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Showing posts from September, 2013

Risk factors and Investing

         Each investment involves various risks. Many people fear to take risks and live in the same situation without any change. Returns are the outcome of taking   calculated risks.Higher the risk,higher will be the returns.     Risk is the possibility of loss occurrence in an investment. We cannot predict any thing in the future.Human life and physical health is also unpredictable. How we will calculate the risk? It is mainly by the price history,growth potential and fundamentals of the assets.     Calculated risk avoid the unexpected vulnerabilities. Some major risks are changes in policy measures of the nation, falling value of currency,changes in interest rates,war, fluctuations in supply and demand,inherent risk in an asset etc. Calculated risk is entirely different from gambling and speculation. It analyse the real value and potential gain of investments with various parameters.It is much superior than short term investment tactics.     Creating financial corpus

Systematic investment planning

       Systematic investments are considered as an effective way to overcome the price fluctuations in multiple assets.It is a disciplined approach of regular investing to reach the financial goals. It helps us to get the benefits from the market volatility by rupee cost averaging and effect of compounding.       Systematic investment plans are offered by leading asset management companies.You can invest systematically in stocks,metals and managed funds.It is like a monthly recurring deposit in a bank.It helps you to start a forced savings which prevent you from impulse buying and unnecessary expenditure.   One need not evaluate the market trend in this method.Systematic investor channelize savings each month for a long period and feel the advantage of averaging.      Longer the time frame,larger the benefits of systematic investing.If you invest at younger age,systematic investment plans will yield a decent return in

Market Cycles and Investing

           Knowing about economic and market cycles are very important in investing. An investor should evaluate the current cycle of economy and industry. No one can make profit in recession period.We should invest in cycles of growth and recovery. See the below graph.It shows the movement in an economy over a long time horizon.  Avoid buying stocks at bearish market. Look into the economic factors. Is the policy measures of government is positive? How the Central Bank tackle the economic problems ? What is the growth rate of industry and agriculture? How much rise happened in the net profit of the company last quarter and year?       If economy is stable,half job is done. An investor should check the industry trends and identify the market leader.Physical market share and Competitive advantage of the company determine returns for an equity investor.Knowledge of financial ratios will help us to identify the right company to invest.    Stock and Metals prices always move w

Invest in Multiple assets.

                 W ise investments need a well informed decision.In depth knowledge create the right perspective.An investor should understand the nature of his investments. He should learn about the historical patterns   of all assets. Information from financial news papers,TV channels,websites and financial advisors are various sources of investment wisdom.        Some of my clients follow conservative investing style.They primarily invest in chits, fixed deposits, postal schemes and endowment insurance plans. Do you believe all these are risk free instruments? Many chits and financiers are disappeared from our surroundings which have been identified as conservative investments. Do you know any bank offering 100 % guarantee for fixed deposits ? No.It is only our belief and trust .Maximum guarantee for fixed deposit is one lac in India.If the bank collapses,you will lose hard earned money.       Savings account and liquid funds are useful to park your emergency fund.Fi