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Investing the smart way: 4 things you need to remember

When we talk about investing, especially in the current day and age, multiple instruments come to our mind. From mutual funds and SIPs to equity and commodities, several investment options can be considered. However, most of us tend to rely on traditional choices like FDs, PFs, etc. While various attributes make traditional investment tools special; are those the smartest way to invest? The biggest contributor to people’s affinity for traditional tools has to be the low-risk feature that assures first-time investors about risk arbitrations. But there are other factors that we need to consider to make smarter investment decisions. Here’s what you need to consider while making investments-

Assess Your Risk
Risk assessment is the first aspect of planning your investments and it is also the most important one. The easiest way to do this has to be by analyzing your financial health as well as the short term and long term needs. Based on your financial capability, cash outflow as well as future needs, you can choose your investment options. For example, Ashmita has a monthly income of Rs 45,000 and a cash outflow of Rs 15,000 (Travel and entertainment). She aims to buy a car in three years. So based on her needs and financial capabilities, she invests Rs 15,000 in a high-return SIP (with an ROR of 22%) for five years. The future value of her SIP is calculated at Rs 16,15,000 against an investment of Rs 9,00,000.

Invest Systematically
One of the most common ways of ensuring that you are investing right is by investing consistently. Adding your SIP and ULIP payouts as auto-payments is one easy step that any smart investor can take to ensure they are investing systematically. In addition to this, having monthly, quarterly or half-yearly reminders set for your investments as well as keeping a dedicated access sheet that details all your investments handy will also help you to keep the investments in check, and make conscious calls.

Plan Strategically
There are various tried and tested financial strategies that come in handy while planning your investments. The main thing to remember has to be the need for investments. Whether you are building a corpus of saving smartly for a short-term goal, strategic decisions in making your investments always pay off! Read about the different rules like the 50/30/20 Budgeting Rule or the 30-30-30-10 rule of Financial Planning and choose a plan that suits you the best. While the 50/30/20 rule puts merely 20% of your income after tax deduction into investments and debt repayment is better for first-time investors, the 30-30-30-10 rule has helped several disciplined investors.

The 30-30-30-10 rule states that 30% of your income should be kept aside as your savings/investments, 30% of the income should go towards expenses like groceries and other necessities. Another 30% of the income should be dedicated towards the repayments and liabilities like rent, EMIs, etc. The last 10% of the income should be used for leisure activities like vacations and other entertaining activities.

The Added Smart Covers
While these steps will help you plan your investments better, there are a few pivotal instruments that you need to take, in addition to this. A trusted life insurance plan, reliable health insurance and a dedicated emergency savings funds are the three crucial elements that every financial plan needs to have. These three investments will be over and above your retirement or splurging plans. Additionally, while choosing life insurance, opting for a longer age-cover is always a safe bet. Similarly, opting for health insurance that also covers critical illnesses while providing a family cover is often the smarter choice over a regular individual cover. Your savings emergency fund is also bound to come in handy in case of any financial uncertainty.

Now that you know the basics of making smart investment choices and decisions, it’s time to get started!

(This article is generated and published by ET Spotlight team. You can get in touch with them on
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