every six months. Following are 5 effective actions, you might consider adopting this new financial year:
- Identify what you are saving for
It’s vital to see the end goal for all types of investments. For some investors, the ultimate goal of investing is to attain financial independence where in you have an active source of inflow of cash without hampering your current lifestyle. Being financially independent means that you don’t have to work to live comfortably and can spend your time and resources however you like. There are different types of mutual funds that assist an investor’s varying goals. For instance, if you wish to fulfil your small-term goals, you might invest in mutual funds that have a shorter maturity such as debt funds. Debt mutual funds are also relatively less volatile than equity funds. - Ensure that your financial goals are SMART
Your goals should fall in the SMART category i.e. Specific, Measurable, Achievable, Realistic, and Time-bound. SMART goals aid to provide the correct roadmap and direction to achieve your aspirations and dreams. SMART goals also offer the much-needed clarity and focus to get the most out of your mutual fund investments. - Be disciplined in tough times
As soon as the markets begin to show a downfall, investors lean towards exiting the markets. This is an unhealthy practice and is usually frowned upon by experts. In such difficult times, one should consider going the SIP way. Systematic Investment Plan, or commonly referred to as SIP are a roadmap to mutual fund investments. It is an investment tool that helps to invest in mutual funds. Investments in mutual funds via SIP during a market downturn helps to accumulate more units of a mutual fund scheme. This in turn, averages out the overall cost of mutual fund units bought. This technique is called as rupee cost averaging. - Have a Plan B for your income sources
Several successful people often discuss the need and importance of having a passive income in one’s life. Passive income is possibly one of the most central and significant and ways that helps the rich get richer. It is also thought of as the pathway to success and the groundwork for sheer happiness and wealth. Mutual funds can be the easiest means to create this additional income. Once you are contented with investing in mutual funds, you can surge your allocation accordingly. - Create and maintain your emergency fund
Stocking up on your emergency fund guarantees that you and your loved ones do not fall into the vicious debt trap. It’s a good idea to arrange at least 3 months of your takeaway income as emergency funds. You can invest these funds in an ultra-short term deb fund or liquid funds. Apart from offering you with the required safety and liquidity, these funds also provide returns around 6-7% p.a.
Today, you can easily invest in mutual funds online from the convenience of your home or anywhere in the world. Make sure that your investment options align with your financial objectives, risk appetite, and investment horizon. Happy investing!
