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Dare to Dream

Monday, May 07, 2018
By Jimeet Modi

By Jimeet Modi, CEO & Founder, SAMCO Securities

As foolish as it may sound, the first step in personal finance is to dream. Do you dream to have a car, a big house, millions in your bank account, lots of gold? If having a car is your wish, you have options to buy it at an easy monthly instalment (EMI) or if you can’t wait you may choose to buy one in the second-hand market or may choose to save enough to be able to buy one in the future. Once you have a dream, then you can choose the right path to achieve it.

Next step is to assess your current portfolio which includes your current statement of income, personal list of assets. And to assess how much do you need to spend each month on an average. Don’t forget to keep buffer cash in a savings account for emergency. The next step is to secure the uncertain future with insurance. Insurance penetration in India is 3.4% in FY 2016. Life and medical insurance not only has its tax-related benefits but also ensures a big boon in times of distress. Moreover, with Term Insurance Return of Premium (TROP) kind of policies, premium paid is not really lost in nominal terms as the insurer gets back the premium paid if he survives the tenure.

Other lucrative investment opportunities include investment in the equity market. It goes without saying, higher the risk you are willing to take, higher would be the return. Not just blue-chip stocks, even the small fish render sizeable or sometimes higher returns. Nobody can predict the movement of a stock in full but a strong fundamental and technical analysis might just do the trick. Fundamental analysis would help you assess the strength of the company based on its financials and may give a reasonable long-term perspective. Whereas, technical analysis will help you analyse the movement of stock on the basis of its price.

With just 24-hours in a clock, how much time can you really give to assessing the right investment for you. Some people have no knowledge of how to pick the right stocks and manage their money - That’s where mutual funds and portfolio managers step in. Fund managers are experts in their field and do the tedious task of tracking the market for you on a daily basis. With various equity and debt schemes guaranteeing a range of returns, you can sit back and relax after a long day of work while mutual funds manage your money for you. To regularise your investment in mutual funds, signing up for a Systematic Investment Plan (SIP) is the best way in. SIP’s ensures a regular (i.e. weekly, monthly, quarterly etc) investment in a mutual fund wherein with every payment the size of your mutual fund holding increases. Equity linked savings scheme (ELSS), which is nothing but a type of mutual fund, is the icing on the cake with its tax benefits.

The last step in your path towards your dream is not to forget a regular reassessment and monitoring of your portfolio. Change is inevitable, and you need to keep up with it. Also, remember not to keep all your eggs in one basket ergo diversify your portfolio. Diversification will help you absorb large shocks in the portfolio value and by reducing volatility it in turn reduces risk.

Lastly, be confident in your decision and move forward along the path of making money with zest. It is never too late and everyday is a good day to know about how to manage your personal finances. Personal finances need the same level of attentiveness and planning as businesses do and treat it just like growing a business wherein you may face challenges, overcome obstacles, and hopefully go from one milestone to the next, all the while working towards your long-term dream - Financial Security! Life is filled with unexpected twists and turns, and all you can do is be prepared as much as possible and enjoy the ride.

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