How to Get Richer in 2013

In our attempts to get money rich by investing, the big roadblocks that we often face are local market meltdown, high inflation, global recession, our personal fund shortages etc. There are so many variables here that it is difficult me to list down all in one article. But this does not mean that our endeavor towards getting richer this year should stop in any way. There are ways to manage these problems and this is the reason why I wanted to share my philosophy with my readers. I cannot claim to make you beat Buffett with my suggestions but at least they are relevant and following which you can see your wealth grow year after year.

There will be people who will say that they cannot start planning in 2013 as its already too late. But let me tell you that when the objective is to become ‘richer this year’ and not ‘rich’ I think there is not better time to start than today. Target is to make our future prosperous and make our future generation financially more independent than us. For sure there will be hurdles and losses during the process of getting richer, but let us make this as our learning process. With failures we will become wiser in managing our money.

The way market in 2012 has ended, it has brought lot of hope in share market investors. Not many will debate my feeling that at least this is not the right time to flee the share market. It will not be wrong to say that the way policies are now getting tabled and approved in the parliament, market will see more ups in coming days.

The persistent problem of the industry has been the consistently high interest rates. High cost of borrowing is eating away the margins of the industry which is getting negatively affected on companies earnings. But high inflation rates is not helping RBI to ease the lending rates. Not only on the industry but high interest rates are also tough on the real estate market. High interest rates are also keeping away the home loan takers away from banks. On one side (within country) the interest rates are high keeping industry and real estate market in tenterhooks, and on other side Indian Rupee is also weakening which is also keeping Indian investors to invest outside India.

In consideration with the positives and negatives that we have at the starting of 2013, I try to suggest some idea which will help us to be richer in year 2013. Some quick tips that will you help get richer in 2013 is discussed below:

1. Start saving and investing 25% of your monthly Income from today

Key to creation of wealth is not what stock or real estate you are buying, but how much time you giving your money to stay invested. For example, suppose you are 40 years of age and you start with just Rs 5,000 investment per month as SIP in mutual fund for 20 years (by time you are 60) which yields 15% return per annum, will let you accumulate Rs 70 lakhs. Do I need to say you more, did you ever realize that just Rs 5000 can make you almost become a crorepati.

2. Contribute maximum to Provident Fund retirement scheme

Retirement linked savings scheme like provident fund yields 8% interest and best part is, if you are contributing Rs 5,000/month then your company will also contribute Rs 5,000/month. This way you can imagine that how much is the yield of your provident fund savings scheme.

3. If you are close to retirement keep it simple

If you do not so much time like 20-30 years for investing them my suggestion will to keep it simple. Go for index funds or exchange traded funds.

4. Do try to beat Mr. Market

Lot of experts and fund managers have tried to beat Mr. Market but market has outperformed one and all. So the best option for a common man to keep your investment portfolio well diversified between different asset class. Careful asset allocation should be our focus. Diversification of your funds among equity, mutual funds, risk free security, real estate, gold etc shall be done judiciously.

5. Do savings automatically

I will suggest the best way to save maximum money is to start recurring deposit plan.

6. Buy stocks of sectors which are out of favor of mutual funds

The sectors whose stocks mutual funds are buying is bound to get overvalued. And sectors which mutual funds are avoiding is most likely to be available at bargain price levels.

7. Pay your credit card bills within interest free period

Credit card debt is the costliest debt on this plant. Making delayed payment of credit card bills is only next to crime.