Given the speed at which the world around us is growing today, a diverse financial portfolio is an important factor in determining an individual’s financial success. An individual who wants to achieve their goals without creating the additional layer of financial burden on themselves should work towards reducing risk and increasing their capital gains. There are a few ways in which one can implement consistent growth with respect to long term investments.
What is financial planning?
Financial planning is the process by which individuals evaluate their financial goals and make decisions with respect to their money management, accordingly. These decisions will accumulate and eventually allow the individual to achieve their goals and plan ahead for the future. These decisions are based on data available regarding the income and expenditure of the individual. Therefore, financial planning consists of evaluating the individual’s current monetary data to create a plan with respect to their financial goals to ensure that they have a stable and secure financial future.
Construct your portfolio
Asset Allocation: Based on important aspects such as one’s age, income, existing assets, future goals and more, it is possible to evaluate one’s needs and preferences. The next step is to consider risk tolerance and therefore, categorise your assets.
Diversify your portfolio: Once one has identified their larger categories, these need to be further broken down into subcategories. It is not wise to have all your eggs in one basket, therefore, for greater returns it is important to ensure that the subcategories have varying levels of risk and returns.
Re-evaluate the portfolio: The market is a very volatile place, constantly shifting. It is wise to revisit your portfolio every now and then to adapt to these changes in order to ensure you have the least risk and the highest returns. Furthermore, your financial goals may change overtime, therefore the portfolio may need to be adjusted for the same.
Re-balancing the portfolio: Any tweaks that are made to one’s portfolio to account for market changes, new financial goals and to ensure that one has as little risk as possible while achieving their goals.
Investment Options for Financial Security and Stability
Mutual Funds: This is a large sum of money collected from a number of investors which is then invested by the fund manager to ensure that the investors receive the highest possible returns. It is important to conduct one’s research before investing in mutual funds as they can fluctuate considerably in a short span of time. There are three kinds of mutual funds: Equity, Debt and Hybrid which is a combination of the first two.
Life Insurance: Emergencies can arise at any point of time and leave your loved ones stranded. Life insurance creates a safety net and helps your loved ones stand firm even when you’re not around. Term life insurance plans such as the HDFC Click 2 Protect Life, give you coverage for a fixed amount of time which is especially critical given the COVID-19 pandemic.
Stocks: Stocks are an investment made in a company that provides part ownership as well as part profits. The person that invests in the stocks of a company becomes a shareholder. Stock prices fluctuate heavily based on the market and the performance of the company which can be a high risk to consider. One can invest directly in stocks, but only
Savings and Fixed Deposits: financial planning is about accumulating wealth to achieve your goals. This can be achieved through a savings account which encourages saving especially if one has a fixed income. Another option is that of a fixed deposit in which one can leave a sum of money idle for a certain period and have interest accumulate over that time.
Fixed Assets: these are any tangible objects one may own that can be liquidated but don’t need to be due to their value. A house or land are good examples of the same. These assets hold their value for many years.
Financial security and stability during such trying times can be stressful to think about, however, by diversifying one’s portfolio to ensure that there are varying levels of risk and returns that allow you to accumulate wealth that can eventually be used to fulfill your goals has never been easier. Life insurance is particularly crucial in these times for ensuring the financial stability of your loved ones. The HDFC Click2 Protect Life term insurance plan is a great option to go for, and has a number of variations by which the sum assured can be paid out to beneficiaries.
HDFC Life Click 2 Protect Life (UIN No.: 101N139V01) is a Non Linked, Non Participating, Individual, Pure Risk Premium/Savings Life Insurance Plan. Life Insurance Coverage is available in this product.
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"The thumb rule for retirement planning is - the earlier you start, the more you save. However, with age, your priorities change too. So, you need to factor in the cost of living in the present vis- a -vis future."
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