I cannot invest because I can’t afford it

Investing is the kind of thing that the longer you wait to get started, the more opportunity for future returns you could be giving up.

Procrastination hurts your investment return

Investing is the kind of thing that the longer you wait to get started, the more opportunity for future returns you could be giving up.

If you cannot invest because you can’t afford it then there are some other steps you work on first. Every move you make today is something future you will thank for. There are some important points you must consider and get ready to start investing:

Track your money and make a plan

You don’t have to track eve single piece of money you spend you need is a high-level plan so that you know what’s coming in, and whether you’re working toward your goals. There’s no perfect answer for how to find more money in your budget for investing and saving. But you must start where you are and if you can ‘pay yourself first

Start your emergency fund

From cell phones dropping to medical emergencies, financial emergencies happen, and it happens more usual nowadays. But if you’re financially prepared for them then that’s when your emergency fund takes the stage. You should have at least saved for three to six months. Start with a goal of 1 or 2 months' pay to give you a little cash cushion in the meantime call it an emergency fund.

Pay off debts

There are many different types of debts. There are credit card debts, student loan debt, etc which are usually at high-interest rates. You must pay it as soon as possible you can. If some debts are left with high-interest rates, then it would become difficult for you to focus on investment as you have high debts.

These are a few points you should consider before making any investment if you cannot afford to invest.

Is PF better than Mutual Funds?

Provident fund (PF) and Mutual fund (MF) are two such investment options available to investors in India. However, these two products should not be compared as they serve different purposes.

Is PF better than Mutual Funds?

Firstly, let us understand the basic meaning of these Funds. A mutual fund is a company that brings together money from many people and invests it in stocks, bonds, government securities, etc.

A Provident fund is a retirement savings plan for salaried employees who work for a company with 20 or more employees.

Here is the basic difference between these funds -

• The return generated from a mutual fund scheme is dependent on the performance of the underlying asset where the turn on PF is computed on an annual basis (decided by the government of India).

• The tax treatment of mutual funds depends upon the kind of scheme and period of investment.

• Mutual funds have no definite fixed tenure of holding, investors can choose to exit by selling their mutual funds units. Whereas Provident fund has fixed investment tenure.

• Mutual funds offer a high degree of liquidity. Whereas Provident funds are long-term deposit options with a low degree of liquidity.

• The main objective of a mutual fund is to accumulate the investment of each investor in a pool and cumulatively invest the amount in a financial instrument, to generate high returns. Whereas the main goal of a provident fund is to create a long-term saving corpus, over a long tenure.

PF is for fixed tax-free income and has no volatility except for a change in the rate every year. Mutual fund, on the other hand, provides an option for a debt fund as well an equity investment.

How many Mutual Funds are good enough in a portfolio

All investors are different, every investment is unique. Before deciding on the number of mutual funds, you have to identify your financial goals and invest accordingly.

How many Mutual Funds are good enough in a portfolio

There is no perfect portfolio that would work for everyone. You have to be prepared by doing proper research and finding out what works for you.

Therefore, unless you are very well versed with the markets and have expertise in mutual funds, a good rule of thumb would be to own-

• In a debt category, one or two funds are good. You must reflect on your time horizon and associated taxation.

• You can select one index fund or a combination of two funds in a large-cap category. If you add another fund, there will be a high level of overlap in the large-cap portfolio.

• You should invest in two small-cap and two mid-cap funds. Usually, the overlap in these categories is low if the chosen funds have a different strategy (value/growth).

• In the case of a foreign mutual fund, one fund is fine as far as the underlying is an index of a foreign country (NASDAQ/NYSE).