How to create wealth from your savings?
We belong to a conservative culture where saving habits are embedded in our DNA. As a country, we prefer to save than spend, unlike developed economies that feed on the demand driven spending of their national economies. Saving comes naturally, and all of us save for the future in our own way. Whether it’s putting our savings into a bank FD or contributing to a PPF or cutting expenses to manage a home loan EMI, saving is all we do. What’s going on making your money grow to something beyond savings that, at best, can earn you an 8% to 9% return, half of which is eaten up by inflation?
Is when save and invest they come together to help you build wealth and have a sense of financial security. Having a job is not enough to feel financially secure because what is left of your salary after paying all the monthly expenses is not enough to pay the future global expenses that will be due over time. Salary and salary savings cannot provide for expensive items in life such as children’s higher education, your weddings, health expenses in old age, and the expenses of the long retirement phase of your life when salary no longer I would protect him. It is imperative to put your savings in investment avenues where they can multiply in the long term.
You must understand the difference between short-term and long-term investment decisions in order to take a holistic approach toward creating financial security and wealth.
- safe short-term goals
- Don’t let your money sit idle in the bank
- Invest in Balanced Mutual Funds for Mid-Term Goals
- Invest in long-term equity oriented options
- Be flexible, check and rebalance your portfolio periodically
- Seek professional advice
Short-term goals are generally defined as milestones that you want to achieve in the next 1-3 years. If there are some short-term goals you can’t miss, go for savings options like bank FD, or better yet, invest in suitable debt mutual funds if you’re comfortable with mutual funds. Fixed income mutual funds or debt funds are safer than stock-oriented mutual funds and have the potential to offer you higher returns than bank FDs. But you should do your research well or take the help of a Investment advisor to choose the right funds that work well with your financial objective and your ability to take risks.
Most people just let their money sit in their savings bank account, even when the amount is significantly higher than what is required to manage everyday expenses. Don’t let excess cash sit in a savings deposit. Rather invest it in a liquid mutual fund that can potentially offer you a higher return than the bank would offer you. Liquid funds are convenient to trade as they have no entry and exit charges and the redemption money is available to you the next business day when you wish to sell your share of the fund. Liquid funds are best suited for investing excess cash with a duration of 1-90 days and are the least volatile of all mutual funds.
If there are some requirements that you expect to expire in the next 3-5 years, choosing a balanced mutual fund or a suitable hybrid mutual fund might be a good choice. Balanced Funds which are kind of hybrid mutual funds invests in a mix of equity and debt securities. They capture the characteristics of equity and debt funds while offering a moderate risk-return proposition to their investors that is suitable for those who prefer to play it safe while looking for some upside potential in stocks.
When a financial goal is a long way off, say, your retirement life beginning in 15 years or your daughter’s college education due in 7 years, a well-diversified equity fund would be the best option. Equity funds are the most suitable for long term investments more than 5 years, as stocks are prone to greater volatility in the short term, but can generate good returns in the long term. Invest wisely in some stock funds that follow your personality, that is, your willingness to take risk. You could also consider investing directly in stocks, but mutual funds are better suited for those who don’t like to take risks with stocks. Always try to understand everything about mutual fund risk before investing in them.
Once you have invested your money in various mutual funds, FDs, stocks, ULIPs, PPFs, etc. the job is half done. You should monitor your portfolio regularly and make changes if necessary. A rebalancing is required to reflect any changes in your life circumstances. For example, change the job from a multinational to a new company where the risks are greater. In such a situation, your portfolio’s exposure to stocks should be reduced as your human capital is now invested in high-risk stocks. Working for start-ups is just as good as owning high-risk stocks.
It is best to seek professional advice from some investment adviser or take the help of mutual fund dealers to overcome paperwork and transaction requirements. Tea Investment advisor will prepare your risk profile and carry out a suitability analysis before recommending any investment plan. That help may be worth taking when you’re putting your hard-earned money into a long-term plan. take the time to understand