The economy has recovered faster than expected after the Covid-19 induced lockdowns. The markets are performing well, and companies are releasing much better than desired results. The number of people investing in the equities market has increased dramatically after the lockdowns. If you are looking to invest and save for retirement, here are some investment tips you should keep in mind before investing your money.
Invest in the Long Term - If you understand compound interest, you will know that time plays a vital role in your wealth creation through investing. Invest in companies that you believe have the potential to grow your wealth over the long term. It is a fact that over 90% of traders lose money in the stock market. The best way to avoid that is to invest only in companies with excellent reputations and growth prospects and stay with them for the long term instead of trying to predict whether the markets are going to rise or drop.
Invest in Instruments you Understand - It is essential to understand the asset that you are investing in. If you do not understand cryptocurrencies, do not invest in them. If you have trouble understanding the stock market, do not invest directly in inequities. Only invest in instruments that you clearly understand so that you can plan a portfolio that best suits your financial needs.
Invest in Insurance - While insurance is not considered an investment instrument, no financial plan can be complete without health and life insurance. Find a plan that suits your financial needs and invest in it. You must have a term life insurance if you are the sole bread earner in the family or have a debt to repay.
Keep Some Gold in your Portfolio - It is good to keep at least 5% of your portfolio in gold since it is considered an asset that tends to perform well when the equity markets are down. It will act as a hedge against your other investments and will balance your portfolio well. It is a great way to diversify.
Invest in an Emergency Fund - The pandemic has made people realize the importance of investing in an emergency fund. While financial institutions do not offer a deposit called the emergency fund, it is your responsibility to maintain a fund that you use only for emergency purposes. You can invest this money in a recurring deposit or a fixed deposit so that you can access it as soon as you need it, and the principal amount is also completely safe.
Understand Taxes - Understanding investment-related tax rules is essential to earn the best returns. Short-term capital gains are taxed at 20%, while long-term capital gains are taxed at only 10%. This makes it extremely beneficial to keep your money invested for more than one year. Many investment instruments offer tax deductions under various laws. It is good to learn about them and gain benefit from them as much as possible.
(Check out 'Learn & Grow with Wizely' to read and learn all about investments and the stock market.)