Have these 10 things at least in your life before even you think or do of any kind of investing - Investment Strategy
Have these 10 things at least in your life before even you think or do of any kind of investing - Investment Strategy
When we hear about investing, many people just avoid it by saying, "if you have money, then you can do investing. We don't have money, so there is no investing for us". And many just think we have time, we ill do it later. This is how many people don't do investment..
Table of Contents:
A. Why Investing is Important?
- Life Insurance
- Health Insurance
- Emergency Fund
- Debt Clearance
- Clear-cut Financial Goals
- Retirement Planning
- Regular and Stable Income
- Self Educations
- Focus on Assets, not Liability
- Diversification
Why Investing is Important?
Let me tell you a small story why investing is so so important.
I will take my example. I have an one year elder brother. Once upon a time while we were growing, though my father was a prestigious educator, he was not getting his salary regularly. This was somewhat killing our family desires. My mother realized that all the children are growing very soon. Since she is an Indian lady, it is her habit of saving some money without my father's knowledge.
One day, she told my father that, there is a very good plan running in Post Office where your invested amount is getting double in 6-7 years. My father was interested in the plan but said he does not have money to invest. So my mother said I have some money, and you arrange some. Let's try to save as much as we have. Our children are growing and about to go to high school.
If we invest now, then both the brothers will have doubled money after 6-7 years for taking admission in good professional degree college.
My father finally agreed and they invested 40000 rupees in Post Office KVP scheme. When we passed our intermediate, my parents were not having money but they wanted us to study in good college by taking good course.
So, they somehow realized that there was a KVP done in post office and when they produced the certificate, they got 80000 rupees, which helped us to join engineering and diploma courses for both of us and this decision rescued us at the right time. At the same time with help of small remaining amount, my younger sister could take admission in intermediate college. This money helped all 3 of us in that year to take admission in different colleges.
Hope, you understood why investing is necessary, important and powerful tool to accumulate wealth if invested for long time.
Points to Remember :
Before investing in any kind of investment products, it's important to have certain things in place to ensure of your financial status and knowledge. Here are some key aspects to consider:
1. Life Insurance:
2. Health Insurance:
Similar to Life Insurance, Health Insurance is equally important. You need to evaluate how much of health coverage you need so that you can cover your family from any sort of diseases. If you have adequate insurance coverage then that will protect you and your loved ones from any sort of hospital expenses.
3. Emergency Fund:
As the name says, it is the fund for the emergency. Meaning if any sort of medical emergency or job loss or any other place where some money is needed without breaking your investments. So, start by building an emergency fund that will cover six months to 1 year of your day-to-day living expenses, and at least three months. If I talk about number, then save your 6 months of full salary or 12 months of monthly expenses.
4. Debt Clearance:
First of all, just try to avoid any kind of debt. However, it sometimes becomes impossible for many. So, segregate your "WANT" and "NEED". Then you can know where you should take the debt. And assess your debts and if you have any kind of debt with higher percentages of interests, try to clear of those first, cause the major losses come from there such as credit cards defaults/loans or personal loans.
5. Clear-cut Financial Goals:
As per your earning and expenses, you need to define your short-term and long-term financial goals. then you identify what you want to achieve, whether it's saving for a down payment on a house, funding your children's education, going for a vacation, or planning for retirement. Clear cut goals will help guide your investment decisions.
6. Retirement Planning:
You need to start planning for retirement early. You know how retirement planning and regular pension can help you in your late age. So, explore retirement account options like EPFs, APY, NPS, Annuities or etc... So, start contributing regularly.
7. Regular and Stable Income:
As you will agree with me, it's important to have a stable source of income to meet your basic living expenses and then keep something for insurances and emergency funds and have the rest funds available for investing. Without a reliable income, investing becomes difficult.
8. Self Educations:
You need to educate yourself about different investment vehicles available to you. You need to understand the risks, and potential returns associated with stocks, bonds, mutual funds, exchange-traded funds (ETFs), real estate, FD, or other investment opportunities you are considering.
For this you need to educate yourself always with all the possible investments strategies. Even you will also have to upskill yourself on your regular work, so that you can earn more and invest more.
9. Focus on Assets, not Liability :
As you may be aware, assets and liabilities are two different things. In a layman terms, assets are those which increase their values over time and you will get return out of your investment. Example of assets are like land, house, good stocks or mutual funds etc.. Liabilities are those which reduce their values over the period of time. Example are like Car, bike, TV, fridge, sofa etc..
So focus on building your assets, not liabilities.
10. Diversification:
Diversification means investments in different categories. Like experts say that "Don't put all the eggs in single basket", meaning if you invest all your hard-earned money in single product, and if that gets closed somehow or faces financial ruin or risks, then all your investment goes for a toss and you may not get anything or face huge loss.
So, it is better you put your money in different kind of categories, or asset classes or industries, so that it will reduce the volatility of your portfolio in long run.
Hope, I have given you all the details required before investing or thinking of investing anywhere. If you keep these in mind and plan properly, then you can keep yourself and your family members risk free and on the same note you can accumulate good amount of money or assets in long term.
Conclusion :
In this post, I have shared with you the necessary information related to the prerequisites before investing. Hope I was able to provide all the information you wanted to know. If you like our post, then do share it with your friends and family and stay connected with our website (newswisestories.blogspot.com) to get other such important information.
Happy Investing🙏
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