Saving or investing money rarely featured on women’s to-do-list. This year only one of my friend’s resolution status said “earn more, save more and spend more. The order is important. First earn, then save and spend whatever is left.
I hope that not only that friend but others manage to translate their savings into meaningful investments too. Let 2016 be the year when we discover the route to a richer life. All you need to do is keep these 5 things in mind.
# 1. De-clutter your investment portfolio: Don’t you feel fresh when you weed out unwanted clothes from your wardrobes? It reduces our decision-making time and we feel more organized.
The same applies to investments. Sift through the financial documents your dad or your brother might have given you in the past. You might find an endowment or money back policy, or an old public provident fund account (PPF) account too.
Figure how much it is worth now and if it makes sense to keep holding it or redeem it.
So begin the year by first weeding out old investments from your portfolio.
# 2. Read up a jargon every day: Financial news and information can be intimidating. You can choose not to be scared if you look out for right resources such as financial blogs or online portals that explain jargons and concepts in a simple way. The second money resolution should be to read up one jargon or financial term a day.
# 3. Choosing the right way to invest: Consider investing like vegetable shopping. You may go out and select fresh veggies on your own or you can buy it from online grocer to save time.
In investing as well, you can invest through an intermediary like a bank or a financial adviser. The thumb rule is: you need to see if the person or company giving advice is doing so in your or its own best interest. Stock investing will require you to have a registered broker.
In mutual funds, you can choose to directly register with the fund company or go through an intermediary who can do the necessary paperwork as well as advice on where to invest.
# 4. Choosing the right investment: Keep in the mind three cardinal rules of picking an investment avenue.
- Returns: Does that investment offer fixed rate of return or is it linked to a market? What is the inflation adjusted return it offers you? It may earn a 10% return but if prices rise by 6% over the term of investment, your total return will be 4% only as the purchasing power of the money reduces over a period of time.
- The time period of investing: Can you withdraw your money whenever you want? Is there is a penalty for withdrawing money after a certain period?
- Tax Efficiency: What is the tax you will have to pay for any income or gains arising from that investment? Ask about the post-tax returns of an investment avenue.
# 5. Keep it Simple: Whatever your financial goal - higher education expenses or simply creating wealth for yourself in long-term- you don’t need complex investment products. Investing to create wealth means you invest regularly in an avenue that grows your money over a period of time.
Investing to meet a short-term goal means you invest in an avenue that offers safety of your principal.
About the Author: Rachna Monga Koppikar is the founder of thegreatgruhini.com, India’s first personal finance website that helps women navigate through the money maze.
Having swum and mastered the treacherous waters of corporate and personal finance writing, she is now on a mission through her blog to make every Indian woman a Money Savvy Woman and a Money Savvy Mom!