Smart ways to invest and attain early financial freedom

This is a question that comes up in each of my wealth advisory sessions. Lately, with the stock markets going up, I see this coming up a lot more often than before.   In the past 12 months the BSE Sensex has gone up by 36%. Every week it is scaling new highs and even though every investor is happy seeing his portfolio go up – he/she also knows that it is only paper money, till the stock is sold and the money comes into your bank account. So the question is - should I sell my stocks?   As per me – there are only three reasons for exiting an investment. They are:   You need the money for an expense - for example you need money for a planned car upgrade or an unplanned hospitalisation.  You have investments giving you great returns – but what to do – you need to sell
As a starting point, you may like to read my last post on tax saving options -http://mbaclassdiscussions.blogspot.in/2011/12/how-to-save-tax-under-section-80c.html Not much has changed since I last wrote this - except one thing - the finance minister, Mr Jaitley, has increased the amount that you can invest under this section from Rs. 1.0 lac to Rs. 1.5 lacs per annum from this year. Tax saver Mutual funds are basically equity funds that have 60% plus exposure to equities. To avail of tax benefit, you need to stay invested in the fund for three years and that is where the catch is. In Mutual funds, I do not believe in committing to stay invested in one fund for so long. With the markets being so dynamic, I believe in keeping a check on MF’s every quarter and changing my portfolio if the situation demands.
With the election results behind us – I am sure you are looking forward and wondering if you need to rebalance your portfolio. The answer is YES.If you been following my blog and investing accordingly, you should have invested in Pharma and IT sector focussed MF's.
I am not one to forecast what will happen in the elections. But here are my thoughts of what to do post elections results are announced: If we get a stable and reformist government (remember that AAP did not seem to be reformist in Delhi) – Even though most of India’s economic problems are long term and cyclical in nature and will need more than 12 months to effect any change, the direction of government policies will make the stock market bullish. It would be easy to pick investing ideas –  most ideas will be profitable and it would be difficult to make mistakes.
Here is a question that you may have – “I  save Rs X per month and where do I invest  it – I am looking for long term investment (2-3 years atleast) and I am looking for good returns.” There are no straight answers to this question - the answer will  depend on the risk taking ability and life stage of the person investing. Plus as of now, there is the uncertainty of elections ahead and how does one recommend anything at all.