We all know that investing is an excellent way to make money, but often, we tend to shun away.
Generally, this is because people do not know how to go about their investing process, what strategy to use and what rules to follow.
There are several financial planners available in the market to help you through this.
But the problem is that most people who want to invest cannot afford them or do not want to lose their money to brokerage.
Best Investing & Saving Tips – 2021
Well, if you are one of those people who wants to invest but do not know where to start. Fret no more !!
I will be discussing some of the most popular evergreen thumb rules of investing and saving, which will enable you to get your money on track.
Given below are the Best Investing & Saving Tips and Tricks In 2021:
1. Rupee Cost Averaging
Rupee cost averaging means investing a fixed amount of money regularly over a period.
In simple terms:
You can follow the rupee cost averaging method by regularly investing a part of your income in an asset/assets on a monthly or weekly basis.
This rule ensures that you buy more when the markets are down and buy less when the markets become expensive.
However, the critical factor here is commitment.
Suppose you are patient and remain invested throughout situations like economic downfall etc. In that case, there are more chances that your capital will appreciate most likely.
2. Pay Yourself First
The pay yourself first rule applies evenly to all investors.
As soon as you get your salary or payment, make it a habit to set aside a small amount for your retirement.
Experts believe that people should allocate a minimum of 10% of their income towards retirement funds. However, it is at your discretion to invest more or less, depending on your goals.
3. Rule of 72
This rule is applied to calculate how fast your money will double.
Divide the number 72 by your return on investment – the percentage of returns you are currently earning from your investment. It will give you the number of years at which your investment will double.
If you are earning an ROI of 10%, then your money will double in 7.2 years.
Similarly, you can divide your ROI by 114 & 144 to learn how long it will take for your money to triple and quadruple, respectively.
4. 50-30-20 rule
If you are confused about how much to save, invest and spend your monthly income, the 50-30-20 will give you some perspective.
- Set aside 50% of your income towards all household expenses such as rent, groceries etc.
- 30% of your income can be spent on indulging in outings, food, travel etc.
- The rest of 20% should be put into savings/investments for the short, medium and long term.
The main idea here is to create definitive buckets for your income. You can make a few changes here and there, depending on your commitments.
5. The 100-Your Age Rule
This is a rule used by most retail investors to determine their asset allocation strategy. Subtracting your age from 100 gives shows you how much percentage of your portfolio can hold high-risk investments.
Suppose you are 30 years old, you can hold 70% high-risk assets and 30% low-risk assets in your portfolio.
6. 4% Withdrawal Rule
Anyone can calculate the amount of money required for your retirement using this rule. The 4% rule makes sure your corpus outlasts you.
Here is an example:
Suppose you want to withdraw ₹50,000 (₹6 lakhs) for your expenses for 30 years after retirement. You will require a corpus of ₹1.25 crores assuming zero interest and inflation.
7. The 20/4/10 Rule
Suppose you are looking to purchase a brand new car, this rule could help you keep your finances in check.
Twenty represents the percentage of minimum downpayment that will be required to be paid by you. But remember, the more the downpayment made, the better it is for you.
Four stands for the tenure of your loan. I know that banks ideally offer seven years, but it is better to stick with four.
And ten is the percentage of your salary that you need to allocate for the monthly instalments of the loan (EMI).
8. Saving for Emergency Fund
The importance of this rule was felt by the entire globe when the Pandemic struck us from nowhere. An emergency could occur at any time, and it is unpredictable.
So, it is an excellent practice to stash aside an amount of money that will cover 3-6 months of your daily expenses in a liquid account. Make sure it is readily accessible in times of need.
9. Diversified Investing
Diversification is a crucial part of successful investing. It allows you to spread your risk evenly across all asset classes. However, over-diversification may not be ideal for a strong portfolio.
Though you may get the benefits of diversification, your returns may be marginal to the cost of managing an enlarged portfolio.
I have personally been following a few of the fundas mentioned above for a while now. While some work best for me, some do not suit my profile.
Similarly, all the rules may not apply to you too.
Also, remember that these rules may give you an overall picture of your finances but not the exact image. So, choose wisely and have an incredible investment journey ahead.
[su_note] KuberVerse is an educational initiative. Anything expressed here directly or indirectly is not investment advice. And we ask you to do your own research before investing. [/su_note]
Disclaimer : Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions. The information provided in this post is not to be considered as investment/financial advice from CoinSwitch. Any action taken upon the information shall be at user's own risk.
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