by Sanjeev Kumar Gopalakrishnan, Investing
27 Aug , 2018

5 Smart Tips to making the perfect-fit personal investment plans

Most of us in India often associate personal financial planning and investment plans with non-financial investments such as real estate and precious metals like gold and silver. So, if you are seriously thinking about securing your financial future with some smart investment plans and if purchasing a home of stacking up your gold reserves is what comes to your mind, then you are definitely new to the world of financial investments. You will immediately need to take two corrective actions. Step 1 is to broaden your mindset to think beyond such non-financial options. Step 2 is to find an expert financial advisory service to help you sort your priorities.

 

The innumerable investment options available in the market can be overwhelming. In addition, the rules change often based on the market environment and government policies. In such a scenario, detailed guidelines from regulatory boards and expert investment advisors are a critical support that can help you customize your investment plan to generate wealth and reach your life goals.

So, here are 5 smart tips that can help you get started with making smart investments.

Tip 1: Check the risk versus returns ratio of your investment  

No investments can guarantee you 100 percent security. So, ensure that your investments do not vanish with time. Investing in financial assets that protect your principal invested amount is a good option. Such investments are a good bet to make if you are planning for a relaxed post-retirement life. However, risks are always inversely proportional to returns when it comes to investment. So before you make your investment remember to map the risk profile of the investment option to your risk profile.

Tip 2: Focus on the liquidity factor

Having assets with high liquidity is important to give you a helping hand during crises and is beneficial as short-term investments. But, you also need to make sure that too much of your investment is not locked by liquid assets, as these may not be highly rewarding. Negative effects on liquid assets may be through inflation; hence, consider keeping only a certain number of liquid assets. Emergency funds deliver impressive liquidity but low returns and high risk.

Tip 3: Diversify your investments

Always focus on creating a smart mix of investments that meet your life goal, suit your risk profile, and deliver the right balance of equity, property, gold, cash, and debt products. This gives you higher security in terms of keeping you relatively protected even when he returns from or the risk of any specific type of investment is affected. However, do not go overboard with the diversification plan since market risk can only be neutralized up to a point.           

Tip 4: Consider the tax benefits you can gain from investments

Building your portfolio is an art that can be mastered with experience or with the support of an expert and registered investment advisor. Always try to construct your investment in such a way that it brings you tax relief to a maximum extent. How much you need to invest by section 80C? What is the amount of tax benefit of a particular investment? These questions might be haunting you often. As it is more complicated to understand them, it is better to get the help of a professional to get accurate answers and to be stress-free. A financial advisor can help you through the tax benefits of your investments.

Tip 5: Extrapolate to determine expected returns across timeframes

Investments are intended to secure your money and get you good returns in the future. So when you make an investment for a longer duration your expectations of higher returns are quite high. However, this need not always be the case. Understand the entire investment package in detail and its returns pattern before you jump in and make a lump-sum investment. Consider time frame, market condition, and risk of every investment you make to analyze the returns you can reap out of them. Equally, remember to revisit your investment portfolio to be sure that it still makes sense in the current scenario.

Get an expert to help you get the job done

Always remember that a higher number of investments is not the best portfolio. Optimal investment plans are characterized by an intelligent portfolio that is well-managed and addressed considering its volatility and returns is the best investment. Ideally, you should be able to understand the way your investment works and how the returns are calculated with the support of an expert investment advisor. This will make you feel confident about the portfolio you build for yourself. A good mix of liquidity, risk factor and a percentage of returns must be tied together for a better portfolio.

 


 About The Author

Sanjeev Kumar G, an IBS Chennai Alumni, is a Certified Financial Planner (CFP) from India, since 2005. He has 22 years of experience and is an expert in various personal finance areas like portfolio construction, investment research, life insurance and financial planning.

 

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