Managing money need not be boring. It is not rocket science, and one need not necessarily be from a financial background. They only need to show ounces of commitment. Deciding to save is the first and foremost step towards money management. Here are six expert-approved ways to make investing part of your financial plan:
- Think of investing as one of the elements of your financial plan
Successful investing does not happen in a vacuum. Other aspects of your investment plan, like how much debt you have and how much you save, work in concert with your investment strategy. A financial plan has several steps; some of the crucial ones are:
- Create an emergency fund
- Start contributing to your employer-sponsored retirement plans, irrespective of your age
- Aim to pay off your high-interest debts
- Constantly evaluate your financial plan and ensure that you are on track in achieving your financial goals
- Understand the relationship between investing vs saving
Merely realising the importance of investing isn’t enough. By not investing, you might make your future a little harder. However, if investing doesn’t go with your financial portfolio, then you strip yourself from the benefits of long-term compounding gains. This means that you have to make up for that notional loss with your savings. In short, if you do not save, you’ll have to save more and maybe even live a little bit less, so that you can save enough. If that doesn’t sound too compelling, then perhaps it’s time to reevaluate your need to invest in different investment options.
- Consider passive investment if active investment isn’t your style
There are two styles of investment – namely, active and passive investment. Under active investment, the fund manager makes specific investments to outperform an investment index or benchmark. However, under the passive investment style, an investor follows a buy-and-hold strategy, where they avoid taking any additional risks and make investments in line with the investment index. They are usually less expensive than active investments, as the fund manager does not spend his time and efforts on analysing and understand the markets.
- Consider seeking professional help
One of the best ways to organise your strategy is by seeking the advice of an expert or a professional. Not only they can help you in prioritising your short-term, mid-term, and long-term goals, but they’ll also aid in making sense of volatilities in the market. This will help you in understanding when it’s time to react or maybe, stay put and do nothing.
- Reflect on why you want to invest
As an investor, you should have a fair idea of what’s driving you to invest in different types of investment. Goals are the backbone of the investment strategy. Without a clear picture of your financial goals, it’s too easy to abandon your financial plan when things get rough. Experts always recommend sticking to your long-term investments during short-term volatiles than selling them. If you want to invest for the sole purpose of saving tax, you might want to consider various tax-saving investments.
- Stick to your plan
Consider the stock market like a roller-coaster – the twists and turns are its part and parcel. It’s a small price you have to pay to accumulate wealth in the long run. Indeed, market volatility can be nerve-wracking, but it’s these challenging times that decide your potential gains in the market. It’s important to understand that when markets face a downturn, they are likely to be followed by recoveries.
Never try to time the market. Always align your investment options with your financial goals, risk profile, and investment horizon. Hope this article will help you in managing your finances in a better way. Happy investing!
