Managing finances in a proper manner is a must and you need to make a proper plan and budget to ensure that your investments give good returns after a while. With diversification, investors can enjoy good returns along with reducing the risk of losses.
So, what are those crucial things that you need to keep in mind to get better returns and have financial stability?
9 Steps To Boost Your Financial Status
1. Start Saving
The golden rule of getting good returns or improving your finance status is by saving. You can save a fixed amount every month, either through different schemes started by the government of India or your personal savings. Whatever be the mode, a fixed amount of regular saving goes a long way in accumulating a large amount every month.
2. Whatever You Save, Invest!
Investments are a great way to ensure that you get good returns after a specific time period. You can go for both short term as well as long term investments which can help you achieve financial stability. You can easily make investment in the form of stocks, equity shares, mutual funds, SIP etc. SIPs give good returns over a period of time. For ELSS, investments are locked in for a three period, however for other investments, there are different options.
3. Review Your Finances
Reviewing your Finances on a regular basis is very important. Whatever savings you have planned for every month or small investment you have decided for a monthly basis, you need to review them semi – annually and ensure that you are not missing out on anything. A regular review will help you rectify mistakes, if any.
4. Insurance Products & Tax Benefits
Each year when you pay a large amount of taxes to the government, you try to figure out methods that can help you save on these taxes.
A great way to do so is through the purchase of life insurance, medical policy, travel insurance, which help provide a significant amount of tax benefit and adequate cover at the same time.
5. Stock Market Investment
A great way to make some bucks rather than just keeping the money in your savings account. Stock markets are a good way to get returns on your investment, if you’re a risk taking person. However, you need to do proper research and must have a thorough understanding of the stock market, before you take in the plunge. A good research will help you know in detail about when and which company stocks to buy and when to sell off, giving you good returns. Also when considering investment from the point of stock markets, you need to understand that there is some level of risk associated with these.
6. Retirement Planning
It is never too early to start. Retirement plans are a great way to invest some amount of money every month for your retired life. You can decide, as in 10% or 20% amount of your salary should be fixed and kept for pension. You can also opt for different kinds of pension related schemes started by the government through banks, post offices, etc.
7. Preparing A Budget
Making a budget in accordance with your monthly expenditure and savings is a very important aspect. Preparing a budget will help save unnecessary expenditure and help you save for more important things like children education, retirement, etc. Depending upon your monthly salary, you can prepare your monthly budget and make a point to adhere to it very strictly.
8. Seek Professional Help From A Financial Adviser
A financial adviser will be able to provide a clear picture of how savings can be done, which investment options suit your needs the best. Prioritising goals is an important task performed by the financial advisor with your inputs.
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9. Taking Calculated Risks
Some investments require risk taking appetite, such as stock markets, mutual funds, etc. However other investments such as fixed deposit, recurring deposits are safe from market volatility. You need to assess your risk taking ability and plan your investments accordingly. In case of any confusion, consulting a financial adviser is perhaps the best decision.
The above mentioned points can help you attain returns on the investments made by you and thus increase and improve your financial status in the longer run. Remember, discipline is the key to a good financial status.
Seeking out the assistance of financial advisors seems like the easy way out while dealing with financial troubles. However, the real problem starts while gauging whether your advisor is actually taking care of your corpus. You might face several questions while dealing with the same. Are your friends and relatives doing better than you? Has your portfolio showcased much growth? These are some common questions which might trouble you while thinking about the viability of experts handling your finances.
Financial markets do not perform equally well every year and the current year is one such year which reported record losses for most investors. However, if you are facing difficulty in accepting the loss experienced, then your advisor might not have correctly gauged your risk bearing capability. This is why you ended up taking more risk than what you could normally accept.
The blunders committed by financial experts become less prominent in those years when the financial market showcases a booming pattern. Investors also do not scrutinize the performance of advisors as long as they keep on making money every year. Today we are going to talk about some common pointers which you need to consider for determining the efficacy of investment advice imparted by your advisor.
- Risk Bearing Capacity
Investors usually get to gauge their risk bearing capacity only when the markets crash. Such downfalls cause most of the investors to report loss figures. But the ones who are left stunned by the rhetoric decline in their portfolio are the ones who had been taking more risk than what they ideally should.
It is the duty of your financial advisor to assess your risk bearing capability on a yearly basis. This needs to form an extremely crucial part of the annual review of your portfolio carried out by your financial advisor. Such a review can either take the shape of a short quiz or discussions conducted regarding the changes in financial standing during a particular financial fiscal.
Childbirth, marriage, death, divorce, job loss and higher education of children are some such factors which deeply impact the risk bearing ability of an investor. Although as an investor, it is your duty to educate your financial advisor about such developments, the reverse also holds true.
Various mutual fund companies have started operating as investment advisors and in most cases, they refer to their own products while designing a client portfolio. Such forms of conflicted advice might be detrimental for clients in the long run. You should thus ensure that you are working with an advisor whose core business is just investment advisory services and not asset management, banking, accounting or insurance.
- Acting As A Fiduciary
Your financial advisor should actually act as a fiduciary thus taking all decisions on your behalf and for your betterment. But in most cases, investors do not have a clear understanding about the concept of fiduciary. Such advisors are under obligation of law to pay greater importance to your interests. Advisors working as representatives of banks, brokerage firms and insurance companies do not act as fiduciaries while advising their clients. This is why they provide advice which might even prove to be detrimental for their clients.
Non-fiduciary advisors on the other hand might recommend proprietary investment products which may not always be in the best interest of end customers. Thus, it becomes very difficult to analyse whether or not your financial advisor is acting as a fiduciary. In such a scenario, you can easily confirm the same by mailing a written request to your advisor. You should accept just written responses as vocal explanations to such complex topics are regarded as null and void. Your financial advisor is also under obligation to specifically spell out his or her fiduciary responsibilities in the contract signed at the very beginning of the investment tenure.
- All Inclusive Advice
Your financial advisor should consider all the other investments held by you as well as your spouse before recommending any particular addition to and deletion from your portfolio. The main intent behind this is avoiding over or under allocation of a particular asset class in your portfolio. Having a balanced mix helps an investor in making the most of his accumulated funds by effectively buffering from all associated risks. If you decide to have separate advisors for dealing with your and your spouse’s finances, then it is necessary to have effective communication amongst them.
- Clear Illustration Of The Process
It becomes easy for investors if a prudent, thorough and easily understandable process is demonstrated by the investment advisor before surfacing the various forms of investment options. The reports sent to them should contain a clear picture of the performance analysis and risk involved in the same. This needs to be prepared in an easily understandable manner which can be gauged easily by end customers and in the way in which it was intended by the financial advisor in the first place.
You can enquire your financial consultant about the viability of recommendations made by them and whether or not they are receiving any additional commission for referring the same. The purchase and sale of investment made by you should not be processed under any form of urgency and you can take as much time as required for evaluating the recommendations.
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At the end of the day, a certain level of trust needs to develop on your advisor. In spite of that, you should also exercise prudence in every single step to determine the efficacy of the funds suggested by these advisors for betterment of your financial standing. Getting the backing of a financial advisor who possesses adequate degrees in the fields of economics, finance and investment can also be of great help in such a scenario.