Financial investments help you secure funds for short-term and long-term monetary needs. These can come handy when you require immediate cash. This is why, it is crucial to take financial decisions in matters of investment, after a proper scrutinization of investment tools, and other factors. Where and when to invest money, how much to invest, are some of the questions you must ask yourself before planning investments.
So, why is it important to invest your idle money?
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Financial investments help to grow money. Thus, your original investment amount increases, providing you a bonus earnings.
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Tax-saving investments save you huge on taxes and keep the savings to investment ratio in check.
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They teach you to become more conscious about your financial position and tackle monetary woes.
Now that you understand that financial investments are important let us discuss a few tips to help you with investment decisions.
Tips to Make the Right Investment Choices
Below-given are tips to consider for taking a decision to invest money.
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Cash Liquidity vs. Investment: It is important to calculate your cash-flow need. Understand the fund required to allocate for paying off debts, savings, investment, and managing other liabilities. You must always have an emergency fund of 6 months’ income. It acts as a buffer during a financial crisis.
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Types of Investment Products: There are different types of investment products to check out, such as stocks, property, direct equity, bank products, Cryptocurrency, insurance, deposit certificates, etc. You must learn about these products, their features, pros and cons, and the returns you can expect from investing for a specific tenure.
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Weigh the Pros and Cons: Every investment product or tool has its own pros and cons, and you have to compare these to understand which one you should choose. As an investor, you should be tolerant to risks to a certain level as predetermining liquidity hastily can prompt you to take wrong investment decisions. You should balance both risk and comfort factor, before investing money.
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Multipurpose Assets: There are investment options that are beneficial two-ways. These help you multiply finances and provide funds during financial urgencies. For example, a precious metal like gold is usable as an investment asset, without even being sold. On the other hand, to fulfil urgent need of funds, you can take a gold loan from a bank or NBFC by keeping the gold asset as collateral.
Another example is a real estate property. It can act as investment, wherein you lease the property and earn rental income. Or, you can take a loan against property from a financial institution, whenever you want excess funds.
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Diversify Your Investment Portfolio: You should never put all our eggs in one basket. Investments must be diversified to insulate against volatility of the market. You can invest in different companies, sectors, assets, over different time periods. Long-term investments must be chosen carefully, as these require a commitment for regular monitoring and investing, as against short-term ones.
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Analyze Your Current Financial Situation: You have to prioritize fund allocation based on your current financial situation. You may want to allocate maximum funds for investment, but it is not the amount for investment, but the time for it, which equally matters. You must not invest more than your capacity. Make sure the investment made does not create a shortage in cash-supply for your daily expenses and commitments.
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A Financial Advisor: Making investment decisions could be a complex task. If you do not have much knowledge about investment products and tools, then it is totally understandable. You can always hire a professional financial advisor, who will help take investment decisions, manage your investment portfolio, keep an eye on the market conditions and trends, etc.
A good wealth and investment manager will revisit investment decisions, before taking a step. He will align investments in a way that will not disrupt your other financial commitments. He will also understand the tax implications resulting from selling/liquidating the investment assets.
Final Words
Plan your investments wisely at least a year or more in advance. Do not take any hasty or prompt decisions based on your emotions.
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Thus, consult a professional if necessary and study the market trends affecting the investment tools. Understand how the market fluctuations can impact your investment strategy.
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Do not get into the ‘panic selling’ mode but take enough time to study your choices. Always keep an eye on investment returns at regular intervals.
So, when you want to make financial investments, think carefully by keeping in mind the above-given tips.
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Author : Nagarjuna Lingayat |
Views : 111 |
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