You will have different financial goals during your lifetime. These goals are segregated as short, medium, and long-term. Generally, short-term plans are those which are due within two years. Medium-term financial goals must be met within two to five years. All financial objectives beyond this period are classified as long-term goals.
Irrespective of your life stage, you may easily achieve your financial objectives through meticulous planning and following sound investment strategies. The investments depend on age, current financial situation, and risk appetite.
The purpose of the financial objectives determines your choice of investment product. If you are retired without financial commitments and have some spare savings, you may invest in schemes offering an assured monthly income.
Some of the most common safe investment avenues include fixed deposits (FDs) and government securities. On the other end are risky products such as equities, company debentures, and commodities. If you are completely risk-averse, investing in government securities is the safest option, irrespective of the duration of your financial goal. However, the returns on such investments are not very high and often inadequate to meet the inflation rate. Nonetheless, if you choose to invest in government securities, you should invest a large capital and start early in your career.
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Let us now study the appropriate investment avenues to meet various financial objectives.
Short-term goals
When you invest in debt instruments, you cannot achieve capital growth. You may be able to grow your capital if you re-invest the interest, which gives it the power of compounding. However, it would help if you remembered that interest investment would be lower because of the declining market conditions, which reduces your return on investment (ROI). Nonetheless, investing in debt instruments to meet short-term goals is recommended because even if you are willing to assume higher risks by investing in other options like stocks, it may result in capital erosion in the short term.
Medium-term goals
Planning for medium-term goals comprises a combination of secured and high-risk financial instruments. The high-risk products provide the advantage of capital growth. On the other hand, safer financial instruments ensure periodic income. Opting for a balanced mutual fund scheme is a good option to invest and meet your open a demat and trading account online with a reliable broker. The trading account is used to buy and sell shares on the stock exchange. Like a regular bank savings account, a demat account electronically holds your investments at a single location. When you make a purchase, the shares are credited to this account, and when you sell the claims, the number is debited from your account.
When you invest in equities, you have several benefits. Firstly, you may earn periodic returns through dividends, rights, and bonus issues. Furthermore, as the prices of the shares increase, you enjoy capital growth.
To earn high ROIs in the stock market, complete the online demat account opening formalities today and start investing.
