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Tata Capital > Blog > Wealth Services > Investment Guidelines 2021-2022

Wealth Services

Investment Guidelines 2021-2022

Investment Guidelines 2021-2022

As Warren Buffet says, “If you do not find a way to make money while you sleep, you will work until you die.” And, the one sure-shot way of earning money while sleeping, especially in the coming two years, is by investing wisely – in safer schemes that are also money multipliers.

Sounds easy enough?  It's not unless you consider these five steps before investing in 2021-2022.

Step 1# Determine Your Future Goals

Perhaps you want to buy several things in life. If you are younger, you often aim to purchase a house, travel around the globe, start a retirement fund, etc. As you get older, you might want to save enough for your child’s education, your medical expenses, etc.

Achieve these milestone purchases by identifying and listing them down early on. Build a corpus of short and long-term investments to reach said goals on time. In a nutshell, figure out what you are investing for and the amount of money required to reach them.

Step 2# Map Your Investment Timeline

After identifying your future financial goals, calculate backwards the amount of time you’ll need to reach it. For instance, suppose your child is presently a year old, you will need to start saving up for their school admissions and fee within the next two years.

Calculating the timeline of your financial goals will also help you figure out whether it’s a short, mid or long-term goal. Once you are aware of the timeframes, you'll know when and how much money should you invest to achieve a specific financial milestone.

Step 3# Asses Your Risk Appetite

This is a critical tip for any year you invest in! As an investor, you must carefully evaluate your tolerance for risk. Doing this will help you decide which investment instruments you choose and the ones you will reject.

It's no secret that most financial products offer high returns at more risk, while others provide lower returns at low or zero risks. Deciding between these two conditions is always tricky. To counter the confusion, experts recommend you diversify your financial portfolio. Make sure you have a bunch of low risks and return investments as well as high risk and returns investments.

You can also diversify within an instrument – go from low risk to high risk. For instance, if you plan to purchase mutual funds, choose from a mixed bag. Meaning, invest in a bunch of low risk and return mutual funds, medium risk and returns mutual funds and high risk and return mutual funds.

Step 4# Invest in Different Asset Classes

Simply put, don't only invest in stocks, shares, mutual funds, and fixed deposits. Also, add other asset avenues like Sovereign Gold Bonds (SGBs), real estate, etc. Remember, having different asset classes ensures you are well-cushioned from market downswings.

For instance, during the pandemic, gold kept delivering great returns, whereas equities crashed. However, individuals with a well-balanced class of assets made up for what they lost in equities with the help of appreciating gold prices.

Additional Read: Investing in different asset classes based on their risk

Step 5# Invest in the Right Product

Before investing, take into reconnaissance the following two things:

  • The investment tenure
  • You Risk Appetite

Needless to say, the financial instrument you choose should carry a tenure and lock-in period, if any, to match your investment horizon and goal. For instance, if our daughter requires Rs. 1 lakh in 1.5 years for their primary school admission, perhaps a fixed deposit is your best bet. Why? Because this expense cannot wait. Capital preservation here trumps rapid money multiplication.

However, along with opening an FD for a shorter duration, as mentioned above, you also need to start a college fund for your daughter's future – something she will need in, say, 12 years. Here your focus should switch to investing in inflation-beating returns. So, putting your money in mutual funds through SIPs make sense.

In simple words, your investment tool must change with differing objectives.

Additional Read: 2021: Sectors to look forward to

Parting Thoughts

If you have the intent to invest and are looking for top-notch portfolio management services, reach out to Tata Capital Wealth – India’s leading wealth management expert. Allow us to help you achieve your financial goals and milestone purchases by identifying the right investment instruments.

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