• Thu. Apr 18th, 2024

World Financial Planning Day 2023: Five tips to become a crorepati

Today, October 4, is World Financial Planning Day. This is an initiative of the International Organization of Securities Commissions (IOSCO). World Financial Planning Day is observed to help raise awareness of the importance of financial planning. Besides being aware, it is very important for everyone to be financially independent. 

On World Financial Planning Day 2023, here are some tips for investors, that they should follow for wealth creation.

1)Diversification of the portfolio

Portfolio diversification is a fundamental investment concept based on the principle that various asset classes, perform differently in different conditions. It involves constructing a portfolio that includes a mix of different asset classes, such as cash, equity, debt, alternative investments, and commodities

By spreading investments across different instruments, investors can potentially minimise the impact of any single investment’s poor performance on the overall portfolio at any point in time.

“In simple terms, an investor’s two main tasks are to identify the asset allocation that best fits his or her objectives, profile, investment horizon, and circumstances, and to then ensure that they manage the inevitable ups and downs of markets and avoid making mistakes in times of market stress,” said Shiv Gupta, Founder, and CEO of Sanctum Wealth.

2) 50-30-20 Budget rule

This personal finance rule says that individuals should divide their income into three categories. 50% should be allocated for spending on needs, 30% should be spent on wants, and 20% on savings.

3) Balancing your debt and equity allocations

A 60:40 portfolio means that investors should have 60% in equities and 40% in debts. Pankaj Mathpal, MD & CEO at Optima Money Managers said that “investors should first think about their risk tolerance and capacity.”

He further added that equity assets will help increase the value of their investment in the long term, in about 7-10 years, while debt assets will provide safety of money when the markets are volatile.

4) Rejigging portfolio with increasing age

Personal Finance experts suggest that investors should increase their debt exposure by 5% after ten years. In simple terms, when we are young, our ability to take risks is very high. As we age we should increase our exposure to debt instruments.

5)Increasing monthly investment with a rise in income

In order to become a crorepati, one should increase one’s Mutual Funds SIP annually. Experts suggest step-by SIP.

A step-up SIP is an automatic increase in the SIP amount by a predefined percentage. For eg. An SIP of 10,000 was made this year. A 10% step-up would mean that the SIP amount for the next year will increase to Rs11,000 (10% of Rs10,000 = Rs1000) 

Mathpal said that the normal annual SIP step-up suggested is 10 percent but for such an ambitious 1 crore investment goal in 10 years, one needs to maintain a 15 per cent annual SIP step-up. 

Disclaimer: The views and recommendations made above are those of individual analysts, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.

 

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Updated: 04 Oct 2023, 11:12 AM IST

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