Start the new decade by making the right investment

March 06, 2020

start-the-new-decade-by-making-the-right-investment

The onset of the new decade calls for taking fresh resolutions for personal and financial prosperity. Both of these can be achieved by making the right choices and investments. However, when it comes to the latter, most feel spoilt for choice and are in dilemma.

The Indian financial markets offer ample choice to investors for wealth creation and achieve set targets. So, how do you make the right investments? Read on to find out the answer.

Have a holistic view of financial goals

To call the shots right, you need to have a holistic view of your financial goals. Knowing what you want to achieve within what time will help you zero-in on the instruments to do so. It’s advisable to divide goals into three buckets – short, medium and long.

For short and medium-term goals such as building an emergency corpus, accumulating funds for a vacation or making a down payment of your house/car, you can opt for a combination of fixed-return and market-linked products.

On the other hand, for a long-term goal such as retirement, investing in asset classes that can help you counter the effects of inflation and build a sizeable corpus should be on your radar.

Get a hold on the fundamentals

To make sure your investments are on the right track, it’s crucial to check the fundamentals of an asset class. For instance, if you are investing in a mutual fund, do research on its underlying assets and ensure, it’s not investing in risky securities.

Also, if you are investing in relatively unknown assets as artworks, peer-to-peer lending, etc., make sure you know its associated risks. To put it otherwise, an asset class must be well-regulated and its objective should match the goals you want to achieve.

Know your risk tolerance

Risk tolerance refers to the level of risk you can take with your investments. To get them on the right track, make sure they are in tune with your risk appetite. Various factors undergo in determining risk tolerance. It encompasses your liabilities, cash flow and most importantly your beliefs.

An accurate estimate of your risk appetite goes a long way in ensuring you make the right calls and opt for investment avenues that align with your risk appetite.

Get out of biases

Biases towards investments can be a major roadblock in financial prosperity. Hence, it’s important to get rid of them at the earliest. Herd mentality, loss aversion, oversimplification tendency, etc., are all biases that can prevent you from accumulating wealth for essential life goals.

Therefore, it’s important to get rid of them at the earliest to ensure you are on the path to financial freedom. If you are finding it difficult to overcome them, then seek help from a certified finance professional.

Conclusion

While money can be earned, wealth has to be created. To do so, it’s important to make the right picks and prudent investments. With digitisation, it has become pretty easy to seek information and invest at your convenience.

As a right call today can make a huge difference in your wealth tomorrow, make the most of this decade to enhance your riches.

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