This is the time of the year when we are more than eager to keep our houses clean. The common belief is that Goddess Lakshmi, who gives wealth and prosperity of all forms, both material and spiritual does not step into an unkempt house. While you may be busy planning gifts and goodies for your family and friends, keep aside some hours of your day to decide your next investment or how to clean up your existing portfolio for better opportunities.
This Diwali, work on your investments to ensure a lightened-up financial life. The strategies are simple provided you are willing to follow them diligently.
Manage your portfolio regularly
As you will be removing the clutter from your house this festive season, remember to get rid of non-performing investments in your portfolio. There is no point in retaining something that benefits you neither socially nor financially. Your purchases should not be limited to home décor and gifts only. Focus on investing in opportunities that earn returns. Check which investments have failed to show any movement or have impeded your financial goals in the past three years. Get rid of them. Also, like the rooms of your house that are decorated differently, remember to diversify your portfolio. Buying new assets to induce diversification and thereby earn from them is the key to achieving financial success.
Avoid obscure investments
Park your funds only in those investments that you understand well. There is a common tendency to buy insurance policies or pension plans from friends and peers. These long-term plans do not earn returns that beat inflation, thus, destroying your investment purpose. Incorrect choice of financial instruments does more harm than good.
For example, buying a big house with a home loan and then blocking most of your investments just to repay that loan within the next decade or two implies that not only you have paid more for the house but also the opportunity to create a corpus for yourself.
“The Power of Compounding” is the underlying principle behind most investments. This explains the need to start investing early and continue your investments over time. However, for this, you must be aware of how your investments are performing from time to time and with each wave of stock market movement.
To build an investment portfolio in sync with your financial goals, be aware of the errors you are making. Then opt for the right financial planning method and tool to identify your short and long-term investments.
Plan your future well
This is not the time to spend recklessly. Instead, use this time to plan your financial future well. Some of you may find it hard to resist paying for high-end electronic devices and jewellery or adhering to contemporary fashion trends. This Diwali, let your expenses assume the form of systematic investment plans (SIPs) toward investments. Do not let the zeal of this festival take away from you the enthusiasm of stepping up your regular investments. You can step up your SIPs by a fixed percentage while also putting in some adding some lump sum investment when the markets are down.
Buy adequate insurance
You may have heard of so many people getting injured while burning crackers. Hospitalization and subsequent medications can be costly, thus, necessitating you to have enough health insurance. If you are yet to buy a health plan, this may be the best time for you to include it in your investment portfolio. If your family members are still financially dependent on you, consider buying a life insurance policy too.
Do not deviate away from your financial goals
Did you know that the word “Lakshmi” comes from the word “Lakshya”, which means “goals”? This festive season, have your eyes on your goals. This is not the time to lose sight of your financial goals. Rather, you must plan your investments in a way that helps you reach your goals within the stipulated period. This may include
- Planning your retirement corpus
- Buying a house
- Saving enough for your children’s education
- Saving for your children’s marriage
- Working towards a fixed and regular income
- Working towards short-term goals such as a travel budget.
Diversity is the key
Do you use only candles to lighten up your home? The answer is “No”. The market is flooded with assortments of all kinds of earthen lamps, string lights, colourful torans, paper lanterns and more. Your festival combines the best of everything such as colours, sweets, bonfires, lights and more. This diversity in decoration is what adds to the beauty and joy of celebrating this festival. Add the benefit of diversity to your portfolio too. This will also relieve you from parking your entire earnings in one investment opportunity alone.
Your investment portfolio should be diversified to the extent that it meets both short-term needs while helping you achieve your long-term goals too. Do not rely on stocks alone. Check out both active and passive mutual funds. See how the exchange-traded funds are performing and invest in those that allow you the dual scope of both growth and liquidity. Check out gold and silver investments too. Including some real estate in your portfolio will do you no harm, though you must not aim to buy property beyond your means to repay the purchase cost.
Plan for emergencies
You do not wait for emergencies to knock at your door before planning for them. This Diwali, plan the size of your emergency corpus. Your corpus must be equivalent to at least your six months’ salary or a bit more. This is because emergencies can be of any kind. You may face a sudden job loss. With not sufficient emergency corpus in place, many people are stuck in jobs or careers they are not interested in.
A sudden hospitalization can also spark an emergency response as the insurance company would not be footing all the medical bills. Also, lack of enough insurance coverage also means that you have to pay from your pocket, thus, mandating to plan your emergency corpus fund now.
Get rid of unwanted debt
You ring in debt only when you spend beyond your means or try to look richer than you are. You will never find a debt-ridden family living in peace. Prosperity evades those reeling under continued and unrelenting debt. Also, too much debt destroys your credit score, thus, making it difficult for you to apply for further loans when needed. This Diwali, destroy or get rid of whatever debt you have incurred with the light of your newly acquired knowledge of personal finance.
Cut off the noise
There is a rocket exploding overhead in the sky. And, then there are bombs whose noise may have scared you out of your wits. You do not rush after that noise; rather you ignore it. You must ignore the stock markets’ noise accordingly. Do not let the noise deviate you from your goals. Rather you must continue your SIP investments sans any disruption or unwarranted interruption. Ignore the noise from people telling you to redeem your mutual fund investments when the markets go down.
When it comes to a reliable financial planning strategy, you must learn to ignore all noise from constant rumours, surrounding myths, and half-baked knowledge of people around you. Your financial decisions must be based on detailed studies and analyses of the various investment opportunities available. Do not rush to make or destroy your investments; seek advice from a licensed investment advisor.
Learning from Diwali
This Diwali, do not celebrate light with crackers alone. Instead, let the light shine on your financial goals so that you can see clearly where you are headed to. Without the light, you will be groping in the dark and titillating between various investments. Use the light within you and around you to work on a correct financial plan, proper budgeting and planning your investments accordingly.
This Diwali, “Let the light shine on both your heart and mind” so that you have the mind to plan correctly and the heart to correct your wrongs.