Skip to main content

Know your risk appetite before taking a decision

 

Time is of highest essence in investing & the earlier you start the more you earn on investment

 

BATMAN does not need life insurance. He certainly needs a wealth manager though. Bruce Wayne (Batman during the day) has no family dependants and therefore does not require life insurance. However, he has an industrial empire generating a large amount of wealth which needs to be preserved, grown and managed efficiently. Homer Simpson, on the other hand, absolutely needs life insurance. He is a family man with dependants and therefore needs to protect his family from any unforeseen events.


   We are all unique—just like everybody else! Who we are and what our life situation is or what we expect it to be has a large bearing on how we manage our money. It is therefore very important that we have the right approach to managing our wealth and choosing the right wealth manager in advising us on an appropriate portfolio because there is after all a world of difference between Batman and Homer Simpson.


   An investor has to understand a few aspects that are common to everybody no matter how different one is. Following are some of the basics that you should dwell upon:

Saving v/s investment:

Saving and investment are often used interchangeably. However, your savings are not necessarily your investments. Funds set aside for future use can be termed as savings. Therefore, cash set aside or left lying in a savings account giving a nominal return is savings. Investments, on the other hand, refer to funds that are put to use with a purpose of earning a return on them and are often made with a specific purpose.

Risk v/s return:

The most common characteristics that a novice investor wants in an investment product is that it should have no risk and very high return. Seasoned investors, however, are aware that returns on an investment product is commensurate with the risk taken by the investor. Higher the risk taken, higher is the probability of return.

Know thyself:

It is very important to know yourself before venturing out to invest. Assessing your risk appetite, time horizon and return expectation is very important before you start investing. A risk profiler is a document available with most wealth managers and answering the questions contained therein will help you identify the kind of investor you are and consequently the amount of risk you can take.

Start early:

The power of compounding is stupendous. Time is of the highest essence in investing and the earlier you start the more you earn on an investment. It is a good idea to start investing early in life for goals that seem distant. A good example is retirement planning. For instance, an amount of 10 lakh invested at the age of 40 in a product giving a 10% return per annum would grow to just above Rs 57 lakh at the age of 60. However, the same amount invested at the age of 28 would grow to more than Rs 2 crore by the age of 60.

Your portfolio:

Once you have identified your goals, it is important to have an investment portfolio that corresponds to your risk appetite, return expectation and time horizon. Asset allocation is a key aspect of diversification which ensures that you get the best optimized return for the amount of risk taken. This is possible by combining asset classes in such a way that the combined portfolio carries a reduced amount of risk while enhancing returns.

The market:

Financial markets differ in nature, depending upon the asset classes and geographies involved. The Indian equity market, for instance, is not without its share of volatility and uncertainty. Though equities as an asset class has given higher return over the long term, investments in equities are subject to large gyrations in the short term. It is wise therefore to expose yourself to equity only with a resolute understanding of this short term volatility and with a faith in the ability of this asset class to deliver superior returns over a long period of time.

Mutual funds:

They are investment pools managed by professionals based on pre-determined objectives. They are excellent vehicles for investment and accord many benefits to the investor. The benefits include professional management, diversification, convenience and tax savings. There are many types of mutual funds spread among the various asset classes varying in risk and return. An investor is best advised to be informed and educated about Mfs or better still, seek professional help while investing in MFs. Investors also have to understand that point-to-point returns should not be the basis of selecting a fund. There has to be a qualitative aspect to selection to augment quantitative methods to give the investor a holistic picture.

Save tax:

An effective way of saving tax is by investing in securities that are eligible for a tax deduction U/S 80C of the I-T Act 1961. Equity Linked Savings Schemes (ELSS) are among the many options available for saving tax. ELSS schemes have a lock-in that is generally for three years and are quite effective in generating returns as the lock-in period ensures a long-term investment period.

 

Popular posts from this blog

Am you Required to E-file Tax Return?

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300   Am I Required to 'E-file' My Return? Yes, under the law you are required to e-file your return if your income for the year is Rs. 500,000 or more. Even if you are not required to e-file your return, it is advisable to do so for the following benefits: i) E-filing is environment friendly. ii) E-filing ensures certain validations before the return is filed. Therefore, e-returns are more accurate than the paper returns. iii) E-returns are processed faster than the paper returns. iv) E-filing can be done from the comfort of home/office and you do not have to stand in queue to e-file. v) E-returns can be accessed anytime from the tax department's e-filing portal. For further information contact Prajna Capit...

IDFC - Long term infrastructure bonds - Tranche 2

IDFC - Long term infrastructure bonds What are infrastructure bonds? In 2010, the government introduced a new section 80CCF under the Income Tax Act, 1961 (" Income Tax Act ") to provide for income tax deductions for subscription to long-term infrastructure bonds and pursuant to that the Central Board of Direct Taxes passed Notification No. 48/2010/F.No.149/84/2010-SO(TPL) dated July 9, 2010. These long term infrastructure bonds offer an additional window of tax deduction of investments up to Rs. 20,000 for the financial year 2010-11. This deduction is over and above the Rs 1 lakh deduction available under sections 80C, 80CCC and 80CCD read with section 80CCE of the Income Tax Act. Infrastructure bonds help in intermediating the retail investor's savings into infrastructure sector directly. Long term infrastructure Bonds by IDFC IDFC issued an earlier tranche of these long term infrastructure bonds on November 12, 2010. This is the second public issue of long-te...

ULIP Review: ProGrowth Super II

  If you are interested in a death cover that's just big enough, HDFC SL ProGrowth Super II is something worth a try. The beauty is it has something for everybody — you name the risk profile, the category is right up there. But do a SWOT analysis of the basket, and the gloss fades     HDFC SL ProGrowth Super II is a type-II unit-linked insurance plan ( ULIP ). Launched in September 2010, this is a small ticket-size scheme with multiple rider options and adequate death cover. It offers five investment options (funds) — one in each category of large-cap equity, mid-cap equity, balanced, debt and money market fund. COST STRUCTURE: ProGrowth Super II is reasonably priced, with the premium allocation charge lower than most others in the category. However, the scheme's mortality charge is almost 60% that of LIC mortality table for those investing early in life. This charge reduces with age. BENEFITS: Investors can choose a sum assured between 10-40 times the annualised premium...

Section 80CCD

Top SIP Funds Online   Income tax deduction under section 80CCD Under Income Tax, TaxPayers have the benefit of claiming several deductions. Out of the deduction avenues, Section 80CCD provides t axpayer deductions against investments made in specific sector s. Under Section 80CCD, an assessee is eligible to claim deductions against the contributions made to the National Pension Scheme or Atal Pension Yojana. Contributions made by an employer to National Pension Scheme are also eligible for deductions under the provisions of Section 80 CCD. In this article, we will take a look at the primary features of this section, the terms and conditions for claiming deductions, the eligibility to claim such deductions, and some of the commonly asked questions in this regard. There are two parts of Section 80CCD. Subsection 1 of this section refers to tax deductions for all assesses who are central government or state government employees, or self-employed or employed by any other employers. In...

Merger of Tata Indo-Global Infrastructure Fund with Tata Equity Opportunities Fund

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300 Merger of Tata Indo-Global Infrastructure Fund with Tata Equity Opportunities Fund Tata Mutual Fund has decided to merge Tata Indo-Global Infrastructure Fund with Tata Equity Opportunities Fund, with effect from January 16, 2015.   Investors of Tata Indo-Global Infrastructure Fund can redeem/ switch out units from December 13, 2014 to January 12, 2015 without paying any exit load. For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call Leave a missed Call on 94 8300 8300 Leave your comment with mail ID and we will answer them OR You can write back to us at PrajnaCapital [at] Gmail [dot] Com --------------------------------------------- Invest Mutual Funds Online Invest Any Mutual Fund Online Download Mutual Fund Application Forms from all AMCs Download Mutual Any Fund A...
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now