Your one page financial plan for wealth creation by Adams

In India, there are lot of financial advice and tips available. It is really confusing and hard to follow. Scott Adams makes it simple for corporates employees. Corporate employees can follow simple investment advice for better tax saving and long term wealth creation. Here is Your one page financial plan.

87 words personal finance by Scott Adams.

Make a will.
Pay off your credit cards.
Get term life insurance if you have a family to support.
Fund your 401k* to the maximum.
Buy a house if you want to live in a house and can afford it.
Put six months worth of expenses in a money-market account.
Take whatever money is left over and invest 70 percent in a stock index fund and 30% in a bond fund through any discount broker and never touch it until retirement.

Scott Adams in Indian context

Write your financial goals.
Pay off your credit cards.
Get term life insurance if you have a family to support.
Invest in PF, ELSS(tax saving) mutual funds and take insurance for 80C tax saving.
Buy a house if you want to live in a house and can afford it.
Keep six months worth of expenses in a money-market account or in gold.
Take whatever money is left over and invest 70 percent in a stock index fund and 30% in a bond fund.

You have to start investing your 70% of your investment in index funds. Index funds invest in Nifty and Sensex stocks. Nifty 50 funds invest in top 50 companies in the Nifty index list. Nifty Next 50 invests in top 50 to 100 companies in the nifty index. The index funds investment are automated investment based on Nifty index list and no active broker associated with the index funds. So these funds expense ratio is very low and higher growth opportunity in long term.

Why Index investment better than direct blue-chip stock investment:

On average, within the Nifty 50, about seven companies get churned every year if we count both companies moving out of the index and those entering the index every year. This constant movement of companies means that ‘buy blue-chip and forget’ is not an efficient strategy. Today’s blue-chip are not tomorrow’s blue-chip. Large companies decline and others take their place. In this piece, we backrest the returns of buying and just holding blue-chip stocks. So invest in index funds ensures that we invest in real best blue-chip company in the Nifty.

You can select any one of the funds in ELSS, Nifty 50 and corporate bond funds. Start with 3 funds, one in ELSS for tax saving, one in Nifty 50 for long term wealth creation and one in corporate bond for low risk and diversification.