Do you have something on your mind that you wish to achieve at a certain period of time? Were you not able to meet your financial target you had earlier set to achieve the same? What would you do in situa-tions like these? Read on to know more…
Ever since Samar was 7 years old, his father Ramesh has been saving for his higher education. Ramesh wants his son to pursue a career in journalism from a university in the United States of America. Samar is now 14, and by the time he touches the age of 20, it would be time for him to go abroad. However, while evaluating his savings, Ramesh realizes that he is falling short of the financial target he had set for him-self. He now wants to catch up.
Many of us may find ourselves to be in such a situation, maybe now or maybe in the past. The mathemat-ical accuracy and the real-life performance of a financial plan are two very different things. You may have catered to every possible detail, but the discrepancies in the plan and the precariousness of life soon start to show, and sometimes, unfortunately, the corpus that we create falls short of the amount we need. The reasons for this shortfall can be many.
How to resolve this shortfall?
Very often, we are unable to make an estimate of what a goal may actually cost. In Ramesh’s case, it may have been possible that over the years there was a big increase in the fee of the university, the air tick-ets, the boarding and lodging etc. Also, the constant feature of inflation causes a decrease in the value of money that you may have collected over the years. There have been cases where people suffered a lost-job, a delayed promotion or an emergency expense that dug deep into their investments.
Nevertheless, it is not the end of the road. There are certain short-term investment plans that Ramesh or people sailing in the same boat can explore, that would give them good returns. Our financial plans gen-erally are about long-term planning. However, at different junctions of life, it is our short-term invest-ment plans that take us through. Short-term investment plans not only help us fulfil certain require-ments but can also play a key role in managing a shortfall in your investment corpus, that is a part of some long-term investments. Inflation continues to rise, making it more and more important for people to in-vest in options that offer much better returns than the traditional ways and means of saving. Many of us also look for a more low-risk portfolio.
Prioritize your Objectives
Therefore, having a specific objective of investment is imperative. If you too are aiming at the creation of wealth with the aim of manage shortfall in your investment corpus you must think of an increase in alloca-tion of your funds, but at the same time, you must be extra cautious about the risk factors.
Diversify the Investments
One of the first options that come to mind is equity. In the case of Ramesh, if he decides to raise the allo-cation towards equities, it may expose him to certain risk. He is at a stage where he is too close to his tar-get and so it may not be the best option for him. He, therefore, can consider other alternate options for investment. When you have a portfolio which is variable, it helps you cope better in a situation where one particular short-term investment plan doesn’t do as well as the others. Variation helps in balancing and compensating the plan. Investing in ULIP or Unit Linked Insurance Plan gives you the freedom to in-vest in equity, debt or any other investment instrument available in the market. As the plan is attached to the capital market it can offer flexibility.
Increasing the horizon of your investments can also help you in managing your investments. It is recom-mended that you hold your investments. Therefore, holding period is very important in an investment plan. It plays a key role when selecting a suitable investment choice. Ramesh needs an additional return from all his investments, but with a holding period of 5 years may not bring a very major change in the total corpus value. So, in turbulent times try to hold on to your investments as long as possible. Do not allow your everyday expenses to dig into your investments. Generally, the minimum lock-in period of a ULIP is 5 years, which is more than in the case of mutual funds but then it surely instils the orderliness of systematic and regular saving.
Save more and Pile-up the Quantum Regularly
Once you decide to save on a regular basis, you can then gradually plan to raise the quantum of your sav-ings as well. Here, channelizing the savings also becomes a crucial step. When you invest in ULIPs you re-ceive the dual benefits of investments as well as insurance. When you buy a ULIP, the company on your behalf invests towards your insurance and also an equity fund or debt or maybe both, depending upon your investment plans.
The best ULIP plans that are available in the market today also allow you the flexibility to swap between the unit funds that you hold. Depending upon your appetite for risk as well as your market-knowledge you can invest a bigger portion of your investments towards your insurance and a smaller portion in the market, or vice-versa.
When you wish to save more and more you need to be extra cautious about the taxes that you pay. Se-lect a plan that can help you increase your hard-earned savings by getting an income tax rebate under Section 80C of the Income Tax Act, 1961. Getting a tax exemption is one of the main reasons people con-sider ULIPs to be a great short-term investment plan. Not just Section 80C but even the maturity amount that you receive from your plan is exempted under Section 10(10D).
Most Indians are sensible when it comes to saving, but many of us are not so good at investing, even to-day. With the uncertainties of life, to have a fool-proof financial plan might not be a 100% possibility. As an investor, therefore, you need to research and must always exercise caution. While finding ways on how to manage the shortfall in your investment corpus weigh all your options and then choose an in-strument can help you bridge the gap between what you have and what you need.
Recommended Read: Best Long Term and Short Term Investment Plans