As another financial year has begun, you might be keen to employ an effective financial planning strategy to make the most out of your portfolio. Most of us associate financial planning with creating wealth to achieve long term goals such as children’s education or buying a house or for retirement. But tax planning and short term goals matter too.
The ongoing uncertainty that has gripped the world has highlighted the importance of financial planning.
Having a requisite amount of funds saved for crisis or future needs reduces the amount of stress you might be facing. While most of us are aware of starting a fixed deposit account, there are several other ways to save regularly and grow your wealth.
Factors to Consider
Before you invest in something, make sure you know the pros and cons of each choice. What suits another person may not be the right option for you. Take into consideration the following factors before making a decision.
- What is your financial goal?
- What are the tax benefits?
- What is the duration of the investment?
- What are the risks involved?
- How will the investment grow compared to other schemes?
Types of Investment
FDs are a traditional method of saving money without taking too much risk. Lenders offer the best fd rates depending on the amount of investment and the duration. FDs are suitable for short term and long term (7 days to 10 years). The tenure is flexible, and so is the amount of investment.
Mutual funds can seem complicated at first. They are also quite risky but generate high returns as they are linked to the market. It is essential to understand how MFs work before you invest in them.
MFs are categorised into-
- Equity MF: Market-linked securities with 65% invest is in assets of the company
- Debt MF: Instruments such as bonds, government securities.
- Hybrid MF: A combination of debt and equity MFs.
- Post Office Monthly Scheme
It is a profitable scheme for monthly income generation. The risk is shallow as the government backs it, and the best-fixed deposit rates make it a viable long term investment option. The scheme is suitable for individuals who have no income every month from other sources.
- Gold ETF
Gold Exchange Traded Funds are a mix of gold and stock investments. They are traded on NSE and linked to gold prices. They are a low-risk investment.
- Recurring Deposits
RDs range from 1 to 10 years. You can open an account in any financial institution of your choice and deposit a fixed amount of money each month. You will be paid interest at the end of the tenure along with the total deposited amount.
Apart from the schemes mentioned above, you can also invest in a public provident fund (PPF), national pension scheme (NPS), senior citizen savings scheme, unit-linked investment plan (ULIP), real estate, and more. Make the right investment to grow your money in 2020.