Achievement of investment goal needs to be backed up by proper planning. For an amateur, this may sound a little intimidating but there are enough simple ways to meet your investment goals.
For the process to be simple, we first need to ask ourselves a set of questions:
What is the final objective of our investment? If it is only for saving money on our taxes then we may not be keen to take too much risk and thus may settle for investment avenues like medifast coupons, which would give us assured rate of return. If we are investing with an objective to earn a large amount of money in order to utilize the earnings for maybe children’s higher education, daughter’s marriage or for ultimate investment in something very big like real estate then we will have to opt for avenues which will give greater returns. The objective changes as per our requirement and may be different for people in different age group. Risk appetite also plays an important role in devising the objective. We should take care of the fact that our risk appetite is indirectly proportional to our age and we become averse to taking risk as we grow old.
Once we are decided on the objective then the next question that pops up is – For how long to invest? The duration of investment can be easily decided depending on the objective i.e. If we are expecting fixed rate of return then the duration might range in between 1-3 years whereas if we expect higher returns then we might as well wait for a longer period which can be between 5-15 years or even longer. It also depends on how much time do we have in our hand for the goal to be met. If you have an immediate need then long term investing is not for you.
Then the most obvious question is – Where to invest? There are a plethora of options available for investment; however, we may eliminate the options, which do not seem to fit in as per our investment goal. For e.g. We cannot invest in stock market, if our risk appetite is too low, similarly, a person looking for good return on investment wouldn’t want to put his money in Bonds or Term deposits.
Bonds, Deposits, Money market instruments etc. are form of investment avenues which would give guaranteed returns but the return wouldn’t be very lucrative whereas Stocks, Mutual Fund, Commodities etc. are avenues that can generate rewarding returns.
As the old saying goes “Do not put all your eggs in one basket”, it is always better to diversify one’s investment into different avenues rather than keeping it restricted to one single option. This way there is a possibility of getting better returns. However, this is a matter of personal choice.
Although, listed above are simple ways to meet your investment goals but in case you are a little shaky to start on your own, you may also engage a professional financial planner to assist you in your task.