The start of a new financial year is a good time to take a thorough look at your finances. Financial planners advise that investors should review their portfolio at least once a month. Following are 5 effective actions, you can consider taking this new financial year:
- Know what you are saving for
It’s important to end the end goal for all types of investments. For some, the ultimate goal of investing is to reach financial independence where in you no longer have to work to live comfortably and can spend your time and resources however you like. You should have some short-term goals like buying a new car or home and becoming debt-free. To fulfil your small-term goals, you can invest in mutual funds that have a short maturity such as debt mutual funds. Debt mutual funds are relatively less risky. There are different types of mutual funds to serve your varying goals, such as equity funds, debt funds, hybrid funds, etc.
- Ensure that your financial goals are SMART
Your goals should be SMART i.e. Specific, Measurable, Achievable, Realistic, and Time-bound. SMART goals help to give you the right direction and roadmap to achieve your dreams. SMART goals offer the focus and clarity required to get the most out of your efforts.
- Be disciplined in tough times
As and when the markets start to depict a downtrend, investors tend to exit the market. This is not a healthy practice and is often frowned upon by experts. In such rough times, one should go the SIP way. SIP, also known as Systematic Investment Plan are a roadmap to mutual fund investments. Investors investing in mutual funds via SIP during a downturn tend to accumulate more units. This in turn, averages out the total cost of mutual fund unitspurchasesd. This technique is known as rupee cost averaging.
- Have a Plan B for your income sources
A lot of successful people talk about the need and importance of having a passive income. Passive income is possibly one of the most important and central ways that the rich get richer. It is also believed to be the pathway to success and the foundation for happiness and wealth.Mutual funds can be the easiest way to generate this extra income. Once you are comfortable with investing in mutual funds, increase your allocation in accordance with your goals and risk appetite.
- Set up an emergency fund
Stocking up your emergency fund ensures that you and your family do not fall into a deep debt trap. It’s a good idea to deploy at least 3 months of your takeaway salary as emergency funds. You can invest these resources in a liquid fund or ultra short-term debt fund. Apart from providing you with the required liquidity and safety, these funds also offer returns at around 6-7%.
You can invest in mutual funds online at the convenience of your home. Understand the difference between saving vs investing and choose your investment options accordingly. Happy investing!