If you are thinking about planning your investments a little better, chances are you are thinking about taking help from a professional financial planner. professional is sure to come with his or her own insights into the market, different areas of expertise and a different approach to investment. Ultimately you are the one who needs to take control of the decision.
However, there are still some little trade secrets that not everybody would let you in on! Read on to know about them!
1. You shouldn’t invest heavily if you are still in Debt
While you should always think of investing in whatever capacity you can, there is one small rider to it. You should never invest too heavily in the markets if you are carrying a debt. Something as small as a credit card debt can result in a negative return in the long run, with the debt rates often being more than the average return rates on the folios you may invest in. Therefore,it is advised that whatever the amount of savings that you are planning to set aside, some of it should be used to clear off the debts before going big on investing.
2. Savings matter as much as Investments do
Just making smart investments may not be enough. It is very important that you make sure that you are making enough savings as well. Investments are always subject to a few market risks and sometimes the returns you finally receive aren’t as much as the returns you expected. Another reason to keep a healthy savings fund handy is to make sure that you don’t have to break any of the long term policies or liquidate your assets if you need money in an emergency. Experienced financial planners always advise that you have a savings fund apart from your investment portfolio.
3. Stock market decline isn’t always a bad thing
Most experienced professional financial planners agree on one thing, which is, the stock market declining isn’t necessarily a bad thing, unless you are planning to retire in the next ten years. The main reason for that is the fact that as the market declines, your money gains more value and you can buy a higher number of shares for the same amount of money. And once the markets go back up eventually, those shares are bound to be worth a lot more than what you bought them for.
4. Investing in mutual funds isn’t always a good idea
Mutual funds are looked as one of the most convenient investment options today. It is easy to invest in them, the returns are usually good and you can start the investment at low costs. However, there are some times where mutual funds aren’t the safest bets. In case the mutual fund charges a high initial fee and asks you to pay up a periodically increasing annual fee, then you can steer clear of the mutual funds. One good option for investment if you are looking for alternatives to mutual funds is investing in a unit linked insurance plan or ULIP. A ULIP combines the best of insurance and investment, taking a part of your investment and putting it into various securities while investing the rest of the amount in life insurance cover for you. Several experienced financial planners advise ULIPs as better long term investments than mutual funds- depending of course on your life stage, marital status, financial income, savings etc.