General rule of Investment “Low risk- Low Returns, High Risk-High Returns”
“Products which are Scarce in nature will always have High Demand, and High Demand less Supply leads to Higher Returns, however subject to short term Volatility”
Understanding some basic information about Money Planning can be a great first step in learning how to “Invest and Live Freely”.
So What is Financial Instrument?
A Financial Instrument is an Asset where you put money with a hope that it will Appreciate into a larger sum of money. How you invest money can be very different. It Depends upon several factors like Age, Income, Expense, Time Left to Achieve Goal, Risk Appetite, Assets, Liabilities, Taxation, Liquidity, Returns and Safety of Principal invested. Always remember, Income – Saving = Expense not Income – Expense = Saving
Let’s look at a few key terms worth knowing when it comes to financial investments.
Appreciation is the amount an investment grows in value. For example, you buy a share of stock for Rs. 1000, and a year later it is worth Rs. 1500; the stock has appreciated by Rs. 500.
Dividends are usually cash payments that are paid out on financial investments based on the success and earnings of a company. For example, you invest in Nestle stock, and it may pay you a dividend of Rs.5 per share. If you owned 10 shares you would get paid 5 * 10 which is Rs. 50!
Interest is the return a bank, institution, or government pays you for loaning them money through the purchase of bonds, fixed deposits etc
Asset Allocation (Diversification): Any market linked asset class is subject to uncertainty. To counter that Investors should always diversify their Portfolio.
Eg. Some Proportion of Investments should be in Stocks, Others in Mutual Funds or Fixed Income Securities or Alternate Investments Classes etc.
Every Person should have answers to these Questions to have a Wise and Secure Future
- How much to save monthly to spend a tension free retirement life?
- What is the ideal Insurance and insurance coverage?
- What is the ideal quantum of savings to smoothly meet Children education, marriage expenses etc.
- What is the ideal investment portfolio?
- What is the ideal time to reallocate portfolio?
- How to Execute the plan?
So, if you have Answers to these Questions, there is no need of any Professional Financial Planner. But, If you don’t, it’s the right time to appoint a financial planner. Our team shall be happy to help you in purchasing apt financial instrument.
Some of the Popular Investments Products are –
In this you are lending out your money to a Company or Banks/FI. They pay you interest on your money and eventually pay you back the amount you lent out. It is one of the Safest investment avenue and most favoured by risk averse investors. Returns are guaranteed in this instrument. Rate of interest depends upon bank to bank based upon tenor and several other factors. It has High Liquidity, and can be withdrawn on need basis subject to some prepayment fees.
Insurance and Pension Plans
Insurance gives you peace of mind and a sense of security that if anything happens to you, your family or your business – you will be financially secure. The best course of action is to prepare for the worst and hope for the best. Traditionally, Insurance used to be a lumpsum benefit given in case of death of insured person, however gradually, insurance has been mixed with investment, means now you can have benefit of both Insurance and Investment from one product. However, these are complex as compared to traditional term plans and investment in this product offers lower returns.