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9 golden rules for wealth management to generate best returns

Wealth management is a long term process that grows with time
Aug 21, 2018 / 08:28 AM IST

Vijay Kuppa

We all aspire to become rich, create long term wealth and live a happy and peaceful life. However, at times, we lack the discipline, right information and the plan required to reach our financial goals. One need to understand that wealth management is a long term process that grows with time. There are some golden rules that will always be relevant to your wealth management irrespective of your financial goals.

1. Know your real worth: This is the first step to create a solid financial plan for yourself. When you know your net worth, you also know your assets and liabilities. It offers you a snapshot of your financial position at a given point in time. Knowing your net worth allows you to confront the realities of your current financial situation. A review of your net worth helps determine where exactly you stand. It shows you the path of where you want to go in terms of personal finance. It also gives you a wake-up call if you are not heading in the right direction.

2. Spend less than your income: It sounds like a very old advice, but as they say, old is gold. To create wealth, you must have surplus funds to invest in the market. You should not simply exhaust all of your monthly income on pleasure instruments. We are not suggesting you to be overly frugal, but have a cautious approach while spending your hard-earned money. Keeping a track of your monthly budget is an excellent way to start.

3. Invest wisely with proper knowledge about the product: You need to have left over funds to invest. However, there are so many schemes and products in the market to invest in. Do not gamble your hard-earned money on products that are complex to understand. Decent quality of assets can offer you capital growth as well as income. You need to consider your risk appetite before investing in any financial instrument. We recommend that you should speak to a financial planner for an organised wealth management plan.

4. Don’t put all your eggs in one basket: This is an old saying, yet it is very apt while investing. You need to keep a standard variation in your asset allocation. Diversification of your investments has three key advantages:
a. It minimises the risk in your investments with diverse asset allocation
b. It helps you to preserve the capital and protect your savings

c. It removes the dependency on one source of income and helps you generate returns through other investment channels

5. Be patient: Investments are always subject to market risks. It is important to not panic with the slightest fluctuations in the market. You need to trust your investments, have patience and give it time so that it can settle and mature. Patience will ensure that you get the best returns for your investments. In case of market fluctuations or when you are worried about returns on investments, it is advisable to speak with your financial advisor before arriving at any hasty decisions. Always remember, volatility is an integral part of any investment and can be tackled with patience.

6. Monitor your investments periodically: Patience is good for any investment. However, only patience will not help you generate great returns. You need to keep a periodic tab on all your investments. It will allow you to find out which investments are performing and those which are not. It will help reshuffle your asset allocation, so as to get the best returns over a period of time.

7. Be safe, be insured: You can never be sure of what life has planned it for you. It is imperative to have a proper insurance cover while creating wealth. People purchase insurance to save taxes or as an investment, or both. However, it is important that you do not mix your investments and insurance. First, you need to have a proper coverage that will take care of your family and you in case of any emergency. Next, choose those insurance policies such as endowment or child plans that will help you reach your financial goals. In the end, buy plans such as unit-linked insurance policies (ULIPs) that will help you create wealth.

8. Plan your taxes: One thing is certain in finance: taxes will never go away. The rules, regulations and tax brackets will change according to time, however, taxation itself will remain. It will keep affecting your finances in every aspect. You need to have a very active approach in terms of dealing with taxes. Don’t wake up when it is the final week of filing your returns. Plan your taxes well ahead. Consult with a tax planner who will guide you to make necessary investments that will provide you a tax benefit. Understand other sections such as 80D (premium for health insurance) and 80G (donations and charity) that can help you avail tax deductions. Planning your taxes will not only save you from the chaos and hasty investment decisions, it will also help you save money.

9. Plan for retirement: Retirement planning is an important part of your wealth management plan. You need to invest in such a way that even after your successful professional life, you can have a steady source of income and continue building up wealth. You can also avail certain tax benefits. More importantly, you will have that peace of mind that you were always looking for!

The writer is Chief Business Officer and Chief Operations Officer at Orowealth
TAGS: #Planning
first published: Aug 21, 2018 08:28 am

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