Once you’ve put your finances in order, you should start thinking about investments. However, several questions arise, such as how to begin, when to invest, and where to invest. To make it simpler, let’s go over the 10 most critical aspects of investment planning.
- Set Your Investment Goals: The urge to save money starts with a goal. Hence, investment planning is needed. The purpose of investment can be buying a house, a vehicle, medical expenditure, retirement planning, etc. How much to invest will depend on your current circumstances, age, and time horizon of your goal.
- Do It Early: Starting your investments at an early stage of your life will impart saving habits. It is always advisable to save first and spend later. One can start early by investing in a safe investment option. Investing soon will grow your experience towards various investment options, and you can plan well in future according to your requirements. Early investment will appreciate your capital due to compounding over time.
- Know About Your Finances: Always try to save as much as possible but do not ignore other obligations. Not repaying EMIs and missing credit card payments and monthly bills will attract hefty penalties, which will result in reducing the return value from your investments.
- Learn About Investing: Before starting to invest, try to research the investment option by analysing its past performances. There is a lot to learn about equity, foreign exchange, bonds, mutual funds, etc. Understanding their features is essential to make an informed decision.
- Know About Taxation: There are many tax-saving benefits attached to certain types of investments. Having a basic knowledge of taxation and income tax deductions will benefit you in tax planning. Also, the redemption of the investment amount may attract tax on its returns. Hence, redeem your investments strategically, keeping in view the tax factor.
- Identify Ancillary Costs: Before investing any amount, keep in mind to check if there is any commission charged while redemption by the agent. The fund managers charge different rates of commission based on the products. Before investing, evaluate your future returns after considering any such ancillary costs.
- Diversify Your Investments: Keep your investments diversified. Diversification means investing your funds in different securities classes, which will mitigate the risk attached to a single security. It is the best strategy to avoid significant losses, and one can receive good returns by reducing the risk.
- Examine Your Portfolio: A portfolio means a collection of your financial investments. The investor can split the investment amount based on liquidity and risk. Study your portfolio frequently and rebalance your investments to keep up with the changing market trend and future goals.
- Track The Opportunities: Keep updated on the market changes for new avenues of investment. Also, keep all the data about your assets. It will help you to grab any opportunity.
- Invest Automatically: Nowadays, you can automatically invest a certain amount monthly. Various banks and investment agencies provide such facilities. Such a strategy maintains your consistency in investment and avoids any chances of breaking in your investment goal.
For any clarifications/feedback on the topic, please contact the writer at namita.shah@cleartax.in
I’m a chartered accountant and a functional CA writer by profession. Reading and travelling in free time enhances my creativity in work. I enjoy exploring my creative side, and so I keep myself engaged in learning new skills.