Think back to the time when you first got to know about your pregnancy. What did it feel like? Pure joy, of course. But you also have had some questions about the future. About how life was going to change from here on. You may have even planned ahead about how your baby’s room would look to what school s/he might go to and everything in between.
As parents and parents-to-be, we want the best for our children and do everything possible to make sure they get the best. From the clothes they wear to the food they eat. And moms, particularly, are vigilant about every aspect of their children’s lives.
While we as moms do everything in our capacity to physically, emotionally and spiritually support our children, it is just as important to be able to offer them financial security. If you think that you are financial planning are two opposite ends of a spectrum read 5 Reasons Why Moms are the Best Investors
Financial planning is not as daunting as it seems. Let us try to simplify it for you here.
1. Identify your goals
It is important to have a goal/s clearly in front of you before you decide to invest money in any financial instrument. Goals can be short-term (to be achieved in a few days or months such as baby's monthly supplies), medium-term (to be achieved in a few years such as school admissions) or long-term (associated with life-events like joining college, retirement etc. All of us have a combination of short-, medium- and long- term goals to plan for. Once you have identified your goals, it will be easier to identify what financial instruments help you attain them and invest accordingly.
2. Choose the right product based on your goals and risk appetite
Mutual funds are among the easiest and most convenient products to invest in to meet a financial goal. Asset management companies (AMCs) typically invest on behalf of investors (like you) in various companies. Fund managers have a hawk’s eye on the performance of these companies on the stock market, the economy in general and on various other factors that could affect the performance of the fund. Accordingly, they keep managing the money that investors have entrusted them with to gain maximum returns. Within mutual funds too, there are different types. Large cap funds invest in companies that are big in size and have a more or less steady performance over the years. The risk in investing in these companies may be comparatively lower - so these are a good bet if you want to invest in the long-term but have a low risk appetite. You have the option of choosing a direct lumpsum investment plan or an SIP when it comes to large caps.
Similarly, there are a number of funds which invest in mid-sized companies that show promising potential. The risk might be higher in these mid-cap funds compared to large caps but returns might also be higher. Here too, you have the option of investing through a lumpsum plan or through an SIP.
At the same time, there are funds that invest in a combination of small, medium and large companies - called multi-cap funds or a combination of large and medium-sized companies - called large and mid cap funds thus balancing/averaging the risk and returns in a way. Click here to invest in the perfect multi-cap fund through lumpsum investment and here for investing in the ideal mid and large cap fund through direct lumpsum investment. You can also invest in multi-cap funds and mid and large cap funds through SIP.
If you still find all these options risky, there is the opportunity of investing in another category of mutual funds that are called balanced advantage funds. The money from these funds is not just invested in the equity market (i.e. stocks) but also in other instruments thus lowering the risk considerably, especially during volatile circumstances such as a stock market crash. To invest in a balanced advantage fund through SIP, click here. You can also make a direct lumpsum investment in balanced funds.
Before deciding to opt for any kind of financial product, consult a financial expert on what will best suit your requirements.
*Remember to consult your financial advisor/AMC on what kind of product best suits your objective
3. Go for consistent, habit-forming tools such as SIPs
Habits are hard work but once formed they serve us well. Haven’t we all learnt to brush, bathe and clothe ourselves on a daily basis? It did not come to us naturally as kids but over the years, they have become part of our routine. Similarly, investments need to be seen as a good habit to have. Irrespective of the financial situation, a certain amount of money needs to be invested each month. Tools such as Systematic Investment Plans (SIPs) help create and sustain this habit.0.
Once you have chosen the types of mutual funds you want to invest in, convert your payments to SIPs and keep investing in them steadily over a period of time.
4. Review your goals and investments periodically
Financial planning is not a one-time exercise. Over the years, our goals and the finances required to fulfil them are also likely to change. So it is important to keep reviewing investments and building your portfolio to keep up with changing times. Your AMC is likely to offer the best advice on what kind of financial instruments you can diversify into given your requirements.
Let's do a quick recap.
It is also important to remember that while we have largely discussed planned goals, it is equally crucial to set aside funds for emergencies. Again, your AMC is likely to offer you prudent advice on what kind of tools you must invest in, especially for dealing with unplanned situations.
Doesn't seem all that complicated, does it momma? So start small but stay consistent and invest in your child's future today!#financialplanning #besmartsavesmart