Owing to various tempting factors like high and quick returns, Equity Market today has come way beyond than a tedious and technical platform. It now has become a popular investment opportunity for wealth building and fund generation. So certainly you can not just depend upon ‘destiny’ to get returns! Getting higher returns is the outcome of right decisions taken at right time. Are you sure you, as an investor, know what these ‘right decisions’ and ‘right time’ is all about? Actually, there are some general rules that every investor must follow to make the investments more advantageous:-
Investing in the equity market has come to be a popular method of wealth building, but how many of us actually know what or how it’s all done? And no, it is not just a matter of luck, getting high returns is a combination of making some wise decisions at the right moment. Here is a general set of rules every investor should live by in order to make the most of their investments.
1. Consider mutual funds for investing a major part of your savings (and NOT earnings!!) and safeguard yourself against market risks. Avoid investing in equities as they are more prone to risks, rather, invest 90% of your savings in the mutual funds.
2. If you don’t have a bigger risk appetite, i.e. your power for risk tolerance, then have a Systematic Investment Plan [SIP]. This will put you to the habit of saving on regular intervals, no matter what the value of shares is! You will have longer benefits and you’ll be able to sail through this volatile market easily.
3. Go for mutual funds with maturity less than three years, i.e. for the ones which are short term. These promise much higher returns than the longer ones, plus, you get the freedom to sell them as per your needs and convenience.
4. Minimise your expenditure and maximise the profits by opting term insurance with lower costs. Lower the expenditure, more the profit, simple as that!
5. Always look up for plans and schemes which are tax-free or help in tax-saving, e.g. National Savings Certificates (NSCs). Invest in equity related saving schemes, they offer tax-free returns over a period of a few years, varying from 15 to 18 per cent. NSCs offer returns of around 8 per cent, but they are risk-free at the same time. Just a simple calculation and you will get a clear picture of what is more advantageous and less risky. Choose yourself the most ideal option for making investment.
So the words of wisdon: Do not ‘waste’ your savings in a bank account. A recurring deposit scheme [RD] may look a good option to you, which undoubtedly is good, but, this will not be as profitable as mutual funds, especially during inflation. So it is advisable for investing 90% of your savings in equity mutual funds and the rest 10% in a steady or fixed income returns policy, e.g. RDs, Public Provident Fund (PPF) etc. This will not only boost up your finance but will improve your credit worthiness and records which will help you get loans from banks , plus, it will provide security to your future. Do follow these simple rules and make the most out of your investments!