[Exclusive Interview] This Financial Consultancy Firm Is Enabling Investors To Gain Financial Freedom With Intelligent Investment Decision

Recently, we interacted with Col. Rakesh Goyal (Retd), Certified Financial Planner & Founder at Lets Invest Wisely – a company that helps in managing an individual’s personal finances and investments and improves their relationships with money.

Q. What factors should Gen Z consider when determining the balance between PPF, mutual funds, and insurance

Determining the balance between PPF (Public Provident Fund), mutual funds, and insurance involves considering various factors, including financial goals, risk tolerance, investment horizon, and individual preferences. Here are some key factors that Gen Z should consider:

Financial Goals:

Define short-term and long-term financial goals. PPF is a long-term investment, while mutual funds can cater to both short and long-term goals.

Understand your risk tolerance. 

PPF is a low-risk investment, suitable for conservative investors. Mutual funds carry varying degrees of risk depending on the type (equity, debt, hybrid), while insurance products often have an element of risk mitigation.

Determine your investment horizon. 

PPF has a lock-in period of 15 years, which can be extended. Mutual funds and insurance plans may offer more flexibility in terms of investment duration. Consider insurance only as protection against loss of income due to untimely death, disability and disease

Liquidity Needs:

Assess your liquidity needs. PPF has a lock-in period, and premature withdrawals may incur penalties. Mutual funds and insurance plans might offer more liquidity options, but they also may have exit charges or surrender fees.

Consider diversification. 

Mutual funds, especially equity funds, provide diversification across various stocks or bonds. Insurance plans may have an investment component, but they also offer risk coverage. Returns on the insurance products are very limited

Evaluate how well your investments protect against inflation. 

While PPF returns are generally above inflation, mutual funds, especially equity funds, have the potential to provide better inflation-adjusted returns.

Tax Implications:

Understand the tax implications of each investment. PPF offers tax benefits under Section 80C, while equity-linked savings schemes (ELSS) within mutual funds also provide tax benefits. Insurance plans, too, may offer tax benefits.

Flexibility:

Consider the flexibility of each investment. PPF has restrictions on annual contributions, while mutual fund allow for more flexible investment amounts, both as lumpsums as well as in the form of regular investments as SIP

Insurance Needs:

If you have dependents, assess your insurance needs. Consider buying the term insurance to cover the risk of pre mature death, diability and disease.tive way to get higher coverage.

Market Conditions:

Be mindful of market conditions. Mutual funds are influenced by market fluctuations, whereas PPF offers fixed, albeit variable, returns.

Financial Literacy:

Invest time in increasing financial literacy. Understand the nature of each investment, associated risks, and potential returns. Make informed decisions based on your understanding. 

It’s important to note that there is no one-size-fits-all approach, and the ideal balance among PPF, mutual funds, and insurance will vary based on individual circumstances and financial objectives. Seeking advice from financial professionals can provide personalized guidance based on specific needs and goals

Q. What are some practical steps and strategies for Gen Z to start their investment journey and financial planning?

Here are some of the the practical steps and the strategies to start financial planning and investments

Set Financial Goals:

Identify short-term and long-term financial goals, such as buying a home, starting a business, or saving for retirement. Clearly define the purpose and time horizon for each goal.

Create a Budget:

Track your income and expenses to create a realistic budget. Allocate funds for essential expenses, savings, and discretionary spending. Use budgeting apps to help streamline the process.

Emergency Fund:

Establish an emergency fund that can cover six months’ worth of living expenses. This fund provides a financial safety net in case of unexpected expenses or loss of income.

Debt Management:

Pay off high-interest debt, such as credit cards, as quickly as possible. Prioritize debt repayment to free up more funds for savings and investments.

Understand Risk Tolerance:

Assess your risk tolerance to determine the types of investments that align with your comfort level. Consider factors like age, financial goals, and ability to withstand market fluctuations.

Start with Small Investments:

Begin your investment journey with small amounts. Increase the amount as you start understanding the nuances of investments. Go for top up options with increase in your salary to contribute more towards your investments

Diversify Investments:

Diversification helps manage risk. Consider a mix of asset classes, such as stocks, bonds, and gold, to create a well-balanced portfolio. Exchange-traded funds (ETFs) and mutual funds can provide various options of diversification.

Regularly Review and Adjust:

Periodically review your financial plan and investment portfolio. Adjust your strategy based on changes in your financial situation, goals, and market conditions.

Stay Disciplined:

Stay disciplined in following your financial plan. Avoid impulsive decisions based on short-term market fluctuations. Patience and consistency are key to long-term financial success.

Seek Professional Advice:

Consider consulting with a financial advisor for personalized guidance. A professional can help you develop a comprehensive financial plan tailored to your specific goals and circumstances

Q. How do early investment and financial planning impact long-term wealth accumulation for young investors?

Early investment and financial planning can have a profound impact on long-term wealth accumulation for young investors. Here are several ways in which these practices contribute to financial success over the long term:

Compounding Returns:

Time is a powerful ally when it comes to compounding returns. The earlier you start investing, the more time your money has to grow. Compounding allows both the principal and the returns on your investments to generate additional returns over time. SIP investment of Rs 5000 per month creates a corpus of Rs 3.2 crores over a period of 40 years with 10% RoI.

Long-Term Horizon:

Young investors typically have a longer investment horizon before major financial goals like retirement. A longer time frame allows for a more aggressive and potentially higher-yielding investment strategy, as there is more time to recover from market fluctuations.

Risk Tolerance:

Young investors often have a higher risk tolerance as they have more time to recover from market downturns. This enables them to consider investments with higher potential returns, such as equities, which historically have outperformed other asset classes over the long term.

Financial Discipline:

Early financial planning instills financial discipline and responsible money management habits. Setting a budget, saving consistently, and investing regularly become ingrained behaviors that contribute to long-term financial success.

Informed Decision-Making:

Early financial education and investment experience help young investors make informed decisions. Understanding various investment options, risks, and market trends empowers individuals to make strategic choices that align with their long-term goals.

Adaptability to Market Changes:

Early investors have the advantage of adapting to market changes and incorporating lessons learned over time. They can adjust their investment strategies based on changing market conditions and their evolving financial goals.

Wealth Transfer and Generational Impact:

Early wealth accumulation can lead to greater financial stability not only for the individual but also for future generations. Building a strong financial foundation early in life can contribute to positive generational wealth transfer.

Faster Recovery from Financial Setbacks:

Financial setbacks, such as job loss or unexpected expenses, are easier to navigate when you have accumulated savings and investments. Early financial planning provides a safety net, allowing for faster recovery from unexpected challenges.

Increased Confidence and Financial Independence:

Early financial success builds confidence and a sense of financial independence. Young investors who achieve early milestones are better positioned to take calculated risks and pursue opportunities that can further enhance their wealth.

In summary, early investment and financial planning offer a unique advantage to young investors by harnessing the power of time, compounding returns, and strategic decision-making. Starting early lays the groundwork for long-term financial success and facilitates the achievement of significant financial goals.

Q How can PPF be a wealth-creation and tax-saving tool for this Gen Z with Let’s Invest Wisely?

As brought out earlier, the PPF is a safe investment with sovereign guarantee with tax benefits under section 80 C. As of today, GoI gives 7.1% annual interest on the invested corpus and this RoI gets revised every quarter. Since its a EEE scheme with no tax on maturity amount, its considered to be good investment option for the conservative investors. PPF account can be opened by investors in most of the banks and not necessarily go through the process with Lets Invest Wisely.

Q. How can Gen Z leverage the expertise of LIW through mutual fund investments?

Lets Invest Wisely is more than 5 years old company and is being run by Col Rakesh Goyal(Retd). He is an Alumni of BITS, Pilani and a Certified Financial Planner, highest qualification worldwide in the field of Personal Financial Management. He has been dealing in the financial markets for the last four decades and helping out people in management of their personal finances. 

The USP of the company 

• Main focus remains on making people understand various aspects of investments through mutual funds keeping in mind their risk profile and financial goals and help them achieve these goals in the given time frame

• Provide personalized service, one to one keeping in mind the client’s requirements 

• Mutual Fund investments are linked with each of the financial goals and can be tracked in real time through our mobile App

Q. How can insurance complement other investments and contribute to a well-rounded financial portfolio for Gen Z through LIW?

In our understanding, the insurance is meant only to provide protection against the loss of income due to untimely death, disease and disabilty of an individual. It’s not an instrument for investments. At LIW, we provide only the term insurance to protect the individuals against loss of income as discussed above.

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