Friday, 20 May 2011

Investment Guidelines for regular income people

A good percentage of people get regular income. It may be from salary, Rent, interest or any other sources. But most of the regular income people do not have a regular investment habit. They have enough money to spend at the beginning of the month or at the time when they get income and afterwards their purse or pocket will be empty and waiting for another pay day or the day at which they get income. I normally used to ask such person that if they do not get the income in time or the source of income has been taken up or when they retire from their service, what would they do? Most of them do not have an answer. I advise them to save a portion of their income in any investment option for any future financial needs. If you follow the following investment guidelines, you can keep a portion of your regular income for your future financial needs. They have to learn how to investments made for a future need.

Fix your financial goals. This is the first step of your financial discipline. If you spend a few hours you can assume all your financial goals and can estimate the expected cost of each financial goal. You can start it today itself, do not postponed it for tomorrow. You should start it as early as possible. If you do not have a goal you could not reach out that goal. So first find out your goals and try to reach it at any cost. When you fix your goals it should be affordable with your income and your financial capability.

Set apart a portion of your income for the future financial goals. You must have heard that some people separated a portion of their income (say 10%) for charity work and they are very committed for this. They think that their actual income is the total income minus the portion of income they are separated for charity work and for other good things. Here you should determine how much you can separate for your future needs. You must think that you have only the income at handy is the total income minus the income separated for saving purpose.

Reduce all unnecessary expenses. You have already determined your financial goals and also decided to set apart a portion of your income to attain the desired goals. Now you have to control your expenses. Cut short all unnecessary expenses so that you could survive with the portion of income you have separated for your expenses. It does not mean that you should be a miser. You should spend all necessary amounts for you and your family, but you can avoid or reduce some extra expenses such as smoking, drinking, regular outing etc. Some of these expenses are not good for your health also.

Start a good legal and safe investment method. When start investing, keep in mind that the investment must be legal and safe. Do not go for attractive, but unbelievable investment methods.  The result is the loss of your money and sometimes you may be booked for illegal activities also. Most of the Quick rich programs are fake and you will lose your hard earned money. So go for legal and normal investment programs. You can go for some risky investments such as stocks and mutual funds as per your age and need of money. But remember that for stocks and mutual funds you should keep your money for a long time to get a good return. Otherwise you can go for fixed deposits, Post office savings, government securities etc. Do not be greedy.

Minimize your investment expenses. When you invest in any financial products, try to minimize the expenses such as Commission, exit load, entry load etc. But some cases you have to pay these expenses and try to reach the equilibrium point, when you pay such expenses. Compare expenses and outcome with other financial product and apply your wisdom and decision making power to take a wise decision.

Analyze the taxability of your investments. Some investments are tax exempted when you invest and some income from investments also exempted from tax, in some cases withdrawal from investments also exempted from tax. You should be aware of the tax implication of your investments and calculate the income after tax to determine how easy you could reach your financial goals. Check whether your investment is under EEE- Exempt (When investing) Exempt (When getting income) and Exempt (When redeem or withdraw the investment and profit) or EET (exempt, exempt and Taxed). You should not avoid any investment with the reason of tax, check whether it is profitable or not.

Diversify your investments. It says that do not put all your eggs in one basket to avoid any unfortunate events which may destroy all your investments. Always diversify your investments in many schemes, sectors and institutions. But do not make over diversification which you could not handle yourself. You can compensate any possible losses with other profits.

Keep balancing your investment plans. Always invest in various schemes with various strategies. Invest in equity mutual funds and debt schemes to balance your port folio. The trend in one scheme may get a heavy loss and you can compensate with other schemes. IF all your investments in Bank fixed deposits, when the interest rate come down you will get a heavy loss. So Balance your investment plans. You can allocate your investments in financial products, real estates and some traditional investments such as gold, silver etc.

Do not trust the financial Medias too much. Financial Medias gives you information and trend of the rise and fall of financial market. But you remember that your investments are as per your financial goals which may be a long term or short term. The Financial Medias are not aware of your individual financial goals and expectations. So keep your investments to satisfy your financial goals and take wise decisions.

Give regular attention to your investments. In case of investments you must learn from farmer. A farmer attends his agriculture regularly. Just like you should watch your investments and check whether it is grow or lose. If it shows a regular lose get out of that investment and invest in any profitable investment plans.

Take enough insurance protection. You should take enough insurance protection for your life and your assets and if necessary for the investments also. It will protect you and your family from an unforeseen loss through any possible miss happenings.

If you follow the above mentioned guidelines you can attain your financial goals in time and can be a successful person in your life.

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  1. Salaried class persons do find it tough to manage their investments. But in case people does investing in the most logical way as explained in this blog is the best way of making money.

    Setting up goals, reducing expenses, investment diversification, following value investing are some cool tips discussed here

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