How to save your hard earned money? Do you have an investment plan? Here are some tips to select appropriate investing options to retire wealthy.
Traditionally, there are 3 investment options available. The golden rule is to diversify your portfolio among all the options depending upon your risk appetite, earnings and the time span you let the assets to grow. The diversification balances your portfolio between the risk prone ones to the conservative ones and thus preventing heavy exposure of wealth in a single asset class.
1) Equity Shares
It is, basically, the most common asset class where people put their money because it has
high return on investment, but at the same time, involves substantial amount of risk. People buying equity shares of a company are legally part of the company and thus profit to the company is entitled to them. People who are younger and at the beginning of their career, having higher risk appetite can allocate considerable amount in this class. But people who are about to retire in a few years can limit their exposure, as it is highly risky in their part.
2) Bonds, Mutual funds, Savings A/c
Bonds are securities that people can buy from governments, private companies, etc and the issuer of
the bond is obliged to pay the lender. It involves less risk appetite because of its lesser rate of return. Similarly, savings account also is a good option for investment with less risk. Since the return on investment is less, it is savvy to expose only a part of your wealth in this class. But again, it depends upon ones risk appetite and time horizon.
3) Real Estate
Real estate is yet another area which one should have in their portfolio. Real estates are tangible assets
that provides more stability to a portfolio. But it requires long time period to grow your wealth.
One more asset class getting popular these days are commodities. For instance, gold and silver come under this class and it is good to include them in your portfolio as well. Gold is considered to be the safe haven for investors during inflation, because during inflation gold rate will increase as well, preventing your portfolio from falling off the bridge.
The best investment strategy is to invest in all said classes. And invest only your risk capital that is the money not set aside for emergency needs and monthly expenses.