By- Rahul Jain, Head, Personal Wealth Advisory, Edelweiss
Let this Diwali be about the right type of fireworks, the ones that can skyrocket your finances to the next level. Here’s a five-step guide to achieve just that:
- Pledge to first invest and spend afterwards
With in-your-face festival season advertisements, it’s easy to fall prey to all the discounts on goodies you always wanted for yourself and your family. While gifting is a good idea, make a pledge to first invest for your goals and the goals of your family. Some of the important family goals include:
- Child’s education and marriage
- Larger house / family car
- Retirement planning
The family will be more grateful over the long-term for the investments that go towards these goals than any symbolic gift.
- SIPs – small firecracker, big impact
Think of SIPs or systematic investment plans as the small firecrackers that leave a big impact. That is exactly what SIPs can do for your finances over the long-term.
If you start a Rs. 5,000 SIP this Diwali over 10-year tenure, your portfolio can skyrocket to Rs. 11.5 lakhs @12% CAGR (compounded annualized growth rate).
The money can prove handy for achieving some of the aforementioned goals, if not completely, then partially.
- Settling old debts
Often, individuals take up investing activity at the cost of other priorities like setting long-standing debts, for instance.
Older debt, particularly, the expensive kind, which bleeds your finances in terms of high interest payouts, must be settled on priority. Paying off debt not only saves you money that would otherwise have gone towards interest payments, it also takes a burden off your shoulders. Indians being debt-averse must aim at settling some of their pending debts this festive season.
Below is a 4 –point agenda you need to keep in mind before repaying any loan
- Buy Insurance
One of the best gifts you could give your family is insure their future from any uncertainty. A good way to go about it would be to invest in a group medical insurance policy for your family. You can always opt for signing up for a plan when you get your Diwali bonus. It may be noted that you can keep on adding new members by paying an extra premium on top of the family health insurance plan you purchased.
Another viable option investing, this Diwali would be to choose a good general insurance scheme. These offer holistic protection against everything except life. It covers everything from cars, health, house, travel etc. So, if you are looking at getting a holistic insurance apart from life insurance, you can get one done this Diwali.
- Invest in gold ETF, rather than jewelry
It is fairly common for families to purchase gold in Diwali for gifting or even symbolic reasons.
This year buy gold as usual, but not as jewelry – instead explore a more hassle-free method of gold-buying via gold ETFs. By investing in gold ETFs you get ownership in gold and this investment is listed on the stock exchange.
Gold ETFs are superior to physical gold investing for the:
- Convenience: There’s no physical delivery or storage problem in Gold ETFs – only prerequisite is a brokerage and demat account.
- Quality: Quality of gold in the gold ETF is governed by Securities and Exchange Board of India (SEBI) regulations. It is mandated by SEBI that purity of underlying gold in gold ETFs must be 0.995 fineness and above.
- Resale value: Gold ETFs can be sold easily on the exchange at the prevailing market price. With physical gold, the jeweler will buy back gold at the prevailing rate only if it was originally purchased from him, else he will buy it at a discount.
Clearly Diwali – which marks the advent of a new year – can be a great time to make a fresh start in other areas like the family’s finances, goal-planning, settling old debts and gifting gold of a different shape.