Financial Planning

Asset allocation: Diversifying Investments

asset-allocation

Good investment strategy is the key to achieve your financial goals. This can be done by minimizing risks and thereby maximizing returns. Risks can be minimized by diversifying your investments. In simpler terms it means `do not put all your eggs in one basket’. Your investments should not be focused on just one asset class. It should be allocated strategically in different asset classes. Diversified portfolios are proven to have reduced losses in events such as economic crisis or bearish stock market.

When you diversify assets, any downward movement in one class of asset is offset by growth in another class of asset. It is unlikely that all different types of assets will grow or decline at the same time. Each asset has its own benefit and by diversifying you get the advantage that they have to offer. The various asset classes are cash, stocks, gold, fixed deposit, real estate, provident fund, mutual fund and so on. These can be classified into aggressive, balanced and conservative assets. One can also further optimize your portfolio by diversifying within each investment class. For example, when investing in mutual fund, you can investment different funds such as small, mid and large cap rather than investing in only one fund.

Diversification of asset will depend on your age, financial goals, amount of investment, timeline and your risk appetite. An ideal investment portfolio should have mix of aggressive, balanced and conservative allocation. When you are younger, you can have increased exposure to riskier investment such as equities. These have higher earning potential but it can take longer to give expected returns. There is also need to have balanced assets which are mix of aggressive and conservative assets. Lastly, some allocation has to be done in conservative assets. These are considered safe investment avenues but have lower earnings potential. Liquidity is another aspect that you need to consider while choosing your investments as you never know when you will be in need of funds.

The thumb rule for asset allocation says that `100 minus your age’ is the percentage you need to allocate in equities and the rest in debt and cash. However, everyone’s needs are different and allocation should be done accordingly. A high exposure to equity may give you good returns but increase your losses if the market turns bearish. On the other hand, a conservative investment will be a safe option but it will not have the potential to meet your future needs. Thus, allocation will need to have a good mix of aggressive and conservative investments.

Once you have created a well balanced portfolio based on your needs you can stop worrying about your investments and let your money work for you. You will still need to monitor your portfolio occasionally. You should refrain from constantly adding or removing different assets. As you age, you can shift your preference towards a more conservative portfolio. Do keep in mind not to over-diversify.

Cash is King

Cash-is-king

India is a largely cash dependent economy. Even after extensive drive for digitization of transaction, cash still remains the go to option for many individuals. Cash transactions have yet again come on par with the pre-demonetisation levels. Though there is huge progress in the number of digital transactions, there is still a long way to go. Here is why cash is king for most individuals.

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The Right Time To Start Financial Planning

right-time-invest-financial-planning

Financial planning is a process which helps you to manage your finances. It works by linking your investments to your financial goals so that you can secure your future and be ready for life’s surprises.

The right time to start financial planning is as soon as you start earning even if your income may not be high at this point. Starting early will instill discipline in you and it will become a habit instead of urgency in the later years of your life. It will also give you a bigger benefit of compounding and thus a bigger corpus for your later years. At this age, you can afford to invest in riskier investment option such as equities. You will also be able to buy insurance at a low premium when you are young.

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3 Simple Ways to Stop Leakage – Curtail Expenses

3 simple ways to stop leakage – curtail expenses

One of the hardest challenges youngsters face nowadays is that they are unable to control their expenses. Managing money is difficult as there is always some or the other attractive sale going on, there are so many food joints you want to try and so many places you want to visit. Thus, most of them complain of being broke as the end of the month nears. So if you don’t want to be broke at the end of the month, here are some simple tips to help you curtail your expenses.

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Life Insurance – Secrets No One Shares

Term insurance

We work hard day and night so that we earn enough for our loved ones to live a stress free and comfortable life. And we would obviously want that security to continue even if we are not around anymore. This is where life insurance comes to your rescue, and you can be with your family after you are gone, financially at least. This is why everyone with dependent members in family must have life insurance. But before you buy insurance we want you to read the below mentioned secrets about life insurance which the insurer will rarely tell you.

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New Year Resolution 2019

new-year-resolution-2019

New Year’s Resolution list; is somewhat like how a small kid writes to Santa (before X’mas). Year ends and we all love to start new year with some bold steps.

To help & to have the feel-good factor, every year, newspapers & blogs, talks about same good old financial resolutions, with some jargons. It is way #metoo.

I thought of doing & writing something different. This new year lets invest in life, health and our experiences.

What do I mean with investing in Life?

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Planning a Sabbatical – 3 Tips to Keep in Mind

How to Plan Sabbatical

Taking time off from your hectic work schedule is a great way to rejuvenate, learn something new and regain your lost passion. That is why more and more people nowadays plan a sabbatical from their busy life. A sabbatical can last for few months to a year or two. The idea of deciding to take a sabbatical though exciting, is a bold step and requires proper planning. If you are also planning to take a sabbatical keep the following things in mind.

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Are You Ready For Mid-Life Surprises?

Are You Ready for Midlife-Crisis

As young adults most of us aim to earn more and more money while we can so that we can fulfill our dream of lounging in our vacation home (or any other dream that you may harbor) when we are older without any worries of the world. But things rarely go as planned. Life has a knack of showing us things we never expected. Let us look at some of the surprises that life might throw at us in our mid-life which might impact your financial plans, so that you are ready to face them head on.

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Avoid last minute IT rush – Income Tax Proof Submission

tax-planning

The end of the financial year 2018-19 is fast approaching, and with that begins income tax woes 😉.

Most people keep the task of tax planning hanging till the end of the year. While doing so many of them get trapped in last minute investment ideas, which seems attractive, but actual calculation, they are not.

A proper tax planning can help you to minimize your tax liability with the help of productive investments.The income tax framework allows various deductions under different heads, which can be used to save tax, as well as link same to attractive returns. Some of the most popular heads are described below.

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