- Date : 06/12/2023
- Read: 3 mins
Understanding your risk profile, having sufficient insurance protection, keeping tax burden in mind – which are your go-to money mantras?
Talking of smart money management, there are so many things to consider. When it comes to managing risks and investments, there are a few universal mantras that have worked for every successful investor. Here are four money mantras you should adopt as you embark on your financial journey in 2024.
With personal income tax in India at more than 40%, tax planning must be a part of your financial strategy
Risk management is vital in investments, as 90% of Indian traders end up losing money
It is easy to be underinsured in India with national insurance penetration still in the single-digits
1. Too much monitoring
Too much monitoring of the market results in too much information, which in turn can lead to too much confusion. You will end up switching your investments frequently and impulsively and disrupting your portfolio. This will result in avoidable costs, as well as potential losses. Instead, limit the monitoring to periodic reviews of the asset performance and major trends and patterns.
2. Tax implications
Always consider tax implications in all of your financial decisions. Planning to invest in an asset with exciting returns? Check the income tax rate on the maturity sum and profit. Planning to buy a product or service? What is the GST rate, and can you claim input credit? For instance, an electric car can reduce your GST burden and save income tax on the car loan too.
3. Insulate from risks
Your health insurance coverage may need a relook with a change in family size or the development of medical conditions. The same goes for the coverage of existing life insurance and accidental insurance. Insurance is meant to protect you from unexpected risks in life. Another support from these risks is your emergency fund. Assess its adequacy from time to time and increase your emergency fund size accordingly.
4. Risk profile yourself
Understand your risk appetite, your financial goals, and the type of investor you are. This will bring consistency in your approach towards investment. Many people lose money as they don’t follow a risk-appraised plan and opt for a scattergun approach instead.
Risk profiling will have a major role to play in deciding the weightage of your investment portfolio. A risk-averse investor would opt for a heavier debt allocation while an adventurous investor may go for a large investment in small-cap equities.
Regular monitoring of investment is recommended. But you should avoid knee-jerk reactions to every market movement. Besides, the tax implications of expenses and investments must be studied as they can eat out a big portion of your earnings. Finally, with astute risk management, you can make sure that your new year is financially fruitful!
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