The consistent rise in inflation and the gradual decline in savings have turned investments into an absolute necessity. Slowly and steadily, the culture of managing finances via the investment route has begun to embed itself in the popular psyche. People are constantly on the lookout for instruments which have a low-risk profile but harbour the capability of rendering high returns.
In such turbulent times, how do you ensure that your investment corpus remains sustainable and secure in the longer run? How do you make certain that your regular expenses do not interfere with your allocation towards portfolio maintenance? In other words, how do you deal with any kind of investments shortfall?
If you have been grappling with questions like ‘how to manage shortfalls in investments‘, here are a few simple ways to help you undertake investment management with prudence.
Determine Investment Objective
To begin with, determine the exact objective of your investment. Are you aiming to create wealth or is capital accumulation your only goal? Are you looking to manage debts or do you want to create a steady source of income? Is minimizing tax your ultimate aim or do you merely intend to increase liquidity? Based on these considerations, you can make additional investments in instruments which deal specifically with the fulfillment of these objectives. In the long-term, this would help make up for any investment shortfall.
Increase Investment Horizon
The best way to perform good investment management is by increasing your investment horizon. The greater the time period is for which you hold a particular security, the higher your chances are of earning better revenues. This rise is primarily attributable to the power of compounding and rupee-cost averaging. With an increased horizon, make sure that you increase your total allocation towards investments too. This would enable all recurring investments shortfalls to be met appropriately.
Diversify Your Portfolio
If you are wondering how to manage shortfalls in investments, diversifying your portfolio can offer a credible and competent solution. A variable portfolio ensures that even if the value of one security falls, it is compensated for by the advancing value of another. However, while undertaking this venture, make certain that you choose investments with high returns. Instruments like equities, treasury bills, annuities and money market funds can prove to be a great help in portfolio diversification.
Consider Alternative Investments
In a search for investments with high returns, most investors often overlook the extremely profitable avenue of alternative investments. Ranging from invoice factoring and infrastructure funds to venture capital and peer-to-peer lending, alternative investments are not just low-risk, but they also tend to reap enhanced yields. The dividends obtained from such investments can make up for any paucity of funds, thus limiting the shortfall in your total corpus.
The question of how to manage shortfalls in investments requires thorough research and exercising caution. As an investor, you need to weigh your options and then choose the financial instrument which can help you overcome shortfalls in your investment corpus in the best possible way. After all, investments are the very foundations upon which definitive assets can be built.