Boost your Investing IQ

Boost your Investing IQ

Everyone has personal dreams. Be it owning car, a house, your children going good university, or going on a vacation.

But the majority of people are unable to follow their dreams and give them a specific shape.

The reason for this is, they do not know what they should do to make their dreams a reality.

As a result, all those dreams are left open to chance.

What you have to do is pen down these personal dreams as financial goals and work towards a plan to achieve them.

For example, if you want renovate your kitchen

Consider it a goal by setting a definite time period to it (say in the next 2 years) along with the cost associated with it (say $20,000).

Now, how to achieve that goal?

By following disciplined saving and proper investment planning.

For selecting the best investment options you need to take into account the following:


First of all, you need to consider inflation as one of the most important factors that many do not take into significance and it can be defined as the overall general upward price movement of goods and services in the economy. It causes money to lose value.

For example, a few years back you could get more fruits for $10 as compared to today.
So, keeping your savings in the form of idle cash at bank does nothing to mitigate the impact of inflation.

5% Rule

In fact, your cash loses its inherent value over time due to inflation.
Putting your money in a regular savings bank account won’t help either because of the lower interest rates.

If the rate of inflation is 2% and the interest rate of bank savings account is 1%.

So your money will actually decrease in value over time instead of increasing or in the best case, its inherent value will remain the same.

You have to find investments that earns at least 5% after-tax to ensure it increases in value.

Risk and Reward

Placing your money in investment vehicles like Stocks and Mutual Funds gives you a much better chance of outpacing inflation over a number of years.

Don’t forget, it includes an element of risk, but risk and reward go hand in hand. Higher the risk, higher the rewards.

Seek for a Professional Advice

What is good for one could be bad news for others. Ignoring this fact will land you in trouble. 

Investing in an instrument that worked for your friend may not always work for you. It could actually spoil your friendship.

Never ever go for an investment blindly just because it was advised by your friends or family.

Remember it is your personal finance here. Your personal circumstances (age, risk appetite, goals etc.) are not the same as your friend’s. So how can the same kind of investment work for both?

Stay Focused

What if something uncertain happens and you either lose your life or ability to earn? What will happen to your family and goals then?

What-ifs shouldn’t prevent the fulfillment of your goals or hamper them in any way and you have to stay focused

A safety net for all such risk is Insurance. Never forget to have a good insurance plan in place for protecting your family and goals.

Investing and insurance are two entirely different ball games and you should take care of them separately. But always prioritize insurance over investment.

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