Why income tax saving should not be the only goal of a best investment plan: While making an investment plan, one of the things that is generally given a lot of attention is tax saving. While comparing two or more investment options, it is important to keep in mind the tax benefits available on them. But this does not mean that investment decisions should be taken only keeping tax saving in mind. The best investment planning can be one in which along with tax saving, many other important things are also carefully considered. We are going to discuss some such important things here.
Comparison of risk and return
Before choosing any investment option, it is important to see the return as well as the risk involved. It is possible that after adding tax benefits in any investment option, the returns seen may be quite high. But if the possibility of better returns is associated with higher risk, then you need to be cautious. For example, some equity funds may look very attractive for high return potential and tax savings. But before investing in them, you also have to keep in mind that investing in the stock market is risky and returns are not guaranteed.
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Do not disturb the balance of your portfolio
If you have decided keeping in mind your risk profile, how much part of the portfolio to invest in which asset class, then it is not right to distort that ratio just for the sake of tax-saving. For example, if you have decided keeping in mind your age, financial situation, investment goals and risk profile, that only 30 percent of your portfolio is to be invested in equities, then do not exceed this limit just for the purpose of tax saving. Do it. Rather, consider how to achieve better returns by keeping your portfolio diversified and balanced.
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Don't lose sight of long term goals for short term goals.
If you have set a long term goal for your investment, then it is not right to lose sight of it just for the sake of tax saving. For wealth creation through continuous and regular investment, it is also important that your invested amount remains safe for a long time. If you invest your money in the wrong place to save tax temporarily, your objective will remain unfulfilled. Therefore, while deciding on investment related to tax saving, make sure that it should move towards your long term goal and not deviate from it.
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What is your investment philosophy?
To make a better investment plan, your investment philosophy should also be right. While taking any investment decision, if the only question in your mind is “how much tax will you save”, then you need to adjust your investment philosophy. It would be better if while investing you think instead of just worrying about tax savings, “Will this investment help me build a strong portfolio that will meet my long-term financial goals?”
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Bring flexibility in investment strategy
To achieve better returns in the long term, it is better to include market-related assets in your portfolio. But while doing this, it is better to maintain flexibility in your strategy instead of following a fixed strategy. In fact, while assessing the risk and return in any investment, it is important to keep in mind your risk profile as well as the broader economy, market conditions and fluctuations. Therefore, keep making changes in your strategy as per the need over time, only then you will be able to take advantage of the right investment opportunities and keep pace with the times.
Seek professional help if needed
If you find yourself trapped in confusion while making an investment strategy or making any changes in the already decided strategy, then instead of taking any financial decision based on guesswork or intuition alone, seek professional help. A qualified financial advisor can help you a lot in taking the right investment decision.