If you want to start planning for your future but don’t know where to start, then the following rules may be of help you begin.


  1. Identify your financial needs and goals: The starting point of a sound investment plan is a clear understanding of financial needs and goals. The same is required for determining the tenure of your investment (investment horizon).
  2. Save before you spend: An increasing lifespan coupled with increasing inflation means you must err on the side of caution while planning your retirement. To sustain yourself for 20 years in retirement, you should invest at least 15% of your income every month.
  3. Right investment horizon: If you plan to invest in equity (or even equity mutual funds), 5 years is the minimum time frame you should have in mind. This is because equities are inherently volatile and may not yield desired results in the short term.
  4. Keep your portfolio simple: Having too many funds in your portfolio doesn’t mean a well diversified portfolio. Sometimes more number of funds only leads to duplication and makes the portfolio difficult to manage.
  5. Review your portfolio at least once a year: Realign the duration of investments with your goals. Throw out under performers and add more of high performers. Recheck the asset allocation of your portfolio. All this at-least once a year.
  6. Pay your credit card debt: Credit card debt is expensive and should be paid for at the earliest possible. In case you have to roll over your credit card bill, do not roll it over more than 4 times in a year. If you do it more often, you could be headed for a debt trap.
  7. Life cover: You should buy a life cover at least 6 times of your annual income. Term plans make it possible to take a large cover at a low price. One needs to take additional insurance in case one has liabilities.
  8. Check fund management expenses: A higher expense could prove costly in the long term. Even a 0.5% difference in the expense can widen the gap to 10-15% over 20-25 years. While fund expense ratios could be different across different types of schemes, you should be cautious of a high disparity between expense ratios of two funds of a similar category.
  9. Account for inflation: You must consider inflation while calculating your future financial needs. This is especially important for long term goals such as child education and retirement. An 8% inflation rate may appear high at the moment, but the prevailing consumer price inflation is actually higher at over 9%.
  10. Keep a contingency fund: You should have approximately 3 months’ worth of your living expenses in a contingency fund, which can be accessed at short notice. This way, you will not be forced to break other investments in an emergency.

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