Top 5 Best Investment Strategies for 2020- Best Way To Invest Money
In the turmoil market conditions, investors tend to lose their control and make too many mistakes. They usually sell all their investments that are in red which drastically affect their holistic approach towards long term wealth creation and achieving their long or short term dreams.
But once you have made your best investment strategies, in the beginning, there is no room for coming back and leave your financial goals unfulfilled.
That’s why I always prefer taking the help of financial advisors who are domain expert of their respective fields of this investment.
In this blog post, we will learn the 5 best investment strategies for beginners.
In my personal opinion, Investment is completely based on a few questions that you can ask yourself first. When you get clear answers to all your questions, the best investment strategies will be in front of you. Now, let’s just see what are they.
- How Much
- How to Review/ Monitoring
Look, investment is very simple but our attitude towards different products and varied perceptions has made investments very complicated. I mean we have just overrated or overthought these best investment strategies.
Now let’s understand some simple questions based on which one should make his best investment strategies.
⇒Why do I need money?
⇒When do I need the money?
⇒How much corpus do I need?
⇒How do I achieve this?
⇒How do I review or monitor?
Just believe me, you have to have followed the above philosophy. Else you’d have to bear the pain in future when you really need wealth for your goals or financial objectives. This is not quite desirable for all I guess.
I have experienced different types of people while publishing my blog post on arthikdisha.com.
I found that there are many investors who just started investment knowing and believing
Mutual Funds Sahi Hai. But they didn’t put any goals before their investment in mutual fund or other financial products. Your investment strategies are integral parts of your Financial Planning procedure.
Best Investment Strategies –1: Financial goals or Objectives (Why)
Before investing even a single penny you must set a goal or objective for which you need money in the future. This is called goal planning. Most investors lack this drastically.
As a result, they don’t know when to stop further investment and withdraw/ redeem their existing investment in any equity or equity-related products.
This is the first stage of Financial planning or best investment strategy. This is very much crucial. Because even a Captain of a ship can’t sail through the ocean if he has no predetermined destination or goals.
This means you must know your destination before starting off through roads.
If one doesn’t follow this exclusively, his ship is quite reasonably bound to sink in the ocean.
So, in a nutshell, what is your financial requirements or needs that should be clearly written in a paper before you start your first investment.
This strategy is definitely going to put you forward one step ahead in your personal finance world.
Best Investment Strategies –2: Time horizon or tenure(When)
Once you have decided why you need money, now you have to chalk out when you need the money.
This means if you have set your different goals e.g Daughter’s marriage, child higher education, your foreign tour, buying a new Home or Car and lastly your retirement.
You need to select the time frame for different goals for which you will need the money.
This will make your best investment strategy a consolidated one.
I mean now you know what is your financial goals and when you need this money to fulfil your dreams.
Best Investment Strategies –3: Corpus Estimation/Calculation(How much money)
Now is the time for you to calculate how much money you need for meeting up your future Financial goals like Child higher education needs, buying a house, retirement planning, going for a foreign tour, buying a new car and many more.
There are different methods or tools available nowadays by which you can calculate how much money actually do you need in the future so that it helps to meet your needs.
Certainly, you must consider the inflation factor that would gradually increase your needs.
So it is very important to say that value of Rs. 5 lakh today is not the same as the value of Rs 5 lakh after 5 years.
Because inflation is a factor that literally eats up your money gradually and decreases your purchasing power. In simple terms, it reduces the value of money.
For example, if you buy a 50-gram Chocolate with Rs 100 today. There is a possibility that after one year either you would get 45-gram chocolate with Rs. 100 or to get the same volume of chocolate of 50-gram you would have to pay Rs.110.
This is called inflation in disguise. It reduces the value of money so that power of Rs. 100 today does not remain the same after one year as you can see from the above example.
Let’s take another example, say the education your child wants to pursue is worth Rs 20 lakhs today.
Obviously, it will not remain as 20 lakh after 5 years. If you consider buying inflation @8% for education, it will cost you around Rs.30(29.38 lakh) lakh after 5 years.
So, as a part of your long term investment strategies, you need to withdraw your idle money from your savings accounts and invest little money every month as per your goals and corpus in mutual funds as guided by your financial advisor.
Best Investment Strategies – 4: How to achieve goals(How)
At this point, you know your goals, when you need the money and how much corpus is exactly required.
Now, comes one of the most crucial parts of best investment strategies i.e. how to achieve your financial goals.
This basically means what will be your asset allocation or types of asset classes depending upon your financial needs.
A financial planner helps his client in determining which investment avenue or financial products will be best suited in line with the client’s financial objectives.
Financial advisors always emphasize on some crucial factors like the long time you remain invested, the more possibility of getting higher returns.
But unfortunately, most of the investors end up in random buying and selling of stocks in the stock market in order to achieve higher annual returns.
But they just get confused between trading and investment.
In order to create long term wealth from equity market either you have to invest in good quality growth stocks or in mutual funds as per your risk-bearing ability.
In various cases, it has come to the notice that investors consider investing in real estate as a part of the best investment strategies.
Obviously, it will add to their net worth, but how much of you have been able to sell your real estate properties and making a profit from it on a regular basis.
Also, as an investor, you should not forget the liquidity factor of any investment proposition.
Like how much liquid is your asset? How quickly you can convert your existing investments into liquid cash in an unprecedented situation.
You need regular cash flows as well for meeting up exigencies as well.
Thus, real estate investments may form part of your total net worth but it should not be construed as a sole part of long term wealth creation.
Best Investment Strategies –5 : How to review or monitoring (How)
The last part of the best investment strategy is a review or monitoring of your investment performance on a periodic basis say after every six months i.e. twice in a year.
This is also as crucial as making an investment. Since, if you fail to monitor the performance status of your investments, you are putting yourself far behind to reach the goals that you have already set.
But the question is how you would understand or review the performance of your investments.
The basic idea is comparing it with other similar types of mutual funds or stocks.
Comparing this with index funds such as the S&P 500 index, BSE 30, NIFTY 50.
You must consider some basic things like how much annual returns your investments have delivered, is it in line with the similar other types of investments, how is the overall performance of the market returns.
But do always remember that if the difference between actual return and the market return is within the range of 1% to 2%, you need not switch or change your investment.
As in the future, your investment may recover it and deliver some extra returns.
After analyzing and review if you find that your particular investment has performed very poor in comparison to the same fraternity or overall market, you must consider switching your investments in better alternatives.
To combat this jittery, I would always suggest taking the help of a good financial planner(List of fee-only SEBI registered Financial Planners in India), who we really do need now especially for this shaky market conditions.
Do let me know in the comment box below if you like this post. Kindly share with friends and others if this post helps you personally.