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Hierarchy of investment needs

We know how investing is different from just saving. If we put our saved money somewhere where it will grow, then that's investing. However, there are a number of possibilities available when we want to invest, and it isn't possible to make sensible choices without having a way to classify things.

However, let's not jump into classifying investments right away. Before we do that, we need to classify our need for making an investment. Investments can be made for a huge variety of needs. You could be saving for emergency medical funds which are usually required at a moment's notice. Or you could be saving for your retirement which is a few decades away, or anything in between.
We have created a useful framework for thinking about these investment needs. We divide investment needs into four levels. Each level is more fundamental than the ones that come after it. You should satisfy the need at each level before going on to the next one.
Those who know a bit about psychology m…
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e-diamonds

The lure of buying diamonds might be in their glitter, but you can even buy diamonds in the electronic form, through the Indian Commodities Exchange (ICEX) Ltd as derivative contracts. ICEX is a Sebi-registered commodities exchange that offers diamond futures contracts for 30 cent, 50 cent and 1 carat diamonds. What is it?Like in other exchanges, you can buy and sell these contracts, which are priced at the wholesale market rate (ex-Surat) rather than at the retail price of polished diamonds. You can hold them in electronic mode or choose to take physical delivery. The contract units begin with 1 cent (100 cents make 1 carat). The shape, carat, colour, clarity, cut and other specifications will be mentioned as part of the contract. The standard contract has colour of 'H' level with VS2 clarity. There are limits on the maximum order that can be placed per individual. You can even start with a small amount and invest via systematic investment plan (S…

Know about CTC

HAVE never understood my payslip till date, says Avni Rustagi, a native of Punjab. Avni, 25, moved to Bangalore four years back in the hope of turning her dream into reality. In that order, she took up work as a designer with an Information Technology firm. Avni pays Rs 10,000 as rent for a spacious apartment, but ask her about how she manages her other expenses and she throws her hands up in the air. Numbers scare me, she admits. I don`t know a thing about finances. She says, For instance, I don`t even understand my pay structure or CTC as it is called, what I get in hand or why I get that much. Wealth realised that Avni's dilemma is a common problem with most working people. The transformation from CTC to take home leaves mostly everyone confused. Let`s decode and understand what happens when CTC becomes take home.
What is CTC?
CTC is nothing but the cost that the company incurs to employ you and keep you employed. It includes your pay and anything else that the company may incur …

NCDs are a Good Investment Option

Non-convertible debentures(NCDs) and fixed deposits issued by companies can turn out to be good investment alternatives given that bank fixed deposits are not offering attractive rates. With several companies vying for investors' attention with these instruments, investors may be spoilt for choice.
Fixed income investors have endured muted returns for some time. The one-year fixed deposit at SBI currently fetches 6.65%, while the five-year deposit earns 6.75%. Even bond funds have fetched insipid returns, clocking around 6%. But recent NCD issues suggest good times. On May 22, Dewan Housing Finance (DHFL) launched its ₹12,000-crore NCD issue, offering a coupon rate of up to 9.1%. It received subscriptions worth ₹10,000 crore the very first day, getting fully subscribed soon after.Last week, JM Financial Credit Solutions' ₹750 crore issue — offering up to 9.75% coupon rate — got oversubscribed the first day. The rates NCDs are offering are at least 200-250 bps higher than bank f…

Invest Savings from FDs to Debt Funds

No matter what savers are hoping for, interest rates are going to stay low for years to come. It is time to study the investment alternatives.A few hiccupsalong the way notwithstanding, it's more than likely that India is heading for lower interest rates for years to come, if not for decades. In fact, if one steps out of the ivory tower of economists and into the real life of savers, a huge amount of damage has already been done. A measly 2.5 - 3.5% on savings bank deposits and 5-7% on other deposits are going to be the normal from now on.Most Indian savers, including retirees who need income, are heavily invested in bank fixed deposits. Their earnings have fallen by 25% or more in the past three years. So is there a solution? As it happens, there is. There are mutual fund products that fit the bill perfectly. They not only give you higher returns than the banking products, but are also liable for a lower tax outgo, making the effective return very attractive. In fact, their liqui…

Calculate RETIREMENT Amount

An ideal retirement corpus should take care of all your expenses after you stop working. But can you calculate the amount required? It involves taking into account life expectancy, interest rates, inflation and the time value of money...and can be a bit tricky. Here we explain how to use MS Excel to calculate the amount easily. But first, let's understand some basics.

The concept of time value of money states that the worth of a rupee received today is more than a rupee received at a later date because of its earning potential. The concept of time value has two elements: Compounding and discounting. Compounding helps to estimate future values whereas discounting helps to estimate present values. For calculating your retirement corpus, it is the present value that matters.

For example, an investment product promises ₹8 lakh in 10 years if you invest ₹4 lakh today. Given interest or term deposit rates of 8% per annum, will this investment product be profitable? You will have to find o…

PPF vs ELSS Tax Saving Mutual Funds

The Public Provident Fund (PPF) and equity-linked saving schemes (ELSS) are popular investment options that both qualify for income tax deductions. A deduction reduces your overall tax liability. Contributions up to Rs 1.5 lakh a year qualify for tax deduction under Section 80C. Financial planners say that when it comes to investments in the PPF and ELSS mutual funds, investors should look at these investments not just from a tax-saving perspective but one that will help achieve their financial goals. ELSS mutual funds invest in equity shares of companies across sectors and market capitalization and have a three-year lock-in. An ELSS mutual fund is quite the same as a diversified equity fund, other than tax deduction benefits and the three-year lock-in. ELSS investments come with a lock-in period of three years, which is lowest among Section 80C investments. Investors should understand ELSS mutual funds are equity market-linked products. 1) The PPF is a 15-ye…
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