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Business News/ Brand Stories / Achieving Financial Success: Practical Tips for Everyday Investors

Achieving Financial Success: Practical Tips for Everyday Investors

Ajay Lakhotia, the founder & CEO of StockGro, shares 9 mantras for investors to try

The best way to build up your money is by saving and investing regularly—and being patient while it grows. Premium
The best way to build up your money is by saving and investing regularly—and being patient while it grows.

People often say, 'I want to be rich.' But the real question is, 'Are you willing to do what it takes to get there?'

Everybody dreams of becoming wealthy. It is the ultimate passport to financial freedom. But what exactly is "wealth"? Technically, wealth represents the value of all assets owned by a particular individual, community, or company. Net worth is the most common measure of wealth, determined by subtracting debts from the total market value of assets.

But wealth differs from income. It is not a continuous flow but a snapshot of assets at a particular time. Unlike income, which is variable, wealth measures the total value of assets accumulated at a given moment.

While some of us have been blessed with legacy wealth, the rest must build it independently. So, how do you create wealth? We asked Ajay Lakhotia, the founder & CEO of StockGro and here are the 9 mantras he recommended investors to try!

Tip 1: Keep aside 6x of your monthly salary

Set aside six times your monthly income to establish an emergency fund. This ensures financial stability during unexpected events like job loss or medical emergencies. Allocate these funds wisely, considering safe options like insurance or fixed deposits for accessibility and security. It's a necessary step towards safeguarding your financial well-being.

Tip 2: Place 20-50% of your salary for investments

Setting aside a portion of your salary for investments, ideally between 20% and 50%, is a prudent financial strategy. If you are not into taking risks, you can invest your savings in traditional investments like Fixed Deposits (FDs). These offer security but yield negative long-term returns when factoring in inflation. However, alternative options exist.

  • Consider debt funds for a conservative approach or Sovereign Gold Bonds (SGBs) for gold investment with a 2.5% annual interest.
  • Exchange-traded funds (ETFs) track indices or commodities, offering straightforward and passive investment options.
  • Mutual Funds, including multi-cap, large-cap, small-cap, and Equity Linked Savings Scheme (ELSS) funds, cater to various preferences.
  • Real Estate Investment Trusts (REITs) allow participation in real estate ventures without direct ownership.
  • Infrastructure Investment Trusts (InvITs) combine equity and debt, promoting infrastructure investment.
  • Liquid funds offer stability with short-term, low-volatile investments.
  • Private equity involves acquiring and managing companies before divesting them.
  • Explore secondary market shares, but diversify to mitigate risks and optimise returns.

 You can practise and learn the best ways to invest across asset classes with social investing platforms like StockGro.

Tip 3: Diversify investments across low-correlation asset classes to minimise portfolio risk

Investment diversification means spreading your money across different types of investments to reduce risk, similar to not putting all your eggs in one basket. Balancing risk and reward is easier with diversification, and spreading your investments can potentially increase returns without adding extra risk.

A diversified portfolio can offer protection during market volatility. While not foolproof, it can mitigate losses during rough periods.

Tip 4: Make use of 80C and 80D (deductions) to save on taxes

You can reduce your taxes as an Indian resident by deductions from sections 80C and 80D. Section 80C lets you save on taxes by investments in options like the Public Provident Fund (PPF), Equity Linked Savings Scheme (ELSS), National Savings Certificate (NSC), and life insurance premiums. Section 80D also helps you to save on taxes for health insurance premiums, securing your wealth and health.

Tip 5: Youngsters should invest 70-80% of their income

For young investors starting their journey, consider allocating 70-80% of income to investments. Tailor your asset allocation to your risk appetite:

  • Conservative: Prefers low-risk options like fixed deposits, gold, government bonds, or blue-chip stocks.
  • Aggressive: Comfortable with high risks for potentially high rewards, such as cryptocurrencies and small-cap stocks.
  • Risk-averse: Seeks a balanced approach, combining debt instruments with higher-risk options like stocks and mutual funds.

While being young may tempt you towards aggressive investments, remember to manage risks and maintain a balanced portfolio. Don't take unnecessary risks; prioritise balance and diversification.

Tip 6: Strategic Financial Planning for Life's Milestones

Establish financial goals for short-term and long-term needs such as education expenses, weddings, or travel. Allocate resources based on timelines and required amounts. Prioritise saving and budgeting to meet these goals effectively and ensure financial stability and preparedness for future expenses.

Tip 7: Invest in yourself: read at least one book each month

Did you know? Reading just 1.5 books a month can make you a super-achiever!

Commit to reading one book every month to invest in personal growth. Pick books that help you learn new skills, gain knowledge, or improve your mindset. Reading regularly boosts your learning, creativity, and ability to think critically. Set aside time for self-improvement to stay ahead in life and your career. It's like investing in yourself, bringing long-term benefits and opening up new opportunities. 

Tip 8: Limit debt to no more than 10% of your income

Borrow only up to 10% of your income to keep debt to a minimum level. Avoid excessive borrowing to prevent financial strain and ensure long-term financial stability. Prioritise saving and investing to build wealth steadily while minimising debt-related risks. 

Tip 9: Limit luxury spending to 5% to 10% of your earnings

Limit spending on luxury goods to 5% and 10% of your income. Prioritise saving and investing most of your earnings to secure your financial future and achieve long-term goals.

The bottom line

Sometimes, those get-rich-quick might sound tempting. But the best way to build up your money is by saving and investing regularly—and being patient while it grows. It's okay to begin with a little bit. The critical point is to get started; the sooner, the better. Make money, save it, and invest it wisely. And don't forget to protect what you've got with insurance and try to pay less in taxes.

 Disclaimer: This article has been produced on behalf of StockGro by HT Brand Studio. The content is for information purposes only and doesn't constitute financial advice.

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Published: 29 Mar 2024, 11:57 AM IST
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