Everyone wants to get rich and is on the lookout for investment opportunities which provide better returns. People emulate their friends or colleagues in absence of sound advice and more often than not lose money as they are unaware that financial strategies differ for every individual. Identifying the specific objectives and the time- period in which to achieve them is the first step in devising a plan of action for better monetary yields. Zeroing in on the methods accordingly, taking into consideration the risks involved is the next step and the success or failure of the whole stratagem depends on them and therefore one needs to be extremely diligent while deciding on the techniques. Consider the five tactics listed here for realizing the dream of economic prosperity.
Putting all your eggs in one basket is never a good idea and it holds true for monetary planning too. There is a tendency to buy stake in companies related to a particular sector based on forecasts predicting better yields in it and in case of the predictions coming true, it may well happen but for an investor looking for returns with minimal risks, it may not be an appropriate practice as in the reverse case, the losses suffered may be substantial. Acquiring shares of different companies belonging to different industries not only helps in mitigating losses but also gives a surety of profits at the time of exit. In the event of one sector performing badly, a buffer is provided in the form of other resources which may be doing well. Investing money in different classes like stocks, funds and property gives ample protection from factors like market conditions and interest rates. Any individual looking for preservation of capital assets can use this tactic to safeguard his money.
Everybody wants to be a stakeholder, no matter how little, in big corporations but their high valuation make this impossible most of the time and a better option is to identify and acquire stocks of other organizations priced at lower than their intrinsic value. In essence, a buy and hold technique, it requires a lot of patience and the decision to purchase has to be made carefully as the target is to obtain shares at prices lower than normal, but which are expected to perform better in the coming future. A tricky field as the acquisition is being made on the evaluation that the pricing is temporarily low but with little idea of how much it will rise in future. The key lies in the ability of making a thorough analysis and opting for corporations based on strong business models which are passing through a rough patch. The market reacts to the current problems being faced by the entity and it does not take into account other factors and this is what aids an investor in making the addition to his portfolio.
Fixed Income Investing
One of the most secure financial strategies that will surely reward any investor, it involves putting the money in instruments like bonds and mutual funds which provide a fixed amount at regular intervals of time. While bringing diversity to the portfolio, it also guarantees the full return of capital along with the dividend at the termination of the stipulated time period making it appealing to an individual looking for safe returns. People averse to taking risks prefer this mode as apart from being managed by professional managers, there is almost nil chance of losing the principal amount but its downside is that the money gets locked in for a specific duration and if one wants to exit the plan, some sort of charge has to be paid. Another good feature associated with these tools is that most of them provide tax exemptions to the buyer.
It involves investing in enterprises whose earnings are growing at above- average rates and requires ample funds as such deals tend to be expensive. Ideal for individuals looking for higher capital appreciation rather than income generation, such groups normally do not pay dividends as the companies look to reinvest the gains in projects. As the risk factor is also not high, people like to use this method to compound their wealth by looking for companies witnessing high growth with expectations of the trend continuing in the coming days. The most interesting aspect of this method is how and when to time the exit as no share can be expected to keep performing at high rates consistently. Big gainers of one bull run do not usually fare that way in the next one and selling an older growth stock in favour of a new one will be advantageous.
Some readers may be surprised to see this entry in the list but if creatively managed, taxes can actually help to augment your income. A regular complaint that one hears all the time is how these mandatory charges cut into the profits but an understanding of the taxes associated with long and short-term gains will help in making informed decisions. Approaching experts at any respectable law firm in India who are skilled in deciphering the technicalities surrounding tax compliances, will prove to be beneficial when formulating your plans. Organizing the investments in taxable and tax-free tools combined with charity donations can be extremely beneficial in minimizing the amount paid as tax. Moreover, one can always apply for deductions in case of losses incurred while trading.
There is no one size fits all model when it comes to determining financial strategies for wealth expansion and everyone has to make choices depending on factors like end goals and funds in hand which are unique for every individual. Making an assessment of the current situation and educating oneself about the relevant tools will definitely help an individual achieve the desired goal of economic prosperity.
Amy Jones is a professional legal expert working with Ahlawat & Associates, A leading law firm. In this blog post, she’s exploring the financial strategies that let you know how to investing in market. Follow Amy on twitter.