Steps to Take For Capital Appreciation
Investment is crucial for financial stability in the long run. There are many people who invest for capital appreciation. It refers to the increase in the market price or value of an investment.
Investing also helps in saving taxes and brings one closer to their financial goals. Planning your finances is essential so that you are safeguarded against any uncertainty. For instance, opting for a health insurance policy should be part of your financial planning. It is necessary to protect your hard-earned money from draining out if a medical emergency occurs unexpectedly.
Having a proper understanding of financial jargons is of utmost importance. Hence, we aim to give you useful information on what is financial planning, the various ways of financial planning and some tips for investing for capital appreciation.
What is Financial Planning?
Financial planning involves the creation of a comprehensive plan for allocating money in different assets, attaining financial goals through savings and managing expenditures. Investment is considered the best approach towards effective financial planning.
An individual’s financial goals may be short-term goals like purchasing a vehicle or long-term goals like retirement. Financial planning impacts every aspect of personal finance, whether it is taxation, insurance or attainment of financial goals.
Types of Financial Planning
Let us take a look at the different types of financial planning:
Investment Planning
The significance of investment is different for different people. One can aim for achieving high returns by investing in various financial instruments such as mutual funds, fixed deposits, equities, debt securities, etc. Also, by investing in real estate, investors can look forward to sound returns through rental income and capital gains.
Cash Flow Planning
Cash Flow refers to movement (incoming and outgoing) of money during a period of time. It is advisable to keep a check on your income and current expenditures while estimating your future expenses. This will help you build a financial buffer that will serve as a cushion during emergencies.
Insurance Planning
Many events that happen in life are unpredictable. Even illnesses come unannounced. This is why having a health insurance cover is essential. Moreover, the healthcare costs in India have skyrocketed and new ailments are posing health risks for people, both young and old. A health insurance policy will minimise the burden of huge medical expenses.
Tax Planning
For minimising your tax liability, you can choose from the numerous tax-saving instruments which are available. Selecting a good investment option will not only help you get sound returns but also save money through tax deductions and tax exemptions. For instance, you can avail tax deduction up to Rs 75,000 on the premium paid for a health policy which covers your family (self, spouse and dependent children) and senior citizen parents.
Retirement Planning
Life can be challenging after retirement as there arises a greater need for a stable income-source. This is why it is important to plan for retirement at an early stage in one’s life. Nowadays, there are various schemes that have been designed to guarantee steady returns for comfortable retirement. It will also help one stay financially protected against unforeseen expenses such as medical treatment.
Conclusion
Capital appreciation is the difference between the sale price and purchase price of an investment, calculated at the time of disposal of an investment.
Capital appreciation occurs in various types of investments viz. mutual funds, gold, real estate, etc. Some important facts to keep in mind are:
- One can invest in an asset class for capital appreciation or earning regular income
- Capital appreciation may occur over a short period of time for asset classes such as equities
- It may also occur over a longer period for asset classes such as real estate property
- There are various factors for Capital appreciation. For example, capital appreciation in commodities like gold depends on demand and trade whereas in case of equity shares or mutual fund, the financial performance of the company is a key factor.
Sound financial planning not only involves choosing right investment options but also monitoring the progress. Opting for secure investing schemes and being prudent can lead to higher gains with minimum losses for an investor. It also becomes essential to equip oneself with the right knowledge to make wise decisions.
Protect yourself from financial impact due to medical emergencies. Choose health insurance policy from Care Health Insurance that comes with several Sum Insured options and benefits such as no claim bonus.
Disclaimer: The information above is just for reference.
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