Guide to Financial Planning

MONEY MATTERS: Financial planning does not begin at investing, but at reviewing the overall financial profile.

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Keywords: Investment, Savings

Start investing NOW

Every day that you gain by beginning early is a day that your money spends working harder for you. So, start planning now! The only thing worse than beginning to invest late is not investing at all.

Use the power of compounding to your advantage

The power of compounding is the #1 reason to start investing early. The sooner you begin investing, the better, because every day that you are invested, is a day that your money is working for you. To understand this better, read Power of Compoundingand Benefits of Starting To Invest Early

Match your investments to your liquidity needs

If you will need cash next year for a down payment to buy a house or for your child's college fees, use one of the shorter term and low capital risk investments for your money, such as liquid/gilt/ money market funds or bank term deposits or top-rated company deposits/ fixed income investment options. In the same vein, invest only that money in short term instruments that you're actually going to need in the short term. For money that you won’t need for at least three, preferably five years, choose the stock market.

Evaluate your investing skills

Finding the right money manager for your investments is an important part of the investment process. You could either manage your money yourself, or invest through mutual funds (or professional money managers).

moneycontrol recommends that you use the first option only if you have the required temperament, aptitude and technical knowledge. You can take our Investment IQ Quiz to evaluate how you fare on each of these parameters.

Financial planning is not about financial expertise and hard work. All it needs is the right approach and discipline. And you’ll see the benefits of this when your money starts working harder for you!

Getting your financial plan in order is half the battle won. To learn and understand more about the different investment options available, read Investing in Fixed Income, Investing in Mutual Funds, Investing in Equities and Insurance.

Happy planning!