Manage your finances better this financial year by making smart investment choices

BusinessManage your finances better this financial year by making smart investment choices

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As the new financial year commences, now is the perfect time to review the financial decisions you took last year and optimize them based on your current goals if you have already set them. If you haven’t set them yet, now is the right time to do so!

Once you set your goals you should ideally start saving. You can save and invest in a lump sum or you can start saving every month. Saving and investing a good part of your salary or monthly income is a very wise practice. Inculcating this habit early on can help in building wealth. Financial experts suggest that one must save at least 20% of their monthly earnings.  Wanting to splurge your earnings is an instinct but by doing this you are only robbing yourself of greater wealth.

Read also: How to build a contingency fund by investing in the right financial tools

After understanding the importance of savings you should aim to invest your earnings. Money sitting idle is no good as the ongoing inflation rates are high they can erode your savings in the future. Investing in the right tool is of key importance. Investments can be bifurcated on various basis. One widely used way to bifurcate investments is by dividing them into three categories based on your risk appetite i.e. high-risk, medium-risk and low-risk investments.

Let’s shed more light on the kinds of investment tools available in the market based on their risk parameters.

High-risk investments

These are instruments that function based on the market dynamics and market performance. When the market is going well you can earn substantial amounts from your investments. However, when the market tanks you face the risk of capital erosion and loss of funds. It is vital to track your investments regularly when you park them in these volatile tools. These high-risk instruments usually provide great dividends to the investor. If you are someone who is not risk-averse and is willing to take a high risk to receive good returns, then you can choose such a fund.

High-risk investments include:

  • Stocks and bonds
  • Crypto assets
  • Hedge funds
  • Foreign exchange

Medium risk investments

These are instruments that are bear lesser dependency on the market performance making them sounder but also earning decent returns. Longer tenures are suggested when you choose these financial tools to mitigate the risk of capital loss.

Medium-risk investments include:

  • Mutual Funds
  • Real estate  
  • Low volatility small-cap stocks
  • Corporate Bonds

Low-risk investments

Investing a considerable amount of money in a stable financial tool over a longer tenure can help you earn generous amounts at maturity. These are stable as they have no effect of the volatile market uncertainties. These low-risk investments can help investors grow their savings which can eventually beat the ever-rising inflation. You can evaluate your projected returns and align your funds as per your financial goals as these bear no effects of the market and the interest rates are fixed at the time of investment.

Low-risk investments include:

  • Fixed deposits
  • Recurring deposits
  • Sukanya Samriddhi Yojana
  • Senior Citizens Savings Scheme

Read also: EV retail sales zoom by three-fold in this financial year

Striking the right balance

One golden rule of investing is to put all eggs in different baskets. This safeguards from the risk of losses. Along with high yielding market-linked tools, your investment portfolio should include risk-mitigating stable and secure investment options as well. A well-balanced portfolio is sure to grow your savings and generate wealth over the years.

Now that you know all about investments and their risk types. Start saving and investing to make your money grow in this new financial year.

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