We are living in the 21st Century and we have a wide variety of products & services to choose from. You can buy a Car, branded clothes, a Smartphone, or even customized Tourist Package and akin to this are the varieties of Financial Instruments available in the Financial Markets. You can invest in traditional avenues like Gold and Real Estate or non-traditional avenues like Mutual Funds and Insurance.
What ends up quintessentially is how one chooses which items to look over, when to invest and of course the investment timing.
Even if you have finally decided to invest in Mutual Funds, there are multiple schemes and Fund Houses to choose from. Investing could be very confusing for many & if words like Portfolio Balancing, Market Performance, and Income Generating Assets make your head spin then remember you are not alone. Every investor has a different timeframe, risk appetite, corpus to invest, liquidity need, age factor, and investment objective depending on which the investor should make an investment decision.
While searching a perfect investment avenue for yourself that suits your risk appetite and financial Goal the most herculean Task is to choose a fund manager and an investment plan that would be the most suitable for your situation and goals. You have the choice to choose the manager with whom you entrust your capital.
A Fund manager can offer multiple plans with varied level of profit and risk which will depend on the underlying securities. Therefore, before investing, you need to understand the advantages of each type of investment, time horizon & risk appetite. It is also essential for the investor to understand an essential connection between expected profits and risks: the higher the expected profit, greater are the fluctuations in the value of investments.
Every individual has a different Investment style and the most successful Retail investors are those who believe in short-term pain & long term Gain. An average tax paying investor’s portfolio should essentially comprise of bank deposits, liquid mutual funds which can take care of his liquid needs. He or she can also invest in debt mutual funds, gold ETF. Investing in gold ETF is better than the physical Gold because liquidity is guaranteed in Gold ETF whereas it is not so in the case of physical gold. The combination of all these investments will create a diversified portfolio on a post-tax adjusted basis & will give surely give return to the investor with low risk.
If you are willing to invest then you should ask these 7 questions to yourselves and they will surely help you build a sound investment plan based on your goals.
• What is the Purpose of my Investment?
• What are the minimum and maximum amounts I want to set aside for investing?
• What are my financial obligations especially the debt obligations?
• What should be the time horizon of the Investment?
• What is my Risk Appetite?
• Which is the best Financial Instrument to invest in that will fulfil my investment Goal?
• Which particular Fund House/ Scheme/Plan would give me the maximum ROI?
Once you have identified the level of risk is acceptable to you, & the most reliable and safest fund manager, you should now identify the investment plan that would be the most appropriate to your interests.
Remember, what kind of investment plan you will choose, is only up to you. A Financial Advisor can only give you a piece of advice but it is you who have to take the final decision and once you have chosen a plan, you should regularly review it & stick with it! That is the key to investing success.