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12 essential financial planning rules for a successful investment journey

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12 essential financial planning rules for a successful investment journey

In 2024, with interest rates expected to go down, will debt funds take the crown? What is the outlook for gold and equities in 2024? Will gold continue to rally with geopolitical tensions rising? Will equities continue outperforming or take a backseat? This is where financial planning and asset allocation are important. 

As an investor, your focus should be on financial planning and not chasing returns. The new year brings a lot of enthusiasm and optimism. Use this opportunity to streamline your financial freedom journey with these 12 financial planning rules.

Take expert help to make smart decisions

In this era of Do It Yourself (DIY) platforms, a qualified and experienced investment expert’s importance must be recognised. The expert can handhold you for listing financial goals, making goal plans, making investments, and regular reviews till the goals are achieved.

Adopt budgeting

Budgeting helps you free up financial resources for investing towards financial goals. For example, the 50/30/20 budgeting method allocates 20% of income towards savings and investments. Automate your investments through SIPs, and insurance premium payments through auto-debit instructions. Keep the SIP date around 2-3 days after your salary date so that the investments are taken care of, and you can spend the remaining amount on needs and wants.

Gain knowledge of risk and reward

Usually, the higher the risk, the higher the expected reward, and vice versa. An investment expert can help you identify suitable financial products based on risk, investment time horizon and other factors.

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Understand the impact of inflation and compounding

Inflation is a silent monster that erodes the value of your money. On the other hand, compounding, which Albert Einstein called the world’s 8th wonder, helps you grow your money. Long-term investing helps you benefit from the power of compounding and earn inflation-beating returns.

Set clear goals

You should set SMART goals: (S)pecific, (M)easurable, (A)chievable, (R)elevant, and (T)ime-bound. It helps pursue them till achieved. Setting up SMART goals will help you stay focused on achieving them.

Take informed risk

Taking measured risks in investments is important. Investing in a product that gives you 12% annual growth vs a low-risk product that gives you an 8% annual return can have a significant (2-3 times) impact on your final accumulated corpus. Take informed risk for your long-term goals keeping this in mind.

Build tax efficiency

While investing for goals, maximise the deductions under Section 80C of the Income Tax Act. For example, a Nifty 50 Index fund (ELSS) can give an annual deduction of up to Rs. 1,50,000 compared to other Nifty 50 Index funds (non-ELSS). Similarly, you can save tax with NPS contributions (Section 80CCD), and health insurance premiums (Section 80D) for self and family.

Regular reviews

Sit with an investment expert to review the progress of your financial goals every 6-12 months till they are achieved. A review helps to replace underperforming investments with appropriate new ones.

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Don’t time the market

Time in the market beats timing the market. Rather than speculating on the entry and exit points, stay invested for the long term till your goals are achieved.

Invest systematically

The SIP mode makes you invest regularly in a disciplined manner. Using step-up SIPs, increase the monthly investment amount annually in line with your increasing income.

Focus on investing behaviour and process

Greed and fear are an investor’s biggest enemies. While investing, keep your emotions aside and trust the investment process to sail through the tough times and enjoy the good times.

Don’t chase returns

As long as your investment returns meet the expected rate of return in the long run, you don’t need to chase schemes with the highest returns in 1, 3, or 5 years. The table toppers will keep rotating every quarter. Adopt a strong investing process that provides resilience for staying invested despite market volatility.

The financial planning journey is a marathon and not a sprint. Hence, following these 12 financial planning rules will keep you in the race for the long haul till the financial goals are achieved.

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Mayank Bhatnagar is Co-founder & COO, FinEdge.

 

 

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Published: 12 Jan 2024, 10:57 AM IST

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Finance

Man who built Guernsey finance charity retires

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Man who built Guernsey finance charity retires

A charity has announced its new chair following the retirement of its founder.

Peter Neville worked for more than five years to set up Guernsey Community Savings, which first opened its doors in September 2020 to support people who were not able to access mainstream banking, staff said.

Former banker James Ellis is taking over the role. Neville said: “James brings exactly the right blend of financial services experience, charitable involvement and community understanding.”

The charity had helped about 200 people, who would otherwise have been excluded from the financial system access, to accounts and linked debit cards, and offered money‑management guidance to many more, staff said.

Neville said: “The initiatives now being discussed, together with the additional features offered by the new money‑transmission platform, reassure me that James’s vision aligns perfectly with the aims we set in those early days.

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“I wish the board and GCS staff every success as they take the charity forward.”

Ellis said: “‘The creation of Guernsey Community Savings in 2020 was only possible because of Peter’s unique set of qualities that enabled him to create a talented team and the structure to tackle the issues facing the financially excluded in our island.

“I was delighted when he asked me to continue with his work and further expand his vision, which I share, to provide help in the form of bank accounts, debit cards and financial education and to realise our ambition to provide grants and soft loans where needed.”

He added he was pleased Neville agreed to remain involved with the charity as life president.

Follow BBC Guernsey on X and Facebook and Instagram. Send your story ideas to channel.islands@bbc.co.uk.

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Finance

Hong Kong’s first 5-year plan to tackle economic gaps, boost jobs: Paul Chan

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Hong Kong’s first 5-year plan to tackle economic gaps, boost jobs: Paul Chan

Hong Kong’s first five-year plan will map out concrete paths to address the city’s shortcomings and magnify socio-economic benefits, including how artificial intelligence can create quality jobs, the financial chief has said a day ahead of the public consultation on the blueprint.

Financial Secretary Paul Chan Mo-po said on Sunday that the key task for the blueprint would be the upgrading and transformation of the city’s economy, vowing to press ahead with the Northern Metropolis megaproject and make it a “spatial carrier for deploying emerging and future industries”.

“Hong Kong’s five-year plan aims not only to provide greater momentum for economic development and better application of technology, but also to promote more inclusive and equitable development in society, provide residents with more quality employment opportunities, and create a better life,” he said in his weekly blog.

The efforts to formulate Hong Kong’s first five-year plan are led by Chief Executive John Lee Ka-chiu, and the blueprint is expected to be finalised by the end of 2026.

Lee said last week that the public consultation for the outline would begin on Monday, confirming an earlier South China Morning Post report.

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The public can submit views via dedicated websites during the two-month period, and the government would hold multiple sessions to gather input from various sectors, including lawmakers and industry representatives.

The blueprint aims at aligning Hong Kong’s development with China’s 15th five-year plan, which positions the city as an international hub for finance, shipping, trading, innovation and technology, offshore yuan and global talent.

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Finance

2 Awkward Talks to Have With Your Kids Before They’re 18 (Not ‘That’ One)

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2 Awkward Talks to Have With Your Kids Before They’re 18 (Not ‘That’ One)

As children reach adulthood, many parents assume they’ll still be able to step in when needed. In reality, that dynamic often changes quickly. Once a child turns 18, parents can lose both visibility and influence in ways they may not expect.

That’s why I suggest having two difficult conversations that can make a meaningful difference: The first helping your children build financial literacy, and the second ensuring you can support them effectively in a medical emergency.

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