Investments should be goal-based. What has goal-based investments got to do with risk management?
If you would follow a goal-based saving and investment strategy then the money saved will help you in adverse situations like we talked about earlier.
If you do not require the money do not withdraw and let the power of compounding work its wonders.
However, you have to be careful as not to be invested in all the products in the market. Individuals who have done that have suffered when the markets go down like they have done in the recent past.
You should invest according to your needs, responsibilities and dreams. Once you base your investments on this fundamental idea you will not have much difficulty in fulfilling your responsibilities even in adverse financial situations.
As the world's richest man Warren Buffet rightly said, "Invest within your circle of competence, it's not how big the circle that counts, it's how you define the parameters."
That takes us to the most frequently asked question today: Where to invest? Is it stock market, fixed deposits, PPF (Public Provident Fund), KVP (Kisan Vikas Patra) or gold? You can choose any of these depending on how helpful could these investments turn out when you need them the most.
Photograph: MANAN VATSYAYANA/AFP/Getty Images
Also see: What if the Sensex falls below 10k?
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