| Things to consider before investing your hard earned money... |
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Why Invest? |
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Where are you going to put your savings? |
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Understand the risk vs expected return relationship |
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How much risk do you want to take? |
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Liquidity of your investment |
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Other value added Benefits |
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Why Invest? |
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What you could buy with Rs 100 five years ago certainly cannot be bought today. It is clear that if you are to cope with even a mild inflation, you must undertake investment strategies that maintain your real purchasing power; otherwise, you are doomed to an ever-decreasing standard of living. Investing requires a lot of planning, make no mistake in this regard. Romantic novels are replete with tales of great family fortunes lost through neglect or lack of knowledge on how to care for money. They had not worked to keep their money. Even if you trust all your funds to an investment adviser or a financial institution, you still have to know which adviser or which institution is most suitable to handle your money and your savings. |
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Where are you going to put your savings? |
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You have budgeted and identified an amount to save monthly. By investing, you want to put the money you saved to grow, making more money and increasing your wealth. Now you need to work out a good Financial Plan. Good investments will make money; bad investments will cost money. Do your homework. Gather as much information as you can. Seek advice of trained financial advisors and financial institutions of repute. Read newspapers, magazines and other publications. Identify credible information sources on the Internet. |
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Understand the risk vs expected return relationship |
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When you are saving and investing, the amount of expected return is based on the amount of risk you are willing to bear with your money. Generally, the higher the risk higher is the expected return. For lesser risk, an investor should expect a smaller return. For example, a deposit with a good financial institution that offers an assured return on maturity of the deposit , the "return" or "interest paid" on your savings / deposit will generally be less than the expected "return" on other types of risky avenues of investments. |
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On the other hand, the return from investment in a capital market is not assured or guaranteed because it is subject to market risks & fluctuations. The amount invested may even be eroded if the portfolio does not perform as expected. |
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How much risk do you want to take? |
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Here are some tips to consider while determining the amount of risk that best suits you. |
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Financial goals : How much money do you want to accumulate over a certain period of time? Your investment decisions should reflect your wealth-creation goals. |
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Time horizon : How long can you leave your money invested? If you will need your money in one year, you may want to take less risk than you would if you would not need your money for 20 years. |
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Financial risk tolerance : Are you in a financial position to invest in risky alternatives? You should take less risk if you cannot afford to lose your investment or have its value diminish. |
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Inflation risk : This reflects savings' and investments' sensitivity to the inflation rate. For example, while some investments such as a savings account have no risk of default, there is the risk that inflation will rise above the interest rate on the account. If the account earns 5 percent interest, inflation must remain lower than 5 per-cent a year for you to realize a profit and "grow your wealth". |
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If you require assistance please do get in touch with Peerless financial advisors, who would be happy to help you determine your risk tolerance level. |
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Liquidity of your investment |
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Is one of the most important factors to take into account. How easily can you access your money? Is there a facility for premature withdrawal in case of an emergency? Is the "lock in period" low or high? Is there a facility for obtaining a Loan against the Deposit to help you overcome interim financial needs without withdrawing your deposit? If so, can it be adjusted against the Maturities Proceeds? Are the loan repayment rules flexible enough? These are important questions, as uncertain future events or emergency may require you to withdraw your money prematurely or avail a loan against the deposit to overcome emergency with / without obligations of regular repayment of the loan. |
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