Diwali also marks new beginnings and triumph of good over evil. It is a celebration of the day when Lord Rama returned to his kingdom Ayodhya after defeating Ravana. The festival is mainly associated with the worship of Goddess Lakshmi- The Goddess of Prosperity and Wealth. People pray for Financial Success, Financial Stability and Financial Security during Diwali.
Diwali also marks the commencement of the Hindu New Year and for a large part of India’s trading and business community, it is the beginning of new financial year as well. Thus, Diwali is considered as an auspicious time to make new investments, indulge in financial planning and purchase assets smartly.
As we celebrate Diwali, it is also our duty to learn from the festival and lead on to the path of financial freedom. Let us bring a correlation of Diwali to the field of investment.
In this write-up, we are going to discuss some of the most significant money lessons from the festival of Diwali so that you can ensure a solid plan for financial planning-
1. Clean Your Portfolio
It is a general trend that a few days before Diwali, we start cleaning up our houses, offices and other premises and dispose off old things so that we can enter a cleaner environment and give a fresh start to things in our life.
Similarly, you must apply this principle to your investment portfolio by rebalancing it from time to time. The best way to do this is to note down every asset and liability of yours. After this, you can check your investment portfolio to check how it is progressing. Check if it is meeting your investment goals and whether you will be able to achieve your desired goals within the time horizon decided by you.
You can also review your portfolio with the help of your investment advisor to seek their professional opinion so that you can do away with investments that are not performing well and invest the money in other avenues.
2. Goal-Based Investing
During the festival of Diwali, we purchase gifts for our loved ones taking into consideration their likes, dislikes, personality, age etc.
In the same way, when this principle is applied to the world of investments, it must be ensured that you keep in mind your goals, investment horizon, risk appetite and other factors.
When your goals are clear, it is easy to decide which investment avenue is the most suited to your goal. Goal-based Investing is very beneficial in the long run and is the key to proper financial planning. It helps you in deriving maximum financial benefits from your investments.
3. Advance Planning
Before the festival commences, we indulge in advance planning and buy new things for our house and gifts for our loved ones.
The same principle should be applied to our investments. When you start investing early, you get to enjoy the benefits of compounding and ultimately your retirement planning becomes easy. Thus, it is essential to make a solid financial plan in advance before investing anywhere. Ensure that you invest in safe and profitable investments so that you can make more profits from your hard-earned money.
4. Set Up an Emergency Fund
While there a lot of firecrackers being burnt in our locality, people also ensure that there are fire extinguishers around so that in case of emergencies, they can be used in case of any possible accidents.
Corelating it with investments, one should ensure that they must have a back-up plan, i.e., an emergency fund that can be used in times of contingencies. Today, mutual fund investments are so reliable that you can withdraw the amount invested by you within a few hours and use them for any emergencies that may arise.
Thus, you must look for investment avenues that help you in the time of uncertainties.
5. Variety Rewards You
We all choose a variety of clothes, sweets and other precious items so that we can get a flavour of different varieties and enjoy them in each way.
Similarly, one also needs to diversify their portfolio so that they can reap benefits offered by different companies and industries. A well-balanced portfolio means a combination of schemes that have varying risk and return profile. This helps investors in achieving financial balance and stability.
Diversification is key to successful investment and helps you to achieve profits even during bearish phases. So, avoid putting all your eggs in one basket and diversify to the maximum possible extent.
6. Dispel the Darkness of Financial Ignorance
Diwali illuminates our surroundings and dispels the darkness. Similarly, everyone must dispel their ignorance related to finances and investments and ensure that their financial planning process is smooth. Learn about financial concepts like cash flow, net worth, creditworthiness, risk appetite and investment options.
When you invest in the stock markets, you must read financial newsletters, newspapers, blogs and books related to finance, budgeting, savings and investments to hone your skills. This enables you to invest wisely and choosing correct financial products.
Choose light over darkness and knowledge over ignorance. So, keep your lamp of learning on forever.
7. Ignore Noise Pollution (Rumoured Investment Opinions)
A lot of people have realised that firecrackers cause noise pollution and do more harm than good. Also, they are not safe and can lead to accidents. So, it is essential not to burn firecrackers and avoid the consequent noise.
In the same way, you hear a lot of “noise” when it comes to investing. You may come across many rumoured opinions, hearsay advice, investment tips and recommendations from friends etc. It is highly risky to fall prey to such opinions as they can literally damage your investment portfolio.
You must understand that your investment must entirely depend on your financial goals, risk appetite and time horizon. You can take help of an investment advisor instead of making impulsive decisions based on hearsay advice.
So, this Diwali, do not let noise pollution affect your investments and avoid the bad noise!
Through this write-up you have learnt a lot about financial planning and its correlation to Diwali. You can spend you holidays by sitting back and thinking about your financial plan and how you can improvise your investments, budget and savings in the new year. Safeguard yourself and develop new investment strategies and if you need any help from a professional financial advisor, we are just a call away!
Team mastertrust wishes you a Happy, Safe and Prosperous Diwali!