Rethink, realign your finances this festive season

Festivities could be an ideal time to rethink and realign your personal finances. The aim is to invest with a focus on wealth creation based on your risk appetite, time horizon0 and financial goals.

First, start by dividing your goals into three basic buckets: long, mid and short terms.

Long-term goals could be anything more than 10 years. So, you can look towards achieving these goals via equities, Exchange Traded Funds (ETFs), and mutual funds, among others. For instance, investments in stocks can earn quite high inflation-beating returns in the long run. Also, within equities, allocate the investments across large-cap, mid-cap, and small-cap funds. 

Similarly, mid-term goals could be anywhere from 3 to 7 years. Long-term Bank Fixed Deposits (FDs), Equity Mutual Funds and Dynamic Asset Allocation Funds, among others, are some of the options one can look at to fulfil mid-term goals, which could be buying a car, home renovation, funding a new venture and more.

On the other hand, short-term goals have a short time horizon of fewer than three years, and you cannot afford to take any risks with your returns. Treasury bills, Gilt Funds, Ultra Short-term Recurring Deposits, Debt Funds, Low Duration Debt Funds, Money Market Funds, and Post Office Time Deposits, among others, could be considered to fulfil short-term goals. For instance, take the case of RDs, which are without risks and extend liquidity with guaranteed returns, as their performance is not directed by market conditions. The best part is that you can start with an investment as minimal as Rs 500 for a duration as low as six months.

Remember, before you kickstart your investment journey, adequate research needs to be undertaken on the asset types and the risk factors involved. So, apart from spreading a festive cheer, also focus on the financial health aspect.