Person A invests about 1 Lakh per month and is very happy about it, while Person B could invest only about 25k per month.
Both of them invest in proportion to their income.
Person A can reach his goal earlier than Person B could. Right? Wrong.
This information is just not enough to determine if sufficient investments are being made by each.
Person A is looking to send his children abroad for their higher education and planning to retire in his early 50s so he can travel the work while he can.
Person B is very confident that his children will get scholarships to good colleges in India. His pension would suffice most of his post retirement needs.
Person A is ambitious and his goals demand higher investments. Whereas, Person B’s goals are basic and hence his need for investment is also less.
Basically, investments should be in proportion to each’s goals rather than just their income.
Will exercising one day get you those six packs? Can Rome be built in a day? While we all know the answers to these questions, why do we fall for quick fixes and false promises when it comes to investments?
Be it Diet, Exercise or Investment, they all work similarly. Here are a few steps to achieve success:
Fixing a goal: reduce a few stones of weight or save a few thousands in a period of time.
Planning before kick off: planning what to eat, which form of exercise to take up, how to save or where to reduce expenses.
Being disciplined: break up the goal into daily/monthly tasks, like eating the right food and exercising or saving regularly. Consistent efforts pay.
Gaining right knowledge: this gives the clarity and confidence to stay on course at the face of challenges.
Giving it time: anything worthwhile takes time to build. Success is sculpt and not bought.
Take an expert advice: Uniqueness of an individual reflects in the person’s diet and life style. One size doesn’t fit all. Diets and investments should be tailor made to suit one’s needs.
Insurance is sold in the name of Tax saving instrument or as an investment avenue. But what real benefit does life insurance bring?
We wear helmets to protect our head. Our body protects all our internal organs. Anything that is precious needs protection, even our dreams!!
Ambitious Dr.X, a famous paediatrician, built his home in a posh locality for which he had taken a big home loan. He was sure that his practice would grow and was determined to pre close in the next couple of years. As fate played, he passed away within a year due to a mishap. Now the grieving family is facing a heavy loan burden amidst all the chaos.
Love of a dear Spouse or Parent can never be replaced. But a simple Life insurance at the cost of a few thousands every year would have saved the family from at least the financial burden.
Life Insurance (Sum Assured) should be able to cover the future expenses and all the other needs(not wants!)of the family in case of the breadwinner or primary earner’s demise.
We do not expect to have an accident each time we pay the premium for the car insurance. Rather, we are happy to receive a no claim bonus on the insurance. Why should a priceless life be any different from a car?
Investment made into the stock market through any instrument like Mutual funds, direct stock purchases, Unit Linked Insurance Policy(ULIP) or NPS is an Equity investment.
When does Equity investment become risky?
1. You don’t understand how stock market operates. Then it becomes a gamble. This is not a fixed income generating instrument. Stock market Returns depend on various factors like the companies you are invested in, the economy, investors’ emotions and time horizon of your investment, etc.
2. You depend on stock market for short term returns. Stock market is a long term(at least 3 years) game. A good stock may not give you any return or even negative returns in a year. But on an average, it may have the ability to fetch an exorbitant return over the years.
3. You do not have patience. Stock market is bound to move up and down, it is highly volatile. Equity can be a good investment, if one has the patience to sit through the tide.
4. You buy stocks on hearsay. Not all stock advice is genuine or backed by research and analysis.
5. You do not have conviction in your investment. Unless a thorough homework has been done before investing, it will be very difficult to hold on to investments in a volatile condition.
Mr.X has a lump sum amount and wants to invest it immediately into a product which has been giving him good returns for past few years. But his friend, a stock analyst, says the stock market is really at its bottom and stocks are available at huge discount. This is a time to invest into stock market.
His wife suggested that Gold looks bullish and has been observing its price movements and gold is a sure shot good investment.
Now, he is confused as to where to invest his money? Mr.X can base his investment choice on the following:
1. Investments should be aligned to his financial goals.
2. Choice of Financial products should be based on priorities. After #financial planning, Mr.X realises a big shortfall in his Retirement funds and hence wants to forgo his international vacation this year and invest accordingly.
3. Timeline of his Financial goals. Choose products like stocks, real estate or equity mutual funds for a long term ( beyond at least 3 years) and FDs or debt mutual funds for short term needs.
4. Aligned to his risk profile. What is the use of investing into a product, but loose sleep over it ? He should choose products that he understands and has conviction in it.
Rich and Wealthy both seem to have a high income. What’s the difference then? The difference is in the source of their income. For the high income to be sustainable, the ‘Rich’ have to invest their time and effort continually.
Whereas the ‘Wealthy’ invest into the assets from a portion of their income, thereby letting the money also work for them. They have an additional source of income that is coming in from the assets that they have invested.
Anand’s Son Yuva’s dream of becoming a Doctor is taking shape now. Yuva has got a seat in a prestigious private medical college. Anand is very happy and proud of his son.
Only when the talks about admission and fees, is Anand brought down to Reality.
His thoughts quickly moved to the Education loan and the repayment. How much should he repay and will that affect his retirement kitty? Will Yuva have to take the partial burden of his Graduation and Post Graduation as well?
He had been saving for his Kid’s education for the past 5 years. What more could he have done? Anand has been wondering what has gone wrong in his planning for his son’s education and his own retirement?
What Anand had not foreseen is that Inflation had a major role in causing a dent in his plans. He didn’t realize that his savings in FDs were not growing as much as the Inflation. Inflation in Education in India is almost 10 – 12%. On the other hand, FD rates have been steadily decreasing.
What could Anand have done differently? 1. He could have started early, as soon as his kid started schooling, so time would have been on his side. 2. Instead of just saving, he could have invested in an avenue that beats inflation.
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