Here's what Diwali teaches your finances

Publish Date: November 6, 2018

The most awaited festival of lights for all Indians is right here, bringing the joy of festivities to every household. Homes full of laughter, variety of snacks and sweets, visits from friend and relatives, bursting of firecrackers brings to life the spirit of Diwali. Along with all this fun and frolic, this festival teaches us some important financial lessons which can be summed up as below:

• Diversify Your Portfolio

  As we buy new clothes, appliances and different gifts for our family members, so should we add new stocks or financial products in our portfolio? As the famous saying goes “Don’t put all your eggs in one basket” – your portfolio should have a variety of products such as stocks, mutual funds, gold or bank fixed deposits, to balance out the returns earned. The percentage of allocation would depend on your risk capacity, age and future goals.

• Start Early
  With children and office goers getting maximum holidays during this festival, many people plan their vacations at this time. Planning of these holidays are usually made early to take the benefit of early bird discounts and various deals. In the same way, financial investments will need a lot of planning and research by you. Mutual funds and stocks have always given better returns in the long run, so the key is to start early and stay invested for a longer period. Learn more about how to choose a mutual fund scheme.
• Protect Yourself

  Diwali brings in the excitement of bursting fire crackers and lighting beautiful oil diyas all across the house. While everyone is dealing with fire, it is important to take care and protect yourself from any mishap. Likewise, financial planning is viewed as overwhelming and scary especially if you tackle your portfolio on your own, as one small mistake might cost you dearly. In such cases you need to acquire the necessary knowledge or take the help of professionals such as financial advisers or brokers to manage your portfolio. Know more about how to create a financial plan.

• Clean Up Your Portfolio

  The beginning of Diwali is marked with the cleaning of the house. Old unwanted stuff is discarded to make a place for new things. In the same way, you need to review your portfolio on regular basis and make appropriate changes depending on the financial circumstances. With the introduction of long-term capital gain tax on stocks and equity mutual funds in current year’s budget, many people decided to sell their stocks before 31st Jan 2018 to save themselves from capital gain tax. Accordingly, decisions to change from fixed deposit or PPF to other products with the changes in the rate of interest, or change from stocks to Gold during volatile times must be taken.

• Worship Your Wealth

  During the festival of Dhanteras, we worship Laxmi - “The Goddess of Wealth”. Likewise, financial planning is all about wealth creation. Money yields more money. The key to creating wealth is in reinvesting. Part of the return earned on your investment should be used for your needs but a part of the same should be reinvested as it will yield more returns thus creating wealth.

This festival, apart from bringing happiness teaches us many financial lessons. Let us take time out and plan our finances.

Also read:  

• Difference between Financial Planning and Wealth Management
• Getting familiar with market-related concepts
• What is ELSS?