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

Mirae Asset Healthcare Fund

Best SIP Funds to Invest Online   Mirae Asset Global Investments (India) has launched Mirae Asset Healthcare Fund. The NFO of the fund will be open from June 11, 2018 to June 25, 2018. Mirae Asset Healthcare Fund is an open-ended equity scheme investing in healthcare and allied sectors. The scheme will invest in Indian equities and equity related securities of companies that are likely to benefit either directly or indirectly from healthcare and allied sectors. The investment strategy of this scheme aims to maintain a concentrated portfolio of 30-40 stocks. Healthcare is a broad secular theme that includes pharma, hospitals, diagnostics, insurance and other allied sectors. The fund will have the flexibility to invest across markets capitalization and style in selecting investment opportunities within this theme. Neelesh Surana and Vrijesh Kasera will manage this fund. In a press release, Swarup Mohanty, CEO, Mirae Asset Global Inves...

How to Decide your asset allocation with Mutual Funds?

Invest In Tax Saving Mutual Funds Online Download Tax Saving Mutual Fund Application Forms Buy Gold Mutual Funds Call 0 94 8300 8300 (India) How to Decide your asset allocation ? The funds that base their equity allocation on market valuation have given stable returns in the past. Pick these if you are a buy-and-forget investor. Small investors are often victims of greed and fear. When markets are rising, greed makes the small investor increase his exposure to stocks. And when stocks crash to low levels, fear makes him redeem his investments. But there are a few funds that avoid this risk by continuously changing the asset mix of their portfolios. Their allocation to equity is not based on the fund manager's outlook for the market, but on its valuations. Our top pick is the Franklin Templeton Dynamic PE Ratio Fund, a fund of funds that divides its corpus between two schemes from the same fund house-the...

GOLD ETFs

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   GOLD ETFs       Gold funds and ETFs have also lost the tax advantage they enjoyed over physical gold after the Budget changed the rules for long-term capital gains from non-equity funds.   Last year, gold exchange traded funds ( ETFs ) had gained a great deal from the depreciation in the rupee and the UPA government's move to impose additional levy on gold imports, making it an attractive option for investors. The landed price of the yellow metal had surged, pushing up the net asset value ( NAV ) of gold ETFs. However, the recent budget proposal by Finance Minister Arun Jaitley has thrown a spanner in the works for gold fund investors. The revised tax structure for all non-equity funds, includi...

IIFL NCDs

Buy Gold Mutual Funds Invest Mutual Funds Online Download Tax Saving Mutual Fund Application Forms Call 0 94 8300 8300 (India) IIFL NCDs IIF's six-year unsecured NCD 2012 Risk-wary investors should stay away from this issue, and even, risk-taking ones should think twice It is a public issue of unsecured redeemable non-convertible debentures ( NCDs ) by India Infoline Finance ( IIF ), an unlisted company, which is a 98.9 per cent subsidiary of India Infoline, a listed company. The issue seeks to raise Rs 250 crore with an option to retain over-subscription up to Rs 250 crore taking the total potential issue amount to Rs 500 crore. It will be open for public subscription from September 5 to September 18 with a minimum application size of Rs 5,000 in the form of five NCDs of face value Rs 1,000, TENURE & RATES: IIF will redeem the NCDs at the end of six years, and investors wanting out before six years will be able to sell the...

All about "Derivatives"

What are derivatives? Derivatives are financial instruments, which as the name suggests, derive their value from another asset — called the underlying. What are the typical underlying assets? Any asset, whose price is dynamic, probably has a derivative contract today. The most popular ones being stocks, indices, precious metals, commodities, agro products, currencies, etc. Why were they invented? In an increasingly dynamic world, prices of virtually all assets keep changing, thereby exposing participants to price risks. Hence, derivatives were invented to negate these price fluctuations. For example, a wheat farmer expects to sell his crop at the current price of Rs 10/kg and make profits of Rs 2/kg. But, by the time his crop is ready, the price of wheat may have gone down to Rs 5/kg, making him sell his crop at a loss of Rs 3/kg. In order to avoid this, he may enter into a forward contract, agreeing to sell wheat at Rs 10/ kg, right at the outset. So, even if the price of wheat falls ...
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