Prajna Capital - An Investment Guide

A well-known fact about equity investments is that it doesn't rob you of your returns in the long run. In fact, equity has always been kind to those who have showed patience and the perseverance to be invested during tough times. While such a strategy is gainful in the long run, it also needs a careful selection of funds. Diversification of risk among different schemes is an unwritten rule for a perfect investment strategy. In addition, one has to follow a few tips for building a good equity portfolio. Diversify according to risk appetite While diversification is a prerequisite, divide your portfolio according to your risk appetite and investment horizon for the portfolio. For instance, splitting the corpus among five diversified funds will be meaningless as all funds will have similar investment strategies. Hence, diversification has to be according to your needs. One of the smarter options could be to divide the portfolio into short-term and long-term, and then choose funds accor...

It is time to evaluate your asset allocation and balance your portfolio again The five-year bull run which we saw prior to 2008 had made concepts like debt, asset allocation, and financial planning quite unfashionable. The only investment destination one could think of was equity, thanks to the soaring stocks markets. Times have changed and so has the thinking. Investors are now giving more relevance to asset allocation and planning of investments keeping in mind the long-term financial goals. A strategy which always works well in the long term is asset allocation. Asset allocation essentially means diversifying your money among different asset classes such as equity, debt and cash. This would depend on an individual's risk tolerance level and return expectations. The strategy also works well because different asset classes have a tendency to behave differently. While stocks can offer potential for growth, fixed income instruments can offer stability and income. This augurs w...

PRUDENT saving and smart investing may be important for building your portfolio and creating a huge-nest egg, but assuming them to be the only keys to accumulating wealth is akin to financial hara-kiri. For, in the absence of a good debt strategy, the financial planning for your secured future can not only get topsy-turvy but awfully wobbly as well. Debt management, in fact, assumes more importance in the light of the fact that today debt has become a way of our lives, with consumer finance schemes and credit cards becoming big drivers of this devil. Rising disposable incomes, soaring aspirations and convenience in availing credit have increased the amount of debt that an average individual is carrying. In the US, for instance, the household debt-to-income ratio is said to have reached an all-time high, topping 19%, with Americans collectively spending more than what they have earned for the past two years in a row. Likewise, the latest Grant Thornton research shows that personal ...

Background There are mainly two approaches to asset allocation — The Bandwagon Approach and The Contrarian Approach. In the bandwagon approach - one chases the best performing assets and broadly follows the crowd. In the contrarian approach one focuses more on core value and enters assets that may be out of favour. The contrarian approach to asset allocation, if followed judiciously, can be rewarding. It combines a full range of fundamental and technical analysis, evaluating assets continuously — in the search for assets that are likely to reverse its past trend . It is not about just blindly doing the opposite of what the market is doing. It is about identifying assets that offer true value . Rationale One of the key reasons for using a contrarian approach to asset allocation is the cyclicality of asset classes. There are also some asset classes that are complementary to the others. For instance, when interest rates go up, it hurts the bottom line of companies and hence equitie...

WHEN we are a college fresher or in first job, saving and investment are the last things in our mind. Our priority is the latest gadget, movies or a dream car. This is natural among the youth. With so much media exposure, you get tempted to buy these items. I would advise youth to follow five personal finance steps: 1) BUDGETING It’s easy to find ourselves wondering where our money went. Putting a budget in writing can show how we are actually spending our money and what we can do to help control where it goes. We should remember to add entertainment and shopping expenses into monthly budget and not forget to include savings. We should treat it with the same importance we would treat utility bills. In fact, the earlier we start saving, the earlier that money can start working for us. 2) PLASTIC WOES Easy availability of credit cards has provided a major boost to spending. We should use credit cards in a proper way like for emergency payments or life insurance premium payments. If we ar...