Take charge of your finances with this eight-step guide by Deepali Sen, a consultant at Winvestor, DSP Blackrock's investor education initiative
According to a Neilson study sponsored by DSP Blackrock, 77% of working Indian women do not take their own investment decisions, primarily because they are afraid to take risks. You worked hard for it, you saved it; are you ready to learn how to make it work for you? Presenting baby steps to making good investments.
Find a Reason to Invest
Even if you save every rupee you earn today, its value after 10, 20 or 30 years, is not going to be able to buy you the lifestyle you lead today, simply because inflation raises prices, on an average between 7.5% to 8.5% per year (the last 10 years CPI shows an average 8.2% rise).
Get all your investments together—from bank statements, fixed deposits and real estate, to insurance, stocks, bonds and gold. Make a list of your liabilities (loans, credit card outstandings...); What are your post-tax inflows from salary/ professional/ rental/ dividend income?; What are your outgoings (groceries, annual maintenance contacts, mediclaim premiums, entertainment expenses...)? Note down what doesn't make sense; you can either do your own research or get an expert to answer your queries. If nothing more, atleast you now know your net worth.
Stay Reasonably Liquid
Keep three to four months worth of outgoings liquid to deal with contingencies.
Tag Goals to Assets
Identifying goals and tagging investments to them, make goals more tangible. This will also indicate whether or not you need to make additional investments. Tag short-term assets to short-term goals and long-term assets to long-term goals. If you are getting married in six months, equity is not a great idea. On the other hand, if you want to buy a house in seven years, equity is your best bet.
DSP Money Manager, HDFC Cash Managment Fund and ICICI Prudential Savings Fund are good options for parking contingency funds; while HDFC Top 200, DSP Top 100 and ICICI Focused Bluechip could help you meet future goals.
Your insurance should be high enough to take care of your debts (car/housing/education loans) and your future responsibilities (children's education, parents' medical bills...). The greater your existing savings/assets, the lower your insurance needs—your savings could be used to cater to some of your family's future requirements. Do not attempt to bundle insurance and investments; your premiums will be much higher for a relatively lower benefit.
The only way to learn how to swim is to get into the water. The same holds true for investing. An investment ratio of 80:20 (equity: fixed income) prescribed for a 20-year-old just starting to earn, should gradually change to 50:50, the nearer you are to retirement.
Read, Research, Get Help
From news channels and blogs that offer case studies to websites and financial advisors that customise investment plans for you, there's no dearth of professional resources at your disposal. Understanding how things work will also ensure that you won't be taken for a ride. If something's not working for you, you can always walk away. But if you don't take that first step, you'll stay exactly where you are.
Make a Will
Yes, even if you are barely 20, and have no more than a few thousand to your name. The day you start earning is the day someone stands to inherit. In fact, you should do this, even before you start investing.
WHAT SHOULD I LOOK FOR IN AN ADVISOR?
Aditi Kothari, Executive Vice President, DSP BlackRock and founder of Winvestor, offers some sage advice on choosing a financial advisor
1. Ensure that your advisor listens to you and presents different options to suit your needs, as opposed to pushing you to buy specific products without considering your financial situation and your goals.
2. Your financial advisor needs to be realistic and explain all the risks of the products he or she is advising you to buy. If he or she is guaranteeing returns especially in the equity markets, please be cautious.
3. Make sure your advisor answers your questions in as much detail as you require. Ask all the questions that you need to, however basic they may seem, so that you are confident about your investment decisions.
4. Trust your intuition. If your gut tells you something is not right, get a second opinion. There are many advisors out there. It is wise to do a reference check or to be referred to an advisor by a trusted source.