Know Your Financial Duties this Republic Day! Friday, Jan 25, 2019
It was on January 26, 1950, 69 years ago, the Constitution of India came into action which provided us with our rights and duties by which we abide by. Just as we have a Constitution that reflects the rights and duties of the citizens to the country, it is imperative to know that investors need to have a set of financial duties in place that helps them in making right financial decisions during the course of their life. Without these guiding principles it will be difficult for anyone to financially grow and achieve their financial goals.
Here are some of the fundamental financial duties that are essential for you to achieve your long-term goals:
1. Maintaining a rock-solid financial foundation:
Just like a house which is built, you would want this structure to last for many years; it requires a concrete base, a foundation. Likewise, our wealth is no different. It can become unstable if the foundation is not strong enough. We would want it to remain strong for many years so that it withstands economic storms that may come our way during our lifetime. To create the much needed wealth, one needs to establish a rock-solid foundation.
3 pillars for a rock-solid foundation are:
• Education: In order to keep climbing up the ladder of success in your career, it is vital to acquire education continuously. This will help you to advance your income potential. Never stop learning and being financially aware of your savings. Commit to learning a little bit more about your tax liability when investing in certain mutual funds to minimize your taxes. Avoid funds that chalk up costly investment management fees. Be aware of where your money is saved. Don’t let the money that you save lie idle in your bank account. Keep aside a certain amount for emergency and invest the rest in other investment options by educating yourself about the options available. Try to increase your investments steadily over time.
• Developing a financial mind-set: The primary difference between wealthy individuals and the rest of us is that the wealthy don’t let money control them; they’re in control of their money. When you learn how to manage your money prudently, you tend to develop the right mindset by spending less and saving more.
• Avoiding consumer debt: With personal loans and credit cards easily available in today’s world, wealth creation becomes detrimental. To purchase something that you desire such as a laptop on loan is perfectly alright but it doesn’t teach one to save wisely given the fact that interest rates are a part of loan repayments.
2. Invest first, spend later:
Investing is not rocket science. The problem with most investors is that capital is generally allocated towards the basic necessities such as food, clothing, shopping etc. and the difference (if remaining) is then invested for later which never happens due to insufficient funds. Let’s take for instance – when you receive your salary by the end of the month, the first thing that you should do is to take aside an XX amount and transfer it in a savings account or even better – invest that amount in a Systematic Investment Plan (SIP) and harness the power of compounding. To start your SIP investment with Quantum, all it takes is 3 simple clicks by investing online through our Invest Online portal.
3. Keep an eye on costs:
'Expense ratio' is nothing but the annual fee charged by the mutual fund scheme which covers the fund manager’s fee along with other expenses required to run the administration. It tends to differ from fund house to fund house and even from scheme to scheme! Remember, the expense ratio is a fixed component whether a fund generates positive/negative returns you have to pay fees. Thus before investing in a fund you must know the expense ratio of that fund. Difference in return gets inflated with a higher investment period so it would be prudent to pay attention to what the fund’s expense ratio is, especially as a long term investor.
4. Diversifying your portfolio:
To generate long-term wealth one has to possess the right asset allocation strategy as different asset classes can perform differently under similar market conditions. For e.g. when equities do not perform well, bonds or gold may perform better. Adopting a smart habit by diversifying your investments among various asset classes helps you to minimize losses and move toward your ultimate financial goals.
5. Be patient, stay focused on the bigger picture and review your investments from time-to-time:
When you have a long-term attitude, your investments bring amazing results. If you want to grow your wealth over time, you must cultivate the habit of patience. It is unwise to book small profits while having a short-term attitude. Instead, stay invested for longer so that you can beat inflation and market fluctuations. Developing the habit of patience will help keep you focused on your goals. Whatever happens in the markets, in all likelihood your reasons for investing won’t have changed. A long term investor should not be too bothered with negative news or events.
Just as our country needs a Constitution to run smoothly, you also need a financial plan in place to make the right financial decisions. A sound financial plan is a road map to help guide you to a better future free from financial difficulties or troubles later on. We also suggest that you consult your financial advisor before making any investment related decisions.
Happy Republic Day!
Disclaimer, Statutory Details & Risk Factors:
The views expressed here in this article are for general information and reading purpose only and do not constitute any guidelines and recommendations on any course of action to be followed by the reader. The views are not meant to serve as a professional guide / investment advice / intended to be an offer or solicitation for the purchase or sale of any financial product or instrument or mutual fund units for the reader. The article has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. Whilst no action has been solicited based upon the information provided herein, due care has been taken to ensure that the facts are accurate and views given are fair and reasonable as on date. Readers of this article should rely on information/data arising out of their own investigations and advised to seek independent professional advice and arrive at an informed decision before making any investments.
Mutual fund investments are subject to market risks read all scheme related documents carefully.
Please visit – www.QuantumMF.com to read scheme specific risk factors. Investors in the Scheme(s) are not being offered a guaranteed or assured rate of return and there can be no assurance that the schemes objective will be achieved and the NAV of the scheme(s) may go up and down depending upon the factors and forces affecting securities market. Investment in mutual fund units involves investment risk such as trading volumes, settlement risk, liquidity risk, default risk including possible loss of capital. Past performance of the sponsor / AMC / Mutual Fund does not indicate the future performance of the Scheme(s). Statutory Details: Quantum Mutual Fund (the Fund) has been constituted as a Trust under the Indian Trusts Act, 1882. Sponsor: Quantum Advisors Private Limited. (liability of Sponsor limited to Rs. 1,00,000/-) Trustee: Quantum Trustee Company Private Limited. Investment Manager: Quantum Asset Management Company Private Limited. The Sponsor, Trustee and Investment Manager are incorporated under the Companies Act, 1956.