Ganesha's Visarjan: Overcome obstacles to wealth creation

Saving early, managing debt, budgeting, investing regularly, and choosing investments as per your risk appetite can potentially improve financial preparedness and support the journey towards long-term financial goals. 

On this day of Ganesha’s visarjan let us see how we can aim to retire rich. One of the obstacles in this journey is the fear of investing and risk avoidance. Many people are hesitant to invest due to the fear of financial loss. This fear is genuine for most investors. Low financial literacy is one of the biggest roadblocks to investing. Knowledge is an essential asset when you're investing. So let’s try and understand the Keys to financial success.

It takes willingness to do a little reading and applying the learning. Here are eight financial rules to set you on your way.
 

This may seem like simple advice but is extremely powerful. Use the magical power of compounding to create wealth. Albert Einstein called compound interest "the greatest mathematical discovery of all time".  It is the process of generating earnings on an asset's reinvested earnings. This requires two things: the re-investment of earnings and time. The more time you give your investments, the more likely you are able to accelerate the income potential of your original investment. It is never too late to invest but if you invest early, your money will get plentiful time to grow.

Pay off credit card bills and other high interest loans you may have on time. By paying them off, you eliminate the additional interest charges, if any, that you incur on  credit cards and loans.

You cannot set spending and saving goals if you don't know where your money is going. Hence you need to make a budget and more importantly stick with it. A budget helps you see more clearly how much money you earn and how much you spend and how much you save. Setting spending limits can helps you get rid of your debts, reduce spending and have more money for things that are really important to you.

Pay yourself first! If you wait until you have met all your other financial obligations before seeing what's left over for saving, chances are you'll never have enough to invest. Resolve to set aside a minimum percentage of your salary for savings BEFORE you start paying your bills. Better still, have the money automatically deducted from your salary / bank.

Start small. Invest in a systematic investment plan where you have to invest small amounts at regular intervals. SIPs also offer the benefit of cost averaging. An SIP plan is a good idea for an investor.

• You pay yourself first every month before you start spending
• It turns you into a disciplined investor
• It's affordable
• It helps you avoid the pitfalls of market timing
• You will be getting more units when prices are low and fewer units when prices are high.

Equity mutual funds allow investors to participate in the stock market without spending too much time tracking the markets. Diversified funds are one of the best ways to start investing in mutual funds. However, do remember that at equity funds are meant for the long term. The longer may be better.

At this point, you can start considering tax-saving mutual funds as well, for your Section 80C benefits. Also understand the benefits of various other tax options such as PPF, EPF, insurance and medical insurance.

Take daily steps to keep yourself healthy - like eating fruits and vegetables, maintaining a healthy weight, exercising, not smoking and not consuming alcohol in excess. Do this and you will avoid paying exorbitant medical bills. Remember Health is Wealth.

1. What are the biggest obstacles to wealth creation in India?

As per general market understanding, several factors can hinder wealth creation, such as:

• High inflation
• Inadequate savings
• Irregular investing, and
• Excessive debt

Besides, “market volatility” can further test investor discipline and lead to panic selling. The potential solutions? To build wealth, you may require consistent saving, appropriate asset allocation, patience, and periodic portfolio review.

2. How can mutual fund investors overcome financial obstacles?

Investors may potentially overcome common financial obstacles by setting financial goals, maintaining an emergency fund, and investing consistently according to their risk profile and time horizon. To achieve long-term wealth creation goals, investors may potentially:

• Prefer SIPs to develop investment discipline
• Perform diversification to reduce dependence on a single asset or category
• Do periodic portfolio reviews to ensure investments remain aligned with their risk tolerance and changing market conditions. 

3. How does staying invested potentially help in overcoming short-term market obstacles?

Realise that markets frequently experience “corrections” and periods of volatility in the short-term. By staying invested, you may avoid making impulsive decisions during temporary market declines and give your investments more time to participate in potential recoveries and long-term compounding.

An Investor Education and Awareness Initiative by Tata Mutual Fund . 

To know more about KYC documentation requirements and procedure for change of address, phone number, bank details, etc., please visit: https://www.tatamutualfund.com/deshkarenivesh

Please deal only with registered Mutual Funds, details of which can be verified on the SEBI website under ‘Intermediaries / Market infrastructure institutions.’

All complaints regarding Tata Mutual Fund may be directed to service@tataamc.com and/or https://scores.sebi.gov.in/ (SEBI SCORES portal) and/or https://smartodr.in/login

Nomination is advisable for all folios opened by an individual, especially with sole holding, as it facilitates an easy transmission process. 

This communication is a part of the investor education and awareness initiative of Tata Mutual Fund.