Getting rich has to be on your priority list. No one wants to live a life of poverty. To get rich you must attain financial goals. These financial goals could be buying a house, retiring early or give children a quality education. You have to save and invest if you want to get rich in the New Year 2020.
The year 2019 has been one of equity mutual funds. Lots of people have started investing in mutual funds through systematic investment plans or SIPs. To their credit, most investors never stopped SIPs even when stock markets were not doing too well. With FDs offering a lower interest as RBI cuts repo rate, investors are looking towards mutual funds in a big way to attain financial goals.
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Just saving or investing will never make you rich. If you earn more, you must save and invest more. If you continue with the same rate of savings (even if salary increases), you never get to the target.
Let’s say you want to collect Rs 40 Lakhs in 10 years to buy an apartment. You invest Rs 14,500 each month through SIP of the mutual fund. Sadly, you are not getting the expected returns of 15% and are getting just 12%. You must hike SIPs to around Rs 17,000 each month to reach the financial goal.
How much to expect from equities? Well, look at real GDP + inflation rate which is the nominal GDP growth rate. Set equity expectations depending on this.
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Well, there are several portfolio trackers out there, but you need the best portfolio tracker to achieve financial goals. Get a portfolio tracker that shows the current value of your portfolio and the daily change. You also get the total returns and the inflation-adjusted returns. You also get the total returns from the portfolio and % returns per year. You get the % holdings of each stock in the portfolio.
Modern portfolio trackers show the tax-efficiency of your investments. You get to know the capital gains each financial year. You will find the capital gains indexed for inflation in the case of debt, equity, and hybrid funds. This helps easy filing of ITR.
The year 2019 was a bad year for debt fund investors. After the IL&FS fiasco and DHFL default, debt funds are viewed with a lot of suspicions. The rating downgrades and defaults have led to an erosion in the debt fund scheme values. This is because they had exposure to low-quality instruments and many mutual fund houses were not expecting defaults from AAA rated debt in top companies like IL&FS and DHFL.
Be careful of debt funds that have high exposure to low rated bonds. Mutual Funds do this to increase returns, but this move is fraught with risk. A default increases the risk of the fund. Always look at a high degree of safety on investments in debt funds.
Gold has traditionally been a hedge against inflation. Gold gave immense returns in the year 2019 because of the US-China trade war. Gold may not give very high returns in 2020, but do maintain the 10% portfolio in Gold.
Have gold holdings in electronic form like gold ETFs for ease and safety of investments.
The housing segment in India is a buyer’s market. Stay far if you are an investor. People invest in real estate only if land/apartment prices are expected to go up or rental yield is high. If you don’t get this, look at other investment avenues like equities or small saving schemes based on risk profile.
The real estate sector in India has been badly beaten for 4-5 years. People used to invest in real estate as they could buy back some other real estate to save taxes under Section 54. But, indexed costs have gone up due to inflation. People are today booking indexed losses. So, they don’t look at real estate as a means to save tax. This demand now flows into other asset classes reducing the demand for real estate.
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Well, the emergency fund must have at least 3-6 months of living expenses. Many people make these 9-12 months of living expenses. It’s not too difficult to find a job in 6 months. Don’t make too long an emergency fund unless you work in a vulnerable sector like automobiles.
Having too much money in emergency funds reduces the chances of profiting from lucrative investments.
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