Everyone wants to earn little extra cash that can help them fulfill their dream. What is better than an investment plan that can be beneficial in providing you market-linked returns if appropriately executed. With the returns offered by such an investment plan, you can secure your and your family’s future.
Although, there is a high risk of investing your hard-earned money. However, with proper investment planning, you can pull this off. With the help of the following tips, you can maximize returns from your investment plans:
Have A Diversified Portfolio
Almost everyone knows the importance of diversification. But, in the case of the bull market, this concept can easily get lost. If your stock allocation becomes large in this rising market, it will help your portfolio’s performance.
The bull market never lasts, and that’s a problem. The recent crash of Thomas Cook in the market should be a wake-up call to anyone who has ignored proper diversification in the last few years. Markets are unpredictable, and they can fall much more quickly than they rise. It is because of this unpredictability; it is advisable to prepare, and that is where diversification will help you.
Even if your stock allocation is doing good in the market, make sure that you maintain appropriate percentages of your portfolio in both cash equivalents and fixed-income investments. This will help you reduce the losses you’ll face on your stock allocation during a down market. Minimizing losses during a bear market is equally important as maximizing your gains in a bull market.
Let us say if you have planned to have 50% of your portfolio invested in stocks, 35% in bonds, and 15% cash. You must rebalance if your stock allocation grows higher than 50%. Rebalancing is a process where you return your portfolio to its original level of diversification.
Also, rebalancing is the same in a bear market. If your stock allocation has fallen to 30% due to the decline in the market, you can rebalance to increase that position. This will be advantageous as you will gain when the market recovers.
Focus On Tax-Efficient Investing
Tax on your investment earnings has a major impact on the performance of your portfolio. It is not easy to get rid of those taxes; however, it is possible to minimize investment taxes. One of the best ways to reduce taxes is by avoiding heavy trading. With trading, you will get capital gains, and with capital gains, you must pay capital gains taxes. These taxes, along with trading fees, can result in a portfolio that doesn’t perform well.
Instead, you should invest in tax-saving investment plans, and one such plan is ULIPs. These plans will not only provide you tax benefits under section 80C but will also give market-linked returns and insurance cover. ULIPs plans from reputable insurers such as Max Life Insurance offers you an insurance-cum-investment plan with added tax benefits.
Take Proper Guidance Of Investment Advisor
Take proper guidance before you start investing your hard-earned money in plans. An investment advisor has experience in the field of investment and can tell you what will suit you better than you can. However, many so-called “experts” will claim where the market is heading, but, they know nothing.
You must find an expert that has the proper knowledge and can guide you in the right way. If you want to be a successful investor and want to invest in the long-term, then you should learn how fake experts are different from real experts. This will not distract you from your investment goals and strategies, and it will help you in the long run.
With proper investment planning, you can maximize your returns and can take full advantage of the perks of investing your hard-earned money without worrying about the risks associated with it.