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World Financial Planning Day 2023: Five tips to become a crorepati

by Paul Morgan

World Financial Planning Day is observed on October 4 each year to raise awareness about the importance of financial planning. In a world where financial independence is crucial, it is essential for everyone to understand how to manage their finances effectively.

On World Financial Planning Day 2023, here are some tips for investors to follow for wealth creation:

1) Diversification of the portfolio: Portfolio diversification is a fundamental investment concept that involves constructing a portfolio that includes a mix of different asset classes such as cash, equity, debt, alternative investments, and commodities. By spreading investments across different instruments, investors can potentially minimize the impact of any single investment’s poor performance on the overall portfolio at any point in time.

“In simple terms, an investor’s two main tasks are to identify the asset allocation that best fits his or her objectives, profile, investment horizon, and circumstances, and to then ensure that they manage the inevitable ups and downs of markets and avoid making mistakes in times of market stress,” said Shiv Gupta, Founder, and CEO of Sanctum Wealth.

2) 50-30-20 Budget rule: This personal finance rule suggests that individuals should divide their income into three categories. 50% should be allocated for spending on needs, 30% on wants, and 20% on savings.

3) Balancing your debt and equity allocations: A 60:40 portfolio means that investors should have 60% in equities and 40% in debts. Risk tolerance and capacity should be considered before determining the allocation. Equity assets help increase the value of investments in the long term, while debt assets provide safety of money when markets are volatile.

4) Rejigging portfolio with increasing age: Personal finance experts suggest that investors should increase their debt exposure by 5% after ten years. As investors age, they should increase their exposure to debt instruments.

5) Increasing monthly investment with a rise in income: To become a crorepati, individuals should increase their Mutual Funds SIP (Systematic Investment Plan) annually. Experts suggest a step-up SIP, which automatically increases the SIP amount by a predefined percentage. For example, an SIP of ₹10,000 this year with a 10% step-up would mean that the SIP amount for the next year will increase to ₹11,000.

Mathpal suggests maintaining a 15% annual SIP step-up for ambitious ₹1 crore investment goals in 10 years.

It is important to note that the views and recommendations mentioned above are those of individual analysts and not of Mint. It is advisable to consult certified experts before making any investment decisions.

In conclusion, World Financial Planning Day serves as a reminder for individuals to be aware of the importance of financial planning and take steps towards achieving financial independence. With proper portfolio diversification, budgeting, balancing debt and equity allocations, and adjusting investments with age and income, individuals can work towards creating wealth and securing their financial future.

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