Diwali is not just about the win of good over evil but also the prosperity that comes with it. This notion of prosperity is the reason why, on Diwali, we worship Goddess Lakshmi.
Goddess Lakshmi is the goddess of wealth and so we wish each other a year filled with prosperity and ourselves buy at least a token of gold if not more.
This Diwali, don’t shower all your love on gold. There are other aspects of your money life that you must also focus on. Take the positive, festive energy of the season and pour it into making of a brightly lit money journey.
1. Begin investing by making a plan
Unlike what most people believe, investing is not about finding the right financial product. It’s really about getting the plan right. What is this plan? The plan really is what you want in life and how you can use your money to achieve that. Think about your goals and mark them out on a timeline. Now you can populate this timeline with the investments you need to make to achieve these goals. Long term goals which are 5-10 or more years away need long term investments like equity and short-term goals need more stable options like deposits and fixed return investments.
Only when you draw out a plan that tells you why you are investing and what you hope to achieve from it can you find the right asset and financial product to invest in.
2. Take some risk
No one likes to lose money, but would you believe it when I tell you that risk-taking for long term gains is necessary. Risk is not the same as a gamble and doesn’t assume that you will lose money.
Risk means having some amount of uncertainty with regards to the outcome. When we talk about calculated risk, it means the uncertainty is more on when the outcome will be achieved rather than whether it will be achieved or not.
Why do we need risk?
Without taking some risk in our long-term investments it will be very difficult to grow wealth by beating inflation in a growing economy like India.
No one will pay you a premium interest rate to opt for the safest investment option, it is assumed you are willing to accept lesser earning for the safety that the investment offers. Similarly, you will seek a higher return where there is some risk. Calculated risk in equity assets is the sweet spot; the probability of losses in the long term (10 years or more) comes down to less than 10% at the same time returns will beat price rise or inflation in the period.
When both these things happen, it leads to wealth creation.
3. Clean up your investment litter
Believe me, there will be a lot piled up. We don’t pay attention to the past, but every insurance policy your relative or neighbour sold, every fixed deposit you bought isn’t relevant in your plan. This Diwali pull out all those old documents and investment records. The first on your list to clean out should be traditional life insurance policies which you thought were investments, but really those are just costly ways to get life protection. Switch them out for more efficient life insurance and investment options. Secondly, before you buy more gold this Diwali, check on how much you already own and really do you need to add more as an investment? Poor performing mutual funds, dud fixed deposits and neglected property are some other investments you should be thinking about clearing out in this time.
This Diwali instead of focusing only on wealth, think of how you can grow it. Starting with the plan and the clean-up will help you move forward.