An ideal financial plan

Priyanka Sharma

25 Sep 2017

Untitled Document

To achieve your long term financial goals, you must have a financial plan. A financial plan is a process of estimating the capital that you would require in the future to become financially secure. As life is uncertain and full of certain contingencies, having a financial plan will ensure that you achieve all your financial goals.

It is of primary importance that you make a financial plan that is ideal and is according to your lifestyle. Here are some points which will aid you in making a financial plan:

S.M.A.R.T financial goals

Identifying and setting financial goals is the essence of any financial plan. Without financial goals, there won't be any motive to your financial plan. An ideal financial plan requires your goals to be S.M.A.R.T. For a goal to be an S.M.A.R.T goal, it should be:

  • SPECIFIC by stating the goals to be achieved with the money involved.
  • MEASURABLE by exactly estimating the monetary amount.
  • ATTAINABLE by setting goals which are attainable.
  • REALISTIC by setting goals which can be achieved given the market trends and your financial condition.
  • TIME BOUND by setting a time limit to achieve the financial goals.
  • Once you have set S.M.A.R.T goals, you can start investing your resources to meet these goals within the required time limit.

Emergencies

Your financial plan should provide adequate provisions for unfortunate events and emergencies. It should contain investments that can be liquefied when there is a sudden need of cash. You can look to invest in mutual funds through SIP (Systematic Investment Plan) which will provide you a disciplined approach towards investment as you can invest as little as Rs 500 per month and withdraw when you are in need of money. Another investment you can opt for is a life insurance policy which will provide you a life cover in the form of death benefit and a maturity benefit at the maturity of the term.

Flexibility

An ideal financial plan should always be flexible in the sense that you can change it according to your lifestyle. With time, your income will increase and so will your needs and your standard of living. The financial plan should have the ability to adjust according to the changes in your financial needs and your social status. If your financial plan is rigid and doesn't allow for adapting to change, there is a fair possibility that you won't be able to achieve your financial goals.

Simplicity

A financial plan should be simple; it should be readily understood and managed by you in every sense. As it will be you executing the plan at every stage, you should make it manageable so that you can monitor your investments quickly without having to spend a considerable amount of time. A simple financial plan will ensure that you won't make any complicated mistakes and achieve your financial goals efficiently.

Foresight

An ideal financial plan should be able to anticipate future expenses and market trends after a thorough understanding of the basics of the market and the financial condition of the person making it. It is only by anticipating future expenses that the financial plan can provide a monetary value to the financial goals. In simple words, the ability of foresight would mean that besides the needs of "today," the financial plan also provides for the requirements of "tomorrow".

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mutual-fund

Why to Choose Mutual Funds Instead of Directly Investing Into Equities?

Whether to invest in equities or mutual funds is a question that has plagued every investor. As someone who needs the best value for his/her investment should you invest in equity directly or via mutual funds?

Let’s start by first understanding what these two terms ‘equities’ and ‘mutual funds’ stand for-

Equities- Equities generally represent ownership of a company. If you own any equity in a company, you are a part owner of the said company (depending on how much equity you own).

Mutual Funds – It is an investment scheme which is professionally managed by an asset management company. It pools together the resources of a group of people and invests their money in equities, debentures, bonds and other securities.

Why choose mutual funds over equities?

For people who’ve never invested in either stocks or mutual funds, it is hard to know which is better and where to start. Broadly speaking, if you are a novice investor, mutual funds are not only less risky but also way easier to manage. Here are some ways in which investing in mutual funds is beneficial as opposed to investing in equities -

Diversification

Mutual funds provide more diversification as compared to an individual equity stock. When you invest in equity, you are investing in a single company which has its inherent risk. For example, if you invest Rs.20,000 in buying equities of one company, you could face a total loss if that particular company performs poorly in the market.  

If you invest the same amount in mutual funds, it will be invested in different kinds of stocks and financial instruments, high-risk and low-risk both, so you might not face total loss even if one company does poorly.

Scale of Investment and Lower Costs

For an individual investor buying and selling stocks is a difficult task due to its high price. Thus, any gains made from stock appreciation are nullified if the overall trading costs are considered. Comparatively with mutual funds, as the money is pooled from a large number of investors, the cost per individual is lowered.  

Another advantage of mutual funds is that you don’t need to invest large sums of money. Buying equities for a profitable venture needs huge amounts of money, a minimum of few lakhs. With mutual funds, you can start with Rs.1000 and earn profits on that as well.

Convenience

Keeping an eye on the markets everyday is a time-consuming business, especially if you are investing as a side gig. There are people who spend their lives studying the market and still end up sustaining heavy losses. Though investing in mutual funds does not guarantee high returns, it is stress-free and needs less work as compared to investing in equities.

To sum it up

It is important to remember that mutual funds have their own disadvantages as well. Thus, as with any financial decision, educating yourself and understanding the suitability of all the available options is the ideal way to invest. 


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An ideal financial plan

Priyanka Sharma

25 Sep 2017

Untitled Document

To achieve your long term financial goals, you must have a financial plan. A financial plan is a process of estimating the capital that you would require in the future to become financially secure. As life is uncertain and full of certain contingencies, having a financial plan will ensure that you achieve all your financial goals.

It is of primary importance that you make a financial plan that is ideal and is according to your lifestyle. Here are some points which will aid you in making a financial plan:

S.M.A.R.T financial goals

Identifying and setting financial goals is the essence of any financial plan. Without financial goals, there won't be any motive to your financial plan. An ideal financial plan requires your goals to be S.M.A.R.T. For a goal to be an S.M.A.R.T goal, it should be:

  • SPECIFIC by stating the goals to be achieved with the money involved.
  • MEASURABLE by exactly estimating the monetary amount.
  • ATTAINABLE by setting goals which are attainable.
  • REALISTIC by setting goals which can be achieved given the market trends and your financial condition.
  • TIME BOUND by setting a time limit to achieve the financial goals.
  • Once you have set S.M.A.R.T goals, you can start investing your resources to meet these goals within the required time limit.

Emergencies

Your financial plan should provide adequate provisions for unfortunate events and emergencies. It should contain investments that can be liquefied when there is a sudden need of cash. You can look to invest in mutual funds through SIP (Systematic Investment Plan) which will provide you a disciplined approach towards investment as you can invest as little as Rs 500 per month and withdraw when you are in need of money. Another investment you can opt for is a life insurance policy which will provide you a life cover in the form of death benefit and a maturity benefit at the maturity of the term.

Flexibility

An ideal financial plan should always be flexible in the sense that you can change it according to your lifestyle. With time, your income will increase and so will your needs and your standard of living. The financial plan should have the ability to adjust according to the changes in your financial needs and your social status. If your financial plan is rigid and doesn't allow for adapting to change, there is a fair possibility that you won't be able to achieve your financial goals.

Simplicity

A financial plan should be simple; it should be readily understood and managed by you in every sense. As it will be you executing the plan at every stage, you should make it manageable so that you can monitor your investments quickly without having to spend a considerable amount of time. A simple financial plan will ensure that you won't make any complicated mistakes and achieve your financial goals efficiently.

Foresight

An ideal financial plan should be able to anticipate future expenses and market trends after a thorough understanding of the basics of the market and the financial condition of the person making it. It is only by anticipating future expenses that the financial plan can provide a monetary value to the financial goals. In simple words, the ability of foresight would mean that besides the needs of "today," the financial plan also provides for the requirements of "tomorrow".

Have Referral Code?