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Some Basic Rules to get Optimal Returns on Investments

Lay Down a Financial Map

Before you make a financial decision, sit down and take an honest look at your entire financial situation. The first step is to figure out your goals and risk tolerance, either on your own or with the help of a financial planner.
Evaluate Your Comfort Zone in Taking Risk

Every investment involve some degree of risk. The reward of taking risk is the potential for higher investment returns. If you have a long term financial goal, you are likely to get better returns by investing in equity funds rather than restricting your investments to less riskier assets like FDs.

 

Always Consider Risk of Inflation and Taxes

The biggest concern with less riskier assets is inherent habit of generating negative real returns.

 

Proper Mix of Investments

A mix of asset classes like equity funds and bonds, along with cash can help you to optimize your returns and reduce your risk of losses during different market conditions.

 

Multifariousness

Always reduce your overall diversify your funds even within an asset class that should help risk considerably.

 

Consider Rupee Cost Averaging

Regular or periodic investments by way of SIP or STP will help you to invest in different market cycles and generate better returns. This strategy can be used especially if you are investing for the long term and in equity funds.

 

Rechecking

This helps bring your portfolio back to your original asset allocation plan in case it deviates. This will help you book profit on the assets that have performed well and also buy assets cheap during slowdowns.

 

Think Twice before Investing in Junk Schemes

Every extra amount of return that is above the market return comes with some extra risk. So junk schemes which offer to double your money within a short span of time. Invest only in products from institutions regulated by the government.

November 30, 2014

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