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Volatile markets and a slow economy mean that an increasingly large number of investors are opting for instruments having secured returns such as term deposits. But the question every smart investor needs to ask himself is, “Is the weighted growth of my portfolio higher than the rate of inflation?” Seldom do we realise that if our savings grow at a rate lower than inflation, the real value of our savings is actually coming down. In such a case, you need professional guidance to re-align your portfolio keeping in mind your risk appetite, your goals, the rate of inflation and the instruments available.
Smart financial planning doesn’t only mean assigning goals and saving for them. It also includes a good emergency plan. Life is full of surprises, some of which can be very unpleasant. Little do we know of what’s coming our way in the next few days. A medical emergency, an accident or any other urgent expense could throw our finances out of gear. Recessionary conditions or manpower cuts are cyclical trends that our economy has seen in the last 2 decades. Given that such a situation can be predicted but can’t be timed to perfection, the well planned individual always has an emergency fund at his disposal.
In today’s fast paced life, we often feel, to be quick is the best way. While this hold true for most things, it may not always be the best when it comes to your financial planning. Scores of people get duped in the desire to make a quick buck. Super natural returns over a short period tempt them into investing in sub-optimal schemes, and they often end up feeling cheated. If you are looking for big absolute returns go long term. Most instruments would more often than not give you that extra bang for your buck when you stay invested for long.
‘Don’t put all eggs into one basket.’ This age old saying still hold true for sound financial planning. Having had a good experience with one instrument, we are often tempted to put in more money into the same category or company. However, a wise investor would only invest a limited amount of money in one company or a particular asset class. Diversify your savings to spread your risk and gain from the profits that each sector has to offer, given that changing economic conditions favour different asset classes.
