Let’s Invest: Time and Money

At the start of our career, when we see money for the first time, a lot of us do not know what exactly to do with it. A number of us tend to become spendthrifts, while another set goes into the shell and then there are those who do not fit into either categories. It is always essential that we save up for the future, as no one can ever foresee what lies in store. In order to save, one needs to be aware of the options that are available and invest appropriately, after consulting the concerned experts, properly.

As a beginner, in investing, it is advisable to start with mutual funds. Most of us know nothing more about it than what is advertised – ‘Mutual Funds are subject to market risks’. Some working knowledge would go a long way in aiding us to make our investments.

It is important that we have clear set goals. Keeping this in mind, and depending on the amount of risk we are willing to take, the portfolios need to be allocated. These days, it is considered safe to invest a percentage: equal to your age – in debt and the rest in equity. That is, if you are a 25 year old, then 25 per cent in debt and the remaining 75 per cent in equity would be ideal.

Debt schemes can be chosen either from the floating rate fund or from the dynamically managed income schemes. In the case of equity – large cap equity diversified funds, with a track record of doing well – even in the bear phases, is a good option. Index funds should be preferred, in case you are looking for low maintenance costs and sector funds should be avoided, unless you are willing to bear the extra risk involved, therein.

Choosing between the dividend and growth option might also be tricky. If you have a long term objective and are not dependent on money coming back at intervals, then growth option might come in handy. On the contrary, if you require a regular inflow of money, at various intervals, dividend option would be ideal. With regard to tax planning, both dividend and growth options are exempted from income tax and hence returns are equal..

It is generally observed that funds have a potential to deliver good returns, in the long run, if it has a mandate of going for value buying – irrespective of sector bias. Such funds have performed better than peers, both in times of crisis and in times of recovery.

Investing alone would never be sufficient. Keeping track of portfolio performance is as important as choosing and allocating them. Tracking these days can be easily done, either with the help of a professional financial adviser, who can keep you abreast with relevant data, or with the aid of internet portals that try to replicate the work done by the advisers.

It is always prudent to exercise caution. While there is no harm in being over-ambitious, it is important that you do not lose hold of yourself in the face of more money. Where risk is involved, you never know what is going to happen in the next instant.


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