I am sure all of us want to be wealthy while with the limited money in your hands don’t you think it’s not so easy. Therefore it’s essential to power your money to get wealthy. Precisely, it’s about understanding how to make your money work for you? What if people take wrong investment decision and that result into a low return event. In such case don’t you think there is high probability of risk in achieving life goals? So I would say invest only in the product that suits your dreams and avoid the product which appears fancy but doesn’t suit your requirement.
Are you saving enough?
I often observed that saving is quite difficult for people. I see few people having extravagant spending habit and remain empty wallet much before the month ends.
“If you buy things you don’t need, you will soon sell things you need” – Warren Buffett
I met a person who had habit of over-spending and even he could not make rational buying. He had lot of dreams but poor planning or lack of planning led to dampening effect. But when he went through the process of financial planning I realized that eventually he became much determined to save in order to make his dreams come true. Subsequently it helped him to allocate money effectively for his monthly expense as well as for his future need.
Focus on Goals
Mere savings are not enough; you will have to make your money work for you by taking right investment decision. People have changed their way of living as compared to earlier times, but unfortunately carrying the same traditional thoughts when it comes to money or investments. I am sure like everybody even you would like to see a decent growth in your portfolio, won’t you? Even I am also sure that you must be having your goals (short term and long term).
The idea should be to invest with the aim for goals and not just get influenced by traditional products and becoming fool (and feeling smart by taking some pass back). If you put your money in traditional products (viz. endowment life insurance) then how will you power your money and get wealthy? Here you can take rational decision by buying a term insurance which not only help to provide adequate coverage but with low premium. Traditionally people keep comfort zone in gold and real estate while I suggest you should not invest all your money in gold and/or real estate; rather this should be according to your need. Though buying a house is a personal need; investing in real estate should be limited as at times it become too risky or contain liquidity issue. With regards to gold you should buy according to your need or as a safety element and ideally it should restrict in your portfolio with 5-10% exposure at max.
Note: We are not against life insurance, in fact adequate life insurance is must for every bread earner but a taste of bad product could crumble your objective.
Investment Vehicle
I asked a fellow, have you heard of mutual fund? He replied “not much but people lose money in mutual fund”. On lighter note it was almost like Thanda matlab coca cola – mutual fund means loss (just an analogy, not promoting any beverage brand here :-p). Then I deeply interacted with this guy to understand why he thinks so? And I came to know that he thought Mutual fund means equity, equity means loss and nothing else. In fact on further interaction I came across the fact that he had invested for 3 years while expecting decent returns from very first year. Secondly the kind of product he invested into doesn’t suits his risk appetite. I put across my thoughts and discussed with him that where he went wrong. It was too though for him to digest initially but gradually he understood the nuts and bolts of investing and later he benefited by investing – right way.
If you have long term goals (10 years, 15 years etc) invest higher sum in equity mutual fund for your dreams. Believe me sooner or later you will realize that this has worked out best for you. Considering the limited money in your hand, you can opt for monthly Systematic Investment Plan (SIP) in mutual fund.
Conclusion
If your current investment is quite haphazard; it’s advisable to take help of professionals to understand how you can improve upon and streamline your portfolio. You should also get clarity on how to manage life challenges and having an emergency plan. Last but by no means the least – start investing to get wealthy.
P.S. Mutual Fund has several options like Equity, Debt, and Gold. One should look for the category based on the requirement while understanding the risk-reward. You can shield your goals which could otherwise go for a toss- by selecting appropriate investment option.
Disclaimer: All financial Investments are subject to risk; please consult your advisor before investing.
About the Author
Anup Maheshwari is Founder & Investment Advisor at Money-Mantra. He has done his Masters in Business Administration (MBA- Finance) from Pune University. He believes in prosperity of his clients. One can reach him on anup@money-mantra.in or even follow him on Facebook.