tag:blogger.com,1999:blog-36624667710384197232024-02-19T16:27:53.797+05:30Aniket Patkar InvestmentsOne of the Best Blogs in India on Investment, Financial Planning; Retirement Planning, Personal Finance, Mutual Fund, Stocks, Income Tax, Insurance, and Investment services.Aniket Patkarhttp://www.blogger.com/profile/02215989324767435904noreply@blogger.comBlogger40125tag:blogger.com,1999:blog-3662466771038419723.post-12709261770304666092023-05-07T17:03:00.004+05:302023-05-07T17:03:45.004+05:30Unveiling the Value of Health Insurance Premiums: A Wise Investment or a Waste of Money?<p style="text-align: justify;"></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjhLbaptZMwY5XJG0Go6Poz86yAuGsFGN8whsVwmHlF6pzaZZH5hh-CCkpU7e5ib98DfUQxvsec9AmCqFcKnsSaaZBoaWBJ6I5e8FVjL_lKNHwPzUTDhmLsjXptUxFxS_KYlfxUPoc-jPVsY6EJvB5gQ5awL398r4bGsNALR0yfXzrHzhD7YIGy1ETj/s1279/health%20insurance.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img alt="health insurance" border="0" data-original-height="854" data-original-width="1279" height="428" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjhLbaptZMwY5XJG0Go6Poz86yAuGsFGN8whsVwmHlF6pzaZZH5hh-CCkpU7e5ib98DfUQxvsec9AmCqFcKnsSaaZBoaWBJ6I5e8FVjL_lKNHwPzUTDhmLsjXptUxFxS_KYlfxUPoc-jPVsY6EJvB5gQ5awL398r4bGsNALR0yfXzrHzhD7YIGy1ETj/w640-h428/health%20insurance.jpg" title="health insurance" width="640" /></a></div><span style="color: #0e101a;"><p style="text-align: justify;"><span style="color: #0e101a;"><br /></span></p>Health insurance is a topic that often sparks debates, with some individuals questioning whether paying health insurance premiums is truly worth the investment. In this article, we aim to address common misconceptions surrounding health insurance premiums, specifically focusing on the notions of risk transfer, fear of wastage, and overconfidence & Employee Health Cover. By exploring these points, we hope to provide a balanced perspective on the importance of Individual health insurance coverage so that you can decide whether health insurance is a wise investment or a waste of money.</span><p></p><h3 style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;">1.Risk Transfer:</h3><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">One of the fundament</span>al benefits of health insurance is the concept of risk transfer. By paying regular premiums, individuals transfer the financial burden of potential medical expenses to the insurance provider. This is particularly crucial in cases of severe illnesses, chronic conditions, or unforeseen accidents. Health insurance provides a safety net that protects policyholders from exorbitant medical costs, ensuring that they can access necessary healthcare services without facing overwhelming financial strain.</p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><br /></p><h3 style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;">2.Fear of Wastage:</h3><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Some individuals perceive health insurance premiums as wasteful expenditures, especially if they rarely require medical care or have not faced significant health issues in the past. However, it is important to view health insurance as a form of proactive financial planning. Just as individuals purchase home insurance or car insurance to safeguard against potential risks, health insurance serves as a crucial safeguard for one's well-being. While it is true that not all policyholders may fully utilize their coverage in a given year, the peace of mind and financial protection provided by health insurance outweigh the perceived wastage.</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgy44K5ZpCcMVIlzemjRaKzBKtZ3xsB9qybW1IduynMLxYR4i2VM44hNZpYWPAAUUXhFfU33C55L6s9Bv9uRomW__oorI6TuK-ZA1gOgDdq7-38qUvBLSqd1CzogqvmPxpBgDHM8pzl-X02V8YSGRNBw24ZqmBjaw1ygUMPUWsHo-lYesAjVflmKbxW/s1279/ambulance.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img alt="ambulance" border="0" data-original-height="853" data-original-width="1279" height="426" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgy44K5ZpCcMVIlzemjRaKzBKtZ3xsB9qybW1IduynMLxYR4i2VM44hNZpYWPAAUUXhFfU33C55L6s9Bv9uRomW__oorI6TuK-ZA1gOgDdq7-38qUvBLSqd1CzogqvmPxpBgDHM8pzl-X02V8YSGRNBw24ZqmBjaw1ygUMPUWsHo-lYesAjVflmKbxW/w640-h426/ambulance.jpg" title="ambulance" width="640" /></a></div><br /><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span><p></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Moreover, it is important to remember that health insurance coverage extends beyond mere medical expenses. Preventive care, regular check-ups, and screenings are often covered by health insurance plans, enabling individuals to detect and address health issues early on, potentially saving them from more severe and costly conditions in the long run.</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><h3 style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;">3.Overconfidence:</h3><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Some individuals exhibit overconfidence in their ability to handle healthcare expenses without insurance coverage. They may rely on their personal savings or believe that their healthy lifestyle will shield them from significant medical costs. While it is admirable to prioritize health and financial stability, unforeseen medical emergencies or the onset of unexpected illnesses can quickly deplete savings and jeopardize long-term financial plans.</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgnc3wuWJbx-08G-XlmoVbJW1uFsd0FLeyd1ZEUANSfgg6dJlpSE2aaU1qD-PZGxm74sUzSTkE02oST4DjbuN5D9Sec_U3mGksJpQNpliBNXzEnaZV1D8u9_LBDzSeYoY5zB_htwgMt2RUiSaUEYqrHm-ytsne8MzOKas8eEpU7_OMlQ7U4v2LmjIzA/s1280/pexels-pixabay-263402.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img alt="health emergency" border="0" data-original-height="848" data-original-width="1280" height="424" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgnc3wuWJbx-08G-XlmoVbJW1uFsd0FLeyd1ZEUANSfgg6dJlpSE2aaU1qD-PZGxm74sUzSTkE02oST4DjbuN5D9Sec_U3mGksJpQNpliBNXzEnaZV1D8u9_LBDzSeYoY5zB_htwgMt2RUiSaUEYqrHm-ytsne8MzOKas8eEpU7_OMlQ7U4v2LmjIzA/w640-h424/pexels-pixabay-263402.jpg" title="health emergency" width="640" /></a></div><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span><p></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Health insurance acts as a safety net, providing access to quality care and protecting individuals from the financial consequences of unforeseen medical events. It is essential to recognize that health risks can be unpredictable, and having insurance coverage serves as a prudent measure against such uncertainties.</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><h3 style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">4.Employee Health Cover:</span></h3><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">While <a href="https://aniketpatkarinvestments.blogspot.com/2022/07/7-reasons-why-employer-health-insurance-might-not-be-enough.html" target="_blank">employee health insurance</a> is valuable, it should not be considered a substitute for individual health insurance. Relying solely on employer-sponsored coverage can leave individuals underinsured, vulnerable during job transitions, and limited in their choice of healthcare providers. Individual health insurance provides the necessary customization, portability, and tailored coverage options to ensure comprehensive protection for individuals and their families.</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">It is essential to carefully assess personal healthcare needs, considering factors such as coverage adequacy, future job prospects, preferred network of providers, and the desire for flexibility. By making an informed decision and securing individual health insurance alongside employee coverage, individuals can enjoy enhanced peace of mind, financial security, and a comprehensive safety net for their healthcare needs.</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><h3 style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Conclusion:</span></h3><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Health insurance premiums should not be dismissed as wasteful expenses but rather as essential investments in one's well-being and financial security. By transferring the risk of significant medical costs to insurance providers, individuals gain peace of mind and protection against unforeseen health challenges. Overconfidence in one's ability to manage healthcare expenses without insurance can be risky and potentially detrimental to long-term financial stability.</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Rather than focusing solely on the financial aspects, it is crucial to consider the broader benefits of health insurance, including preventive care, access to a network of healthcare providers, and the ability to address potential health issues early on. When choosing a <a href="https://aniketpatkarinvestments.blogspot.com/2022/07/7-reasons-why-employer-health-insurance-might-not-be-enough.html" target="_blank">health insurance plan</a>, individuals should evaluate their specific needs and financial capabilities to ensure they select a policy that aligns with their requirements.</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Ultimately, health insurance is vital in managing health-related risks and promoting overall well-being. By dispelling misconceptions and understanding the value it provides, individuals can make informed decisions about their health insurance coverage and secure a healthier and financially stable future.</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"></p>Aniket Patkarhttp://www.blogger.com/profile/02215989324767435904noreply@blogger.com0Pune, Maharashtra, India18.5204303 73.8567437-9.7898035361788445 38.700493699999996 46.830664136178846 109.0129937tag:blogger.com,1999:blog-3662466771038419723.post-53226569816166640072023-04-23T19:04:00.000+05:302023-04-23T19:04:32.990+05:3018 Summarized lessons from the book "The Psychology of money"<p> <a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgMkzj6LPDXZHprhaJEG9x8rEIdiwvE2Ytc6Dk9w9gPbpnZtQTLxFP38spaaR1lfKs2NoIeZTCBZFNYE4Q2i8NE39Dtzkq_hrjZdsTW99u_KWMiZ2UWxOGaFUcQHFOYC32WwKIKrJ9v7onRXWUs-LMd5yhLmGDhNFyRhoCeSiVWZ2igUFodx7bmcdLq/s5184/money.jpg" style="margin-left: 1em; margin-right: 1em; text-align: center;"><img border="0" data-original-height="3456" data-original-width="5184" height="426" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgMkzj6LPDXZHprhaJEG9x8rEIdiwvE2Ytc6Dk9w9gPbpnZtQTLxFP38spaaR1lfKs2NoIeZTCBZFNYE4Q2i8NE39Dtzkq_hrjZdsTW99u_KWMiZ2UWxOGaFUcQHFOYC32WwKIKrJ9v7onRXWUs-LMd5yhLmGDhNFyRhoCeSiVWZ2igUFodx7bmcdLq/w640-h426/money.jpg" width="640" /></a></p><h3 style="text-align: justify;">Introduction</h3><p style="text-align: justify;">"The Psychology of Money: Timeless Lessons on Wealth, Greed, and Happiness" is one of the best books on personal finance written by Award-winning writer Morgan Housel, a wall Street Journal columnist and partner at Collaborative Fund. The book gives a message that earning a lot of money is not necessarily make you rich but how you behave around that money matters.</p><p style="text-align: justify;">The book explores the complex and often irrational nature of financial decision-making. Housel draws on a variety of real-world examples and anecdotes to illustrate how our <a href="https://aniketpatkarinvestments.blogspot.com/2021/12/10-cognitive-biases-that-can-lead-to-investment-mistakes.html" target="_blank">psychological biases</a> and misconceptions can shape our approach to money and provides practical advice for overcoming these biases and making more informed financial choices. Throughout the book, Housel emphasizes the importance of recognizing that there is no one "right" way to approach money and that what may seem like irrational behavior to one person may make perfect sense to another. Whether you are an experienced investor or just starting out on your financial journey, "The Psychology of Money" offers valuable insights and practical advice for navigating the complex and often unpredictable world of personal finance.</p><p style="text-align: justify;">The book contains short stories to convince you that soft skills are more important than the technical side of money. We think about and are taught about money with rules and laws but it is more about psychology & emotions. </p><h3 style="text-align: justify;">1. No one's Crazy</h3><p style="text-align: justify;">Housel begins by emphasizing the importance of recognizing that different people have different financial priorities, and what may seem like irrational behavior to one person may make perfect sense to another. He notes that our financial decisions are often shaped by a complex array of social, cultural, and personal factors, and that there is no one "right" way to approach money.</p><p style="text-align: justify;">The economists found that people’s lifetime investment decisions are heavily anchored to the experiences those investors had in their own generation. Their view of money was formed in different worlds at different times. Few people make financial decisions with their own unique view of the world, ego, pride, bias, and emotions and then they mix it together into a narrative that works for them.</p><p style="text-align: justify;">He notes that our tendency to focus on short-term gains or losses, our aversion to uncertainty and loss, and our tendency to compare ourselves to others can all lead us to make irrational financial choices.</p><p style="text-align: justify;">However, Housel also emphasizes that it is possible to overcome these <a href="https://aniketpatkarinvestments.blogspot.com/2021/12/10-cognitive-biases-that-can-lead-to-investment-mistakes.html" target="_blank">biases</a> and make more informed financial decisions. He notes that the key is to be aware of our own biases and to take a more rational and evidence-based approach to money.</p><h3 style="text-align: justify;">2. Luck & Risk</h3><p style="text-align: justify;">Housel argues that while many people may attribute their financial success or failure to their own abilities or choices, luck actually plays a much larger role than we often realize. He notes that luck can take many forms, from the family we are born into to the economic conditions of the time in which we live.</p><p style="text-align: justify;">However, Housel also emphasizes the importance of distinguishing between luck and risk. While luck refers to factors that are outside of our control, risk refers to factors that we can influence through our own choices and actions. Housel notes that it is important to be aware that</p><p style="text-align: justify;">Luck and risk are both reality & myth. Many things in our life are guided by invisible forces other than individual efforts. The world around us is too complex to understand which does not allow 100% of our actions to convert into 100% of outcomes. There are seven billion other people with you making efforts and there are infinite possibilities & probabilities. </p><h3 style="text-align: justify;">3. Never Enough</h3><p style="text-align: justify;">Housel argues that despite what many people may believe, wealth is not an endpoint or a destination. Rather, it is a journey that is defined by an individual's sense of "enough". Housel suggests that "enough" is a subjective and constantly evolving concept that is influenced by a variety of factors, including personal values, social norms, and cultural expectations.</p><p style="text-align: justify;">Housel notes that the pursuit of more money can become a never-ending cycle that is ultimately unsatisfying, as individuals may find that they are never able to reach their goal of "enough". </p><p style="text-align: justify;">If expectations rise for what you don't need with risk more than you can bear then it is unreasonable. It gets dangerous when the taste of having more money, more power, and more prestige gets beyond limits.</p><p style="text-align: justify;">We do compare with colleagues, friends, and relatives for career, wealth, lifestyle, and happiness. We take decisions, and risks beyond our capabilities just to fit in, to be more successful than others. We all have invaluable things in our life like family and their love, friends, freedom, reputation etc. The best thing we can do is we cannot endanger these by taking unreasonable risks which might affect them. We should know when is enough.</p><h3 style="text-align: justify;">4. Confounding Compounding</h3><p style="text-align: justify;">More than 95 % of Warren Buffet's net worth came after he attains 65 age. It is difficult to believe, right? His skill is investing, but his secret is time that he stayed invested. That’s how compounding works.</p><p style="text-align: justify;">Housel explains the power of <a href="https://aniketpatkarinvestments.blogspot.com/2021/08/how-mutual-fund-sip-magic-works-for-investor.html" target="_blank">compounding</a>, and how it can help individuals achieve significant wealth over time. Compounding refers to the process by which investment returns are reinvested, and then earn additional returns themselves. Over time, these returns can accumulate and grow exponentially, leading to significant gains in wealth.</p><p style="text-align: justify;">Housel notes that the power of compounding is often underestimated, as people tend to focus on short-term gains rather than the long-term effects of steady, consistent investing. He emphasizes the importance of starting early, staying disciplined, and avoiding emotional or impulsive investment decisions that can disrupt the compounding process.</p><p style="text-align: justify;">He emphasizes the need for a balanced and diversified investment portfolio that can weather market fluctuations and economic downturns.</p><p style="text-align: justify;"></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhdxpueWpNd9aYQJgNGj29nOC89hduwNEwX8PkKHh1ZKyc6WTDxx7_tNwn5IBZEHIgWT5bZfDsH3uAHViGF8dJjQAHaNA9aBdTq4_-GR941seCxLO77Sv6MiXqQLFCp33ACu2oRw4HhCZAH4VjxEs5fL-y97YFaG_PYVzYVNlG_RcyFSVvaptnx2pbV/s1080/compounding%20(1).png" style="margin-left: 1em; margin-right: 1em;"><img alt="compounding" border="0" data-original-height="1080" data-original-width="1080" height="640" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhdxpueWpNd9aYQJgNGj29nOC89hduwNEwX8PkKHh1ZKyc6WTDxx7_tNwn5IBZEHIgWT5bZfDsH3uAHViGF8dJjQAHaNA9aBdTq4_-GR941seCxLO77Sv6MiXqQLFCp33ACu2oRw4HhCZAH4VjxEs5fL-y97YFaG_PYVzYVNlG_RcyFSVvaptnx2pbV/w640-h640/compounding%20(1).png" title="compounding" width="640" /></a></div><div class="separator" style="clear: both; text-align: center;"><br /></div><p></p><p style="text-align: justify;"><a href="https://aniketpatkarinvestments.blogspot.com/2021/08/how-mutual-fund-sip-magic-works-for-investor.html" target="_blank">Compounding</a> only works if you can give an asset considerable years to grow. It’s like planting trees: A year of growth will never show much progress, 10 years can make a meaningful difference, and 25 years can create something extraordinary. Importantly we should not get paranoid about our investment portfolio seeing it every day similar to a growth of a tree cannot be visible in a day.</p><h3 style="text-align: justify;">5. Getting Wealthy vs. Staying Wealthy</h3><p style="text-align: justify;">There are a million ways to get wealthy but there’s only one way to stay wealthy: some combination of being economical about money and being fearful.</p><p style="text-align: justify;">Housel notes that while many people focus on accumulating wealth, the true measure of financial success is the ability to maintain that wealth over time. This requires a focus on not only growing one's assets but also preserving them through smart financial planning and risk management.</p><p style="text-align: justify;">Housel highlights the importance of living below one's means, avoiding debt, and investing in a diverse range of assets that can provide both growth and stability. He also notes that it is essential to avoid making emotional or impulsive financial decisions, and to be patient and disciplined in one's approach to investing.</p><p style="text-align: justify;">Intelligent investing is not necessarily about making good decisions. It’s about consistently not ruining things.</p><p style="text-align: justify;">If we need extraordinary growth or success, it requires surviving all the unforeseen ups and downs that everyone inevitably experiences over time. We can spend years trying to figure out how Buffett got so rich, and what was his investing strategy, how he selected good company <a href="https://aniketpatkarinvestments.blogspot.com/2021/11/Should-You-Invest-in-Stocks-or-Mutual-Funds.html" target="_blank">stocks</a>. It is hard, correct?</p><p style="text-align: justify;">Then what he did differently?</p><p style="text-align: justify;">He didn’t get dragged in <a href="https://aniketpatkarinvestments.blogspot.com/2021/08/should-i-invest-or-pay-off-debt.html" target="_blank">debt</a>. </p><p style="text-align: justify;">He didn’t panic and sell during the recessions or when the market was down.</p><p style="text-align: justify;">He didn’t attach himself to one strategy. He didn’t rely on others’ money.</p><p style="text-align: justify;">He didn’t quit or <a href="https://aniketpatkarinvestments.blogspot.com/2023/02/Ready-to-Retire-Early-Here-are-7-Key-Indicators-to-Help-You-Decide.html" target="_blank">retire</a>. He survived. Survival gave him longevity. Compounding through that long period of time is what matters the most.</p><p style="text-align: justify;">The ability to show up consistently for a long time, without giving up, is what makes the biggest difference. Whether it’s in investing, your career, or a business you own. </p><h3 style="text-align: justify;">6. Tails, You Win</h3><p style="text-align: justify;">In this chapter, Housel discusses the importance of preparing for and taking advantage of rare and unexpected events, also known as "tail events."</p><p style="text-align: justify;">Housel notes that while we often focus on the most likely outcomes when making financial decisions, it is important to consider the potential impact of rare but significant events, such as market crashes or economic downturns. These events can have a profound impact on our financial well-being, and failing to prepare for them can be costly. </p><p style="text-align: justify;">Many times in business and investing, it happens that a small number of events can account for the majority of the outcome. </p><p style="text-align: justify;">How you behaved as an investor during a few months in late 2008 or the crash of the pandemic will likely have more impact on your lifetime portfolio returns than everything you did from 2000 to 2023.</p><p style="text-align: justify;">An investing genius is a man or woman who can behave average when other investors in the market are going crazy. </p><p style="text-align: justify;">Housel argues that by adopting a "barbell" approach to investing, which involves putting a significant portion of one's portfolio in low-risk, low-return investments while also taking on a small amount of high-risk, high-return investments, investors can prepare themselves for tail events while still taking advantage of potential opportunities for growth.</p><p style="text-align: justify;">Housel also notes that it is important to have a plan in place for managing unexpected events, such as an emergency fund or <a href="https://aniketpatkarinvestments.blogspot.com/2022/06/why-should-you-buy-term-insurance-at-a-young-age.html" target="_blank">insurance </a>coverage, and to avoid making impulsive or emotional decisions in response to market fluctuations.</p><h3 style="text-align: justify;">7. Freedom</h3><p style="text-align: justify;">This chapter explores the concept of <a href="https://aniketpatkarinvestments.blogspot.com/2021/08/good-habits-for-financial-freedom.html" target="_blank">financial freedom</a> and how it can be achieved through saving, investing, and living below your means. Housel argues that financial freedom is not about being wealthy, but rather having the freedom to make choices without being constrained by financial considerations.</p><p style="text-align: justify;">Becoming wealthy means the ability to have control over time. The ability to do things you want to do, when you want to do them, with whom you want to do them, for as long as you want to do them. It is priceless, don't you think?. </p><p style="text-align: justify;">Some people say money can't buy happiness. Don't you think that money can give you control over time which same time you can be with your family, you can do things you like, the things you can buy, the things you can do for others?</p><p style="text-align: justify;">Financial Freedom does not mean you stop working. It means you work where you like, with people you like, the only time when you want to work.</p><h3 style="text-align: justify;">8. Man in the Car Paradox</h3><p style="text-align: justify;"><i>"No one is impressed with your possessions as much as you are."</i></p><p style="text-align: justify;">Here it examines the relationship between money and happiness and how it changes as people become wealthier. Housel asserts that while money can certainly provide a sense of security and comfort, beyond a certain point it has diminishing returns in terms of happiness. He also explores the "hedonic treadmill" effect, in which people's happiness levels adapt to their circumstances, and claims that focusing on non-financial sources of happiness can be more fulfilling.</p><p style="text-align: justify;">People generally desire to be respected and admired by others and use the money to buy luxury things but in actuality, it may bring less of it than you imagine. If respect and admiration is your only goal, be careful how you desire to get them. </p><h3 style="text-align: justify;">9.Wealth is What You Don’t See</h3><p style="text-align: justify;"><i>“Spending money to show people how much money you have is the fastest way to have less money.”</i></p><p style="text-align: justify;">Housel explores the idea that true wealth is not just about what you have, but also what you don't spend. He argues that by making smart choices about what we spend our money on, we can create a margin of safety that allows us to weather unexpected financial storms. Housel also emphasizes the importance of thinking long-term and considering the opportunity cost of spending money now versus investing it for the future.</p><p style="text-align: justify;">We tend to judge wealth by what we see because that’s the information we have in front of us. we see their cars, we see their homes, we see their social media accounts but we can’t see people’s bank accounts or portfolio statements. So some people fake it until they can.</p><p style="text-align: justify;">True wealth is what you don’t see. Wealth is the big car not purchased, that gold jewelry not bought, the expensive watch not bought. People always make mistakes, they want to think about wealth in a materialized way.</p><h3 style="text-align: justify;">10. Save Money</h3><p style="text-align: justify;"></p><blockquote><p style="text-align: justify;"><i>“Building wealth has little to do with your income or investment returns, and lots to do with your savings rate.”</i></p><p style="text-align: justify;"></p></blockquote><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgXJvlMUZS2Hk4MV47GKSvpfTsplBHR3DgUTD08InnRcIgrL0nrvQ-jCQf0GY2qTCtRzxT6KeGX0I9C6vfn-mYXHYB_uYrgo4KwE7oCV6GcUuO_5HlTJl-NIS6RcisQTx6rkAfdSnMqX1tr6SsSUZ4eZUWgwIxySzSJDXWU_ShylL22Q9X7TsMaqEm4/s6000/pexels-dany-kurniawan-12357530.jpg" style="margin-left: 1em; margin-right: 1em;"><img alt="save money" border="0" data-original-height="4000" data-original-width="6000" height="426" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgXJvlMUZS2Hk4MV47GKSvpfTsplBHR3DgUTD08InnRcIgrL0nrvQ-jCQf0GY2qTCtRzxT6KeGX0I9C6vfn-mYXHYB_uYrgo4KwE7oCV6GcUuO_5HlTJl-NIS6RcisQTx6rkAfdSnMqX1tr6SsSUZ4eZUWgwIxySzSJDXWU_ShylL22Q9X7TsMaqEm4/w640-h426/pexels-dany-kurniawan-12357530.jpg" title="save money" width="640" /></a></div><p style="text-align: justify;">The chapter focuses on the importance of <a href="https://aniketpatkarinvestments.blogspot.com/2021/08/saving-and-investing-difference-and.html" target="_blank">saving </a>money for long-term financial security. Housel argues that saving money is not just about creating a financial cushion, but also about giving ourselves the freedom to make choices without being constrained by financial considerations. He also explores the idea of "hyperbolic discounting," in which people tend to discount the value of future rewards in favor of immediate gratification, and provides strategies for overcoming this tendency.</p><p style="text-align: justify;">Wealth is just the accumulated leftovers after you spend. It is possible to build wealth without a high income but with a high savings rate.</p><p style="text-align: justify;">A high <a href="https://aniketpatkarinvestments.blogspot.com/2021/08/saving-and-investing-difference-and.html" target="_blank">savings</a> rate means having lower expenses than you otherwise could, and having lower expenses means your savings go farther than they would if you spent more.</p><h3 style="text-align: justify;">11. Reasonable > Rational</h3><p style="text-align: justify;"><i>“Do not aim to be coldly rational when making financial decisions. Aim to just be pretty reasonable." </i></p><p style="text-align: justify;">In this chapter, Housel argues that while rationality is important in financial decision-making, it is often trumped by the need for reasonableness.</p><p style="text-align: justify;">Housel notes that rationality is based on logical and objective analysis, while reasonableness takes into account the subjective and emotional factors that can influence decision-making. He argues that while rationality can lead to sound decisions in a controlled environment, real-life financial decisions are often made in uncertain and unpredictable conditions, where emotions and biases can play a significant role.</p><p style="text-align: justify;">Housel provides examples of how reasonableness can lead to better financial outcomes than pure rationality. For instance, he notes that holding a <a href="https://aniketpatkarinvestments.blogspot.com/2022/02/Asset-Allocation-And-Diversification-For-Long-Term-Wealth-Creation.html" target="_blank">diversified portfolio</a> that takes into account one's emotional attachment to certain assets may be a more reasonable approach than investing purely based on logic.</p><p style="text-align: justify;">Housel also emphasizes the importance of recognizing our own <a href="https://aniketpatkarinvestments.blogspot.com/2021/12/10-cognitive-biases-that-can-lead-to-investment-mistakes.html" target="_blank">biases</a> and limitations and being reasonable in our financial expectations and decision-making. He notes that seeking out diverse perspectives and challenging our own assumptions can help us make more reasonable financial decisions.</p><h3 style="text-align: justify;">12. Surprise!</h3><p style="text-align: justify;"></p><blockquote><i>“The correct lesson to learn from surprises is that the world is surprising. In this chapter, Housel explores the role of unexpected events and surprises in financial decision-making."</i></blockquote><p></p><p style="text-align: justify;">Housel notes that surprises are a constant in life, and can have a significant impact on our financial outcomes. Some surprises, such as market downturns or unexpected expenses, can lead to financial stress and setbacks. Others, such as unexpected windfalls or successful investments, can lead to unexpected gains.</p><p style="text-align: justify;">Housel argues that our ability to deal with surprises is often more important than our ability to predict them. He notes that while many financial experts and analysts focus on predicting market movements or economic trends, it is often more valuable to develop the resilience and flexibility to deal with unexpected events.</p><p style="text-align: justify;">Housel provides examples of how unexpected events can shape financial outcomes, including the impact of <a href="https://aniketpatkarinvestments.blogspot.com/2022/07/7-reasons-why-employer-health-insurance-might-not-be-enough.html" target="_blank">unexpected health problems</a>, job losses, or natural disasters on personal finances. He notes that being prepared for surprises, such as by maintaining an emergency fund or having a diversified investment portfolio, can help mitigate their impact.</p><p style="text-align: justify;"></p><blockquote><i>“History can be a misleading guide to the future of the economy and stock market because it doesn’t account for structural changes that are relevant to today’s world.”</i></blockquote><p></p><h3 style="text-align: justify;">13. Room for Error</h3><p style="text-align: justify;"></p><blockquote><i>“Margin of safety—you can also call it room for error or redundancy—is the only effective way to safely navigate a world that is governed by odds, not certainties." </i></blockquote><p></p><p style="text-align: justify;">In this chapter, Housel discusses the importance of leaving room for error in financial decision-making.</p><p style="text-align: justify;">Housel notes that financial decisions are often made with imperfect information and a degree of uncertainty, which can lead to unexpected outcomes. He argues that leaving room for error, or margin of safety, can help mitigate the impact of unexpected events and increase the likelihood of long-term success.</p><p style="text-align: justify;">Housel provides examples of how leaving room for error can lead to better financial outcomes. For instance, having an emergency fund or <a href="https://aniketpatkarinvestments.blogspot.com/2022/07/7-reasons-why-employer-health-insurance-might-not-be-enough.html" target="_blank">insurance</a> policy can provide a buffer against unexpected expenses, while maintaining a <a href="https://aniketpatkarinvestments.blogspot.com/2022/02/Asset-Allocation-And-Diversification-For-Long-Term-Wealth-Creation.html">diversified investment portfolio</a> can reduce the impact of market downturns.</p><p style="text-align: justify;">Housel also notes that leaving room for error requires a willingness to sacrifice short-term gains for long-term stability. This may involve forgoing high-risk investments in favor of more conservative options or maintaining a larger-than-necessary emergency fund.</p><h3 style="text-align: justify;">14. You’ll Change</h3><p style="text-align: justify;"></p><blockquote><i>“Long-term planning is harder than it seems because people’s goals and desires change over time.”</i></blockquote><p></p><p style="text-align: justify;">In this chapter, Housel explores how our perspectives and priorities can shift over time, and how this can impact our financial decision-making.</p><p style="text-align: justify;">Housel notes that personal experiences, aging, and external factors such as economic conditions can all influence how we view money and make financial decisions. He argues that recognizing and anticipating these changes is crucial for making informed decisions that align with our long-term <a href="https://aniketpatkarinvestments.blogspot.com/2021/08/setting-smart-financial-goals.html" target="_blank">goals</a> and values.</p><p style="text-align: justify;">Housel provides examples of how our changing perspectives can impact financial decision-making, such as shifting priorities as we age, or changes in financial goals based on personal experiences or life events. He also notes that external factors, such as economic recessions or changes in government policies, can impact our financial decision-making.</p><p style="text-align: justify;">Housel argues that being aware of these potential shifts in perspective and priorities can help individuals make more informed financial decisions. This may involve reevaluating financial goals periodically, maintaining flexibility in financial plans, and seeking out advice and guidance from trusted sources.</p><h3 style="text-align: justify;">15.Nothing’s Free</h3><p style="text-align: justify;"></p><blockquote><i>“Everything has a price, but not all prices appear on labels.”</i></blockquote><p></p><p style="text-align: justify;">In this chapter, Housel explores the concept of opportunity costs and how they impact our financial decision-making.</p><p style="text-align: justify;">Housel notes that every decision we make regarding money involves an opportunity cost - the value of the next-best alternative that we could have chosen instead. He argues that being aware of opportunity costs can help us make more informed financial decisions and maximize the value of our money.</p><p style="text-align: justify;">Housel provides examples of how opportunity costs can impact financial decision-making, such as choosing between <a href="https://aniketpatkarinvestments.blogspot.com/2021/11/Should-You-Invest-in-Stocks-or-Mutual-Funds.html" target="_blank">investing in the stock market</a> or <a href="https://aniketpatkarinvestments.blogspot.com/2021/08/should-i-invest-or-pay-off-debt.html" target="_blank">paying off debt</a>, or deciding between buying a house or continuing to rent. He also notes that opportunity costs can be difficult to measure, as they often involve comparing intangible benefits or costs.</p><p style="text-align: justify;">Housel argues that being aware of opportunity costs requires a willingness to think beyond immediate gratification and consider the long-term implications of financial decisions. He suggests that individuals can make more informed financial decisions by taking the time to weigh the potential benefits and costs of different options, and by focusing on maximizing the long-term value of their money.</p><h3 style="text-align: justify;">16.You & Me</h3><p style="text-align: justify;"></p><blockquote><i>“Beware taking financial cues from people playing a different game than you are.”</i></blockquote><p></p><p style="text-align: justify;">In this chapter, Housel explores the social and cultural factors that shape our financial beliefs and behaviors.</p><p style="text-align: justify;">Housel notes that financial decisions are not made in a vacuum - they are influenced by our social and cultural surroundings, including family, friends, and the broader societal context. He argues that recognizing and understanding these external factors is important for making informed financial decisions that align with our personal <a href="https://aniketpatkarinvestments.blogspot.com/2021/08/setting-smart-financial-goals.html" target="_blank">goals </a>and values.</p><p style="text-align: justify;">Housel provides examples of how social and cultural factors can impact financial decision-making, such as the influence of family background on <a href="https://aniketpatkarinvestments.blogspot.com/2021/08/good-habits-for-financial-freedom.html" target="_blank">financial habits</a>, the impact of societal norms and expectations on spending and saving behaviors, and the role of peer pressure in financial decision-making.</p><p style="text-align: justify;">Housel argues that being aware of these external influences requires a willingness to reflect on our own beliefs and behaviors and to question the assumptions and expectations that are placed upon us by society and those around us. He suggests that individuals can make more informed financial decisions by seeking out diverse perspectives and experiences, and by surrounding themselves with people who share their values and priorities.</p><h3 style="text-align: justify;">17.The Seduction of Pessimism</h3><p style="text-align: justify;"><i>“Optimism sounds like a sales pitch. Pessimism sounds like someone trying to help you.”</i></p><p style="text-align: justify;">In this chapter, Housel explores the allure of pessimistic thinking in financial decision-making and the potential drawbacks of this mindset.</p><p style="text-align: justify;">Housel notes that pessimistic thinking can be tempting when it comes to money, as it can feel safer and more secure to focus on the potential risks and downsides of financial decisions. However, he argues that this mindset can also lead to missed opportunities and a failure to take necessary risks to achieve <a href="https://aniketpatkarinvestments.blogspot.com/2021/08/setting-smart-financial-goals.html">financial goals</a>.</p><p style="text-align: justify;">Housel provides examples of how pessimistic thinking can impact financial decision-making, such as avoiding investing in the stock market due to fear of a market downturn or choosing to save excessively rather than investing in opportunities for growth.</p><p style="text-align: justify;">Housel argues that being aware of the seductive nature of pessimism requires a willingness to question our own biases and assumptions and to consider the potential benefits and drawbacks of different financial strategies. He suggests that individuals can make more informed financial decisions by seeking out diverse perspectives and experiences, and by focusing on the long-term benefits of taking calculated risks.</p><h3 style="text-align: justify;">18.When You’ll Believe Anything</h3><p style="text-align: justify;"><i>“Stories are, by far, the most powerful force in the economy." </i></p><p style="text-align: justify;">In this chapter, Housel explores the concept of belief and how it can influence financial decision-making.</p><p style="text-align: justify;">Housel notes that beliefs can be incredibly powerful, shaping how we view the world and guiding our actions and decisions. However, he also notes that beliefs can be easily influenced and distorted by external factors, such as social pressures, emotions, and <a href="https://aniketpatkarinvestments.blogspot.com/2021/12/10-cognitive-biases-that-can-lead-to-investment-mistakes.html" target="_blank">cognitive biases</a>.</p><p style="text-align: justify;">Housel provides examples of how beliefs can impact financial decision-making, such as investing in a hot stock based on hype and speculation or holding onto an underperforming investment due to a strong belief in its potential.</p><p style="text-align: justify;">Housel argues that being aware of the potential for belief to be distorted requires a willingness to question our own assumptions and biases and to seek out diverse perspectives and experiences to challenge our beliefs.</p><p style="text-align: justify;">He also notes that being aware of the power of beliefs can help us to make more informed financial decisions, by avoiding the trap of blind faith or overconfidence in our own beliefs and instead taking a more measured and rational approach.</p><p style="text-align: justify;">In conclusion, "The Psychology of Money: Timeless Lessons on Wealth, Greed, and Happiness" by Morgan Housel is an insightful and thought-provoking book that provides readers with a unique perspective on the often complex and irrational nature of financial decision-making. Housel is able to offer practical advice for overcoming our psychological biases and making more informed financial choices. Housel covers a wide range of topics that are relevant to anyone seeking to improve their <a href="https://aniketpatkarinvestments.blogspot.com/2021/07/why-financial-literacy-is-important-at.html" target="_blank">financial literacy</a> and build long-term wealth. Whether you are an experienced investor or just starting out, "The Psychology of Money" is a must-read book that will challenge your assumptions and provide you with valuable insights into the psychology of wealth and happiness.</p><div style="text-align: justify;"><br /></div>Aniket Patkarhttp://www.blogger.com/profile/02215989324767435904noreply@blogger.com0Pune, Maharashtra 411014, India18.5574028 73.928300499999992-13.200789828876662 38.772050499999992 50.315595428876662 109.08455049999999tag:blogger.com,1999:blog-3662466771038419723.post-40734836912020777622023-03-13T19:12:00.002+05:302023-03-13T19:45:44.093+05:30Fixed Deposits vs Mutual Funds, where to invest your money?<p style="text-align: justify;"><span style="color: #0e101a;">Investing money is an essential step towards achieving financial stability and securing one's future. However, choosing the right investment option can be a daunting task. </span></p><p></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjgTO1iBDoZLd5wPxnWzkZX4bbjDSh6ozixSRewyDoDXHjqnyElv6WMAkZKSh196GrLksYvpi1OcxiXw-P2RWpfMd9vBiLHAmxABh_qqWMejmIwXkc1UW7QFRHm7QVQFFAeX9jcfVNG46zSfmWlUdQojkI8AGVP4KXyci51oWrDhkPCqKXXTEC0C-U7/s1920/Copy%20of%20save%20tax.jpg" style="margin-left: 1em; margin-right: 1em;"><img alt="Fixed deposit Vs Mutual Funds" border="0" data-original-height="1080" data-original-width="1920" height="360" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjgTO1iBDoZLd5wPxnWzkZX4bbjDSh6ozixSRewyDoDXHjqnyElv6WMAkZKSh196GrLksYvpi1OcxiXw-P2RWpfMd9vBiLHAmxABh_qqWMejmIwXkc1UW7QFRHm7QVQFFAeX9jcfVNG46zSfmWlUdQojkI8AGVP4KXyci51oWrDhkPCqKXXTEC0C-U7/w640-h360/Copy%20of%20save%20tax.jpg" title="Fixed deposit Vs Mutual Funds" width="640" /></a></div><p></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">The two most popular investment options in India are fixed deposits and mutual funds. FDs seem to be lucrative when interest rates are on the rise but it is interesting to see if it is true in actuality. This article aims to provide a comprehensive comparison of the two options, highlighting their features, benefits, drawbacks, and suitability for various investment goals.</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><h3 style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">1. Fixed Deposits : </span></h3><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; font-weight: normal; margin-bottom: 0pt; margin-top: 0pt;">Fixed deposits refer to investments made in banks or financial institutions for a fixed period, offering a predetermined interest rate. Fixed Deposits are the traditional investment choice for most Indian families. As per RBI research released in June 2020, more than 50% of the average family's financial assets are invested in Bank Fixed Deposits.</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><br /></p><h4 style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Some key benefits of fixed deposits include:</span></h4><ul style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><li style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; list-style-type: disc; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Guaranteed returns: Fixed deposits offer a guaranteed return on investment, making it an attractive option for risk-averse investors.</span></li><li style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; list-style-type: disc; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Low-risk investment: Fixed deposits have a low risk of capital loss as the principal amount invested is secure.</span></li><li style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; list-style-type: disc; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Stable returns: The interest rate on fixed deposits remains unchanged during the investment period, providing a stable source of income.</span></li><li style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; list-style-type: disc; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Flexible investment tenure: Fixed deposits offer flexible investment tenures ranging from 7 days to 10 years.</span></li><li style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; list-style-type: disc; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Easy to understand: Fixed deposits are easy to understand and invest in, making them a popular investment option among first-time investors.</span></li></ul><h4 style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">However, there are some drawbacks to investing in fixed deposits, such as:</span></h4><ul style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><li style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; list-style-type: disc; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Low returns: The returns offered by fixed deposits are generally lower compared to other investment options such as equity.</span></li><li style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; list-style-type: disc; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">No liquidity: Fixed deposits do not offer any liquidity during the investment tenure, and investors cannot withdraw the invested amount before maturity without incurring a penalty.</span></li><li style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; list-style-type: disc; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Limited potential for capital appreciation: Fixed deposits do not offer any potential for capital appreciation, and the returns are limited to the interest rate offered.</span></li><li style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; list-style-type: disc; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Taxation: FD interest is taxed as per the income tax slab of depositors. </span></li></ul><h3 style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></h3><h3 style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">2. Mutual Funds: </span></h3><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">A <a href="https://aniketpatkarinvestments.blogspot.com/2021/08/what-is-mutual-fund-and-how-it-will.html" target="_blank">mutual fund</a> is a professionally managed investment vehicle that pools money from multiple investors to invest in a diversified portfolio of stocks, bonds, and other securities. <a href="https://aniketpatkarinvestments.blogspot.com/2021/11/10-important-key-terms-you-must-know-before-investing-in-Mutual-Funds.html" target="_blank">Mutual funds</a> have a long history in India with the setting up of Unit Trust of India in 1963, the popularity of mutual funds among retail investors has grown only in the last 20 years. As per AMFI data, The AUM of the Indian MF Industry has grown from ₹ 8.26 trillion as on January 31, 2013 to ₹39.62 trillion as on January 31, 2023 around 5 fold increase in a span of 10 years. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><br /></p><h4 style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Some key benefits of mutual funds include:</span></h4><ul style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><li style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; list-style-type: disc; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Professional management: Mutual funds are managed by professional fund managers who have expertise in the financial markets, providing investors with a higher chance of earning higher returns.</span></li><li style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; list-style-type: disc; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Diversification: Mutual funds offer diversification, which means investors can invest in a variety of stocks (from different sectors), government or corporate securities, commodities etc. reducing the risk of capital loss.</span></li><li style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; list-style-type: disc; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Potential for higher returns: Mutual funds have the potential to generate higher returns & have capabilities to beat inflation.</span></li><li style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; list-style-type: disc; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Liquidity: Mutual funds offer liquidity, and investors can easily redeem their money as and when required.</span></li><li style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; list-style-type: disc; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Variety of investment options: Mutual funds offer a variety of investment options such as Equity funds, Debt funds, Hybrid funds, Flexi cap funds, and more, providing investors with options to suit their investment goals and risk appetite.</span></li><li style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; list-style-type: disc; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Taxation : Short-term capital gains in equity funds (held for less than 1 year) are taxed at 15% and long-term capital gains (held for more than 1 year) of up to Rs 1 lakh is exempted from tax and it taxed at 10% thereafter. In debt funds, short-term capital gains (held for less than 3 years) are taxed as per the income tax slab of the investor and long-term capital gains (held for more than 3 years) are taxed at 20% after allowing indexation benefits. Therefore, in the debt fund vs fixed deposit comparison, debt funds scores high.</span></li></ul><h4 style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">However, there are some drawbacks to investing in mutual funds, such as:</span></h4><ul style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><li style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; list-style-type: disc; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Market risk: Mutual funds are subject to market fluctuations, and investors may incur capital losses in case of a market downturn.</span></li><li style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; list-style-type: disc; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Management fees: Mutual funds charge management fees which can be seen as an expense ratio.</span></li><li style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; list-style-type: disc; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Complexity: Mutual funds can be complex to understand, making it challenging for first-time investors to make informed investment decisions.</span></li></ul><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><h3 style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: left;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">3. Fixed Deposits vs Mutual Funds:</span></h3><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Fixed deposits and mutual funds differ in several ways. </span></p><h4 style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Some key differences between the two investment options are:</span></h4><ol style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><li style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; list-style-type: decimal; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Risk and return comparison: Fixed deposits offer low-risk, low-return investment options. The returns offered by fixed deposits are generally lower compared to other investment options such as mutual funds. On the other hand, mutual funds offer high-risk, high-return investment options. Mutual funds are subject to market fluctuations, and investors may incur capital losses in case of a market downturn. However, mutual funds have the potential to generate higher returns compared to fixed deposits.</span></li><li style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; list-style-type: decimal; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Liquidity comparison: Fixed deposits have no liquidity during the investment tenure, and investors cannot withdraw the invested amount before maturity without incurring a penalty. On the other hand, mutual funds offer liquidity, and investors can easily withdraw their money as and when required.</span></li><li style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; list-style-type: decimal; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Taxation Comparison: The interest earned on fixed deposits is taxed as per the investor's income tax slab. In contrast, the taxation on mutual funds depends on the type of mutual fund, holding period, and the investor's income tax slab.</span></li></ol><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><h3 style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: left;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">4. Where to Invest Your Money?</span></h3><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Several factors should be considered when choosing between fixed deposits and mutual funds. Some of the factors are as below,</span></p><ul style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><li style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; list-style-type: disc; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Risk appetite, Investment Goals, and Investment Horizon: Fixed deposits are suitable for investors looking for a low-risk, fixed-income, and short-term investment options. On the other hand, mutual funds are suitable for investors looking for a moderate or high-risk, high-return, and <a href="https://aniketpatkarinvestments.blogspot.com/2022/08/how-new-earners-can-start-their-journey-to-create-long-term-wealth.html" target="_blank">long-term investment</a> options.</span></li><li style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; list-style-type: disc; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Capability to Beat Inflation: Fixed deposits offer guaranteed returns, but they may not be able to beat inflation, leading to a loss in the purchasing power of the investor's money. In contrast, mutual funds have the potential to beat inflation and provide higher returns over the long term. </span></li></ul><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">In conclusion, both fixed deposits and mutual funds have their benefits and drawbacks. The choice between the two investment options depends on the investor's risk appetite, investment goals, investment horizon, and taxation. FDs can be used as short-term investment for an emergency fund, short-term goals etc. while Mutual funds can be used as long-term investments for long-term financial goals where <a href="https://aniketpatkarinvestments.blogspot.com/2021/08/how-mutual-fund-sip-magic-works-for-investor.html" target="_blank">SIP (Systematic Investment Plan)</a> & SWP (Systematic Withdrawal Plan) can be good options to manage those investments.</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Investors should carefully evaluate their options before making an investment decision. It is also recommended to seek advice from a <a href="https://aniketpatkarinvestments.blogspot.com/2021/08/Direct-vs-Regular-investment-in-Mutual-Funds--Role-of-Mutual-Fund-Distributor.html" target="_blank">financial advisor</a> before investing.</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"></p>Aniket Patkarhttp://www.blogger.com/profile/02215989324767435904noreply@blogger.com0Pune, Maharashtra, India18.5204303 73.8567437-9.7898035361788445 38.700493699999996 46.830664136178846 109.0129937tag:blogger.com,1999:blog-3662466771038419723.post-73605674923053919022023-02-05T00:22:00.000+05:302023-02-05T00:22:25.555+05:30Ready to Retire Early? Here are 7 Key Indicators to Help You Decide<p style="text-align: justify;">Retirement is a significant life event that marks the end of a person's working years and the beginning of a new phase of life. While most people look forward to retiring at the traditional age of 60, a growing number of individuals are choosing to retire early, often in their 50s or even 40s. If you're considering early retirement, it's important to carefully evaluate your financial and personal circumstances to ensure that you're ready for this major change. In this article, we'll outline 7 key indicators that can help you determine whether you're ready to retire early.</p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhIYRACDZL1B0N7E4_fn0odNzmXI65z9Z7PKSe5X0irGHGocS8D_dpINCE2K7GE-BleYR7_h8XSHJYM2iy7xmxZHxLBofZOpO9rQO7XRyf7WBtLzPmxaleg4O6bhdIGQx6t8i8Vklz7aofC2wtI5Y5zSKPfiLYN35b5TxtQbVspGjFI6kbq3M6qEbdd/s1319/retire.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img alt="retirement" border="0" data-original-height="1319" data-original-width="1280" height="640" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhIYRACDZL1B0N7E4_fn0odNzmXI65z9Z7PKSe5X0irGHGocS8D_dpINCE2K7GE-BleYR7_h8XSHJYM2iy7xmxZHxLBofZOpO9rQO7XRyf7WBtLzPmxaleg4O6bhdIGQx6t8i8Vklz7aofC2wtI5Y5zSKPfiLYN35b5TxtQbVspGjFI6kbq3M6qEbdd/w622-h640/retire.jpg" title="retirement" width="622" /></a></div><br /><h3 style="text-align: justify;">1. Debt-Free</h3><p style="text-align: justify;">Debt is one of the biggest obstacles to early retirement, as it can significantly reduce your monthly cash flow and limit your ability to save for the future. If you're considering early retirement, it's important to <a href="https://aniketpatkarinvestments.blogspot.com/2021/08/should-i-invest-or-pay-off-debt.html" target="_blank">pay off all of your debts</a>, including mortgages, credit card balances, and any other loans, before making the transition. Doing so will give you peace of mind and increase your monthly cash flow, making it easier to cover your living expenses during retirement.</p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjCo3E9nTtVtFu9RlS6Rbt8IEjr_65NjRmgLHpmBuQi9NXlx3ElTkDCDp5CeG31i-mtPqk0_Nx9pvegDpiALcIenAyyxcUdo_kOuh_C9m7nk0hM5DeWgvHM-qjw5pOJysarmvm3o7iTlJD7oIkBEMDseGtex5e24yZ7Za6VcK0Azw4bXfnzx2_2fQEj/s1920/pexels-arturo-a%C3%B1ez-9259181.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img alt="debt" border="0" data-original-height="1280" data-original-width="1920" height="426" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjCo3E9nTtVtFu9RlS6Rbt8IEjr_65NjRmgLHpmBuQi9NXlx3ElTkDCDp5CeG31i-mtPqk0_Nx9pvegDpiALcIenAyyxcUdo_kOuh_C9m7nk0hM5DeWgvHM-qjw5pOJysarmvm3o7iTlJD7oIkBEMDseGtex5e24yZ7Za6VcK0Azw4bXfnzx2_2fQEj/w640-h426/pexels-arturo-a%C3%B1ez-9259181.jpg" title="debt" width="640" /></a></div><h3 style="text-align: justify;">2. Sufficient Savings & investments adjusted with inflation</h3><p style="text-align: justify;">One of the important factors to consider before retiring early is your savings & investments. It's essential to have enough money saved to cover your living expenses for the rest of your life. The investment should be calculated considering inflation if not by you then by your financial advisor as per the required retirement corpus to sustain a lifestyle in retirement. Proper <a href="https://aniketpatkarinvestments.blogspot.com/2021/10/importance-of-retirement-plan-and-how-to-build-one.html" target="_blank">retirement planning</a> with diversified <a href="https://aniketpatkarinvestments.blogspot.com/2021/08/how-mutual-fund-sip-magic-works-for-investor.html" target="_blank">mutual funds</a> or <a href="https://aniketpatkarinvestments.blogspot.com/2021/11/Should-You-Invest-in-Stocks-or-Mutual-Funds.html" target="_blank">stock</a> investments, fixed-income securities, & <a href="https://aniketpatkarinvestments.blogspot.com/2022/06/why-should-you-buy-term-insurance-at-a-young-age.html" target="_blank">insurance</a> will give you a solid financial foundation and ensure that you have enough money to cover your living expenses during retirement.</p><h3 style="text-align: justify;">3. Income replacement instruments</h3><p style="text-align: justify;">Income replacement instruments such as annuities or pension plans are an important part of a retirement strategy addition to your savings & investments. These instruments can provide a reliable source of income to help you cover your living expenses during retirement. It's important to have a solid plan in place for covering your income needs during retirement to ensure that you're not caught off guard later in life.</p><h3 style="text-align: justify;">4. Testing your Retirement budget</h3><p style="text-align: justify;">Before retiring early, it's a good idea to test your retirement strategy to see if it's right for you. This can involve taking a sabbatical or a long break from work to see how you adapt to the lifestyle change. You can also try living on a retirement budget for a few months to get a feel for what your expenses will be like. By testing your retirement strategy, you can get a better understanding of what life will be like and whether it's the right choice for you.</p><h3 style="text-align: justify;">5. Health Expenses provisions</h3><p style="text-align: justify;">Healthcare is one of the biggest expenses for retirees, and it's essential to have a plan in place to cover these costs. This may involve purchasing comprehensive <a href="https://aniketpatkarinvestments.blogspot.com/2022/07/7-reasons-why-employer-health-insurance-might-not-be-enough.html" target="_blank">health insurance</a> coverage for you and your spouse. It is important to have such cover to not put a hole in your retirement corpus.</p><h3 style="text-align: justify;">6. Have Emergency Buffers</h3><p style="text-align: justify;">Emergencies can happen at any time, and it's essential to have emergency savings in place to cover unexpected expenses. This can include car repairs, home repairs, or other unexpected costs. It's important to have at least six months of living expenses saved in an emergency fund to give yourself peace of mind and provide a financial cushion in case of an unexpected event.</p><h3 style="text-align: justify;">7. No Dependents</h3><p style="text-align: justify;">Finally, it's essential to consider whether you have any dependents who will rely on you for financial support. If you have children or other family members who are dependent on you, it may not be the right time to retire early. However, if you're independent and don't have any dependents, early retirement may be a viable option for you.</p><p style="text-align: justify;">Retirement can be an exciting time, filled with new opportunities for travel, hobbies, and spending time with family and friends. However, it is essential to have a solid plan in place to ensure your financial stability in the long term. Early retirement is a significant life change that requires careful planning and preparation. By evaluating your financial situation you can determine whether early retirement is right for you, a secure retirement that meets your unique needs and goals. Check out our blog for more such articles and resources. </p>Aniket Patkarhttp://www.blogger.com/profile/02215989324767435904noreply@blogger.com0Pune, Maharashtra, India18.5204303 73.8567437-9.7898035361788445 38.700493699999996 46.830664136178846 109.0129937tag:blogger.com,1999:blog-3662466771038419723.post-89196158532246954112023-01-26T17:18:00.005+05:302023-01-26T17:57:47.138+05:30Securing Your Financial Future on Republic Day: The Power of Mutual Funds and Insurance<p><span style="text-align: justify;">On August 15th, 1947, India achieved the hard-won freedom it had long fought for. With a wealth of resources and a skilled population, the country had the potential for great growth and success. But in order to achieve this, it needed a framework for how the country would function - a Constitution. Similarly, in order to achieve <a href="https://aniketpatkarinvestments.blogspot.com/2021/08/good-habits-for-financial-freedom.html" target="_blank">financial freedom</a> and success through investing, individuals also need a framework for how they will manage their investments.</span></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgJ6IHerQEzHcwPl7TehiS279dd6NQGhaZi0aBfIHFHZx_ykpcrYf5f55Jy-yIT2jvYY_VPl7QZBqXc9fepWl-jNZv5fpLDf1aBY5t1gSnKhxlbctbAX4a07i3eegYIG7DdVlto-ziMuRnQBAArlJtieoSznHfzqiKcHgy3hwBT0DSdg1bvC0ccVpXQ/s1920/india%20gate.jpg" style="margin-left: 1em; margin-right: 1em;"><img alt="republic day" border="0" data-original-height="1218" data-original-width="1920" height="406" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgJ6IHerQEzHcwPl7TehiS279dd6NQGhaZi0aBfIHFHZx_ykpcrYf5f55Jy-yIT2jvYY_VPl7QZBqXc9fepWl-jNZv5fpLDf1aBY5t1gSnKhxlbctbAX4a07i3eegYIG7DdVlto-ziMuRnQBAArlJtieoSznHfzqiKcHgy3hwBT0DSdg1bvC0ccVpXQ/w640-h406/india%20gate.jpg" title="republic day" width="640" /></a></div><p style="text-align: justify;">Just as the Constitution of India was adopted on January 26th, 1950 to guide the nation, <a href="https://aniketpatkarinvestments.blogspot.com/2022/03/the-dilemmas-of-first-time-investors.html" target="_blank">investors</a> can also use financial planning as a guide to managing their investments successfully. By following a set of principles, investors can ensure that their Mutual fund and stock market investments are on the right track.</p><p style="text-align: justify;">As we celebrate Republic Day, let's take a lesson from the Constitution of India and apply it to our financial planning. By setting guidelines and following them responsibly, we can unlock our own potential for financial growth, just like independent India.</p><h3 style="text-align: justify;">1. Importance of financial planning and security</h3><p style="text-align: justify;">Financial planning and security are essential for achieving long-term financial goals and maintaining financial well-being. It involves creating a plan to manage your income, expenses, <a href="https://aniketpatkarinvestments.blogspot.com/2021/08/saving-and-investing-difference-and.html" target="_blank">savings, and investments </a>to help you achieve your financial objectives.</p><h4 style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh_bglaTH2D7yIhsDLfJk0ssWAQQ3-vps-AOS6CrCGTKXjphwj3x9egNSOiUA4KF0TUkhFuHy6QW2tFGJFiLq4RfGZuT2rLcGXkN4LH2ySEEiEqWh8OK1WZ_5OhKWfdEYCQ0iDtK5rVkZN5V5yLCrFHOomEvI9cO5f3iv6mcNr1NrpsikUEhnrBHXI3/s1280/pexels-jessica-lewis-creative-10024581.jpg" style="margin-left: 1em; margin-right: 1em;"><img alt="financial planning" border="0" data-original-height="853" data-original-width="1280" height="426" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh_bglaTH2D7yIhsDLfJk0ssWAQQ3-vps-AOS6CrCGTKXjphwj3x9egNSOiUA4KF0TUkhFuHy6QW2tFGJFiLq4RfGZuT2rLcGXkN4LH2ySEEiEqWh8OK1WZ_5OhKWfdEYCQ0iDtK5rVkZN5V5yLCrFHOomEvI9cO5f3iv6mcNr1NrpsikUEhnrBHXI3/w640-h426/pexels-jessica-lewis-creative-10024581.jpg" title="financial planning" width="640" /></a></h4><h4 style="text-align: justify;">Effective financial planning enables individuals to:</h4><p style="text-align: justify;"></p><ul><li>Create a budget to manage expenses and save effectively</li><li>Set financial goals and make a plan to achieve them</li><li>Minimize debt and manage credit responsibly</li><li>Build an emergency fund for unexpected expenses</li><li>Invest for long-term growth and financial security</li></ul><p></p><p style="text-align: justify;">Without proper financial planning and security, individuals may experience financial stress, struggle to make ends meet, or miss out on opportunities to grow their wealth. Additionally, having a plan in place can also provide peace of mind and the confidence to make sound financial decisions. It's never too early or too late to start planning for your financial future, and seeking professional advice from a financial advisor can be very helpful.</p><h3 style="text-align: justify;">2. The Power of Mutual Funds</h3><p style="text-align: justify;"><a href="https://aniketpatkarinvestments.blogspot.com/2021/08/what-is-mutual-fund-and-how-it-will.html" target="_blank">Mutual funds</a> are a type of investment vehicle that pools money from multiple investors to buy a diversified portfolio of stocks, bonds, and other securities. One of the key benefits of mutual funds is diversification, which means spreading out your investments across a variety of different assets to minimize risk.</p><p style="text-align: justify;">Another benefit of mutual funds is professional management. Mutual funds are managed by investment professionals who have the knowledge and expertise to make informed decisions about which securities to buy and sell.</p><p style="text-align: justify;">There are several types of mutual funds to choose from, including equity funds, debt funds, and balanced funds. Equity funds invest in stocks, debt funds invest in bonds, and balanced funds invest in a combination of both. Each type of fund has its own set of pros and cons, so it's important to do your research and choose the one that aligns with your investment goals and risk tolerance.</p><p style="text-align: justify;">One way to invest in mutual funds is through a <a href="https://aniketpatkarinvestments.blogspot.com/2021/08/how-mutual-fund-sip-magic-works-for-investor.html" target="_blank">Systematic Investment Plan (SIP)</a>. SIP allows investors to invest a fixed amount at regular intervals automatically, rather than a manual lump sum. It has the benefits of rupee cost averaging and the power of compounding.</p><p style="text-align: justify;">Rupee cost averaging is a strategy where an investor invests a fixed amount at regular intervals, regardless of the NAV. This helps in averaging out the purchase price over time and reduces the impact of volatility.</p><p style="text-align: justify;">The power of compounding is a key benefit of investing in mutual funds, as it allows your investment to grow at an exponential rate over time. When the returns on your investment are reinvested, they earn returns on their own returns, which leads to exponential growth. For example, if you invest Rs.1000 in a mutual fund with a 10% annual return, at the end of the first year, your investment will be worth Rs.1100. If you leave that Rs.100 in the fund and it continues to earn 10% annually, it will be worth Rs.1210 at the end of the second year. By the end of the third year, it will be worth Rs.1331, and so on. As you can see, the returns on your investment grow larger each year, thanks to the power of compounding. The longer the time horizon, the more powerful the compounding effect can be. It is important that we should start investing early to let the investment grow for a longer period of time & reap the full benefits of compounding. </p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEihFunu1n3FDuxHSYZqinPuCIouLdiVTZvOrilebX7UnPy_I_BZP5qJ4WRl1reaX67Dsm6uyjK11FvJDY9pYdKjfSekK7hAOAjhSTZ846XQzi4COfxBzYltS1Eg6otMI2gnIhwhWVfcX3ofwM5-94padTOQCBFVXEMK7vMRW_T6ZvgqKVkxCA7S7XGi/s1280/coins-g89023e7ad_1280.jpg" style="margin-left: 1em; margin-right: 1em;"><img alt="mutual funds and power of compounding" border="0" data-original-height="949" data-original-width="1280" height="474" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEihFunu1n3FDuxHSYZqinPuCIouLdiVTZvOrilebX7UnPy_I_BZP5qJ4WRl1reaX67Dsm6uyjK11FvJDY9pYdKjfSekK7hAOAjhSTZ846XQzi4COfxBzYltS1Eg6otMI2gnIhwhWVfcX3ofwM5-94padTOQCBFVXEMK7vMRW_T6ZvgqKVkxCA7S7XGi/w640-h474/coins-g89023e7ad_1280.jpg" title="mutual funds and power of compounding" width="640" /></a></div><p style="text-align: justify;">Regularly reviewing and adjusting your investment portfolio can also help maximize the power of compounding in your mutual fund investments.</p><p style="text-align: justify;">To start investing in mutual funds, you can open an account on each mutual fund site, then research and select the mutual funds you want to invest in that are suitable as per your risk appetite. You can also consult a <a href="https://aniketpatkarinvestments.blogspot.com/2021/08/Direct-vs-Regular-investment-in-Mutual-Funds--Role-of-Mutual-Fund-Distributor.html" target="_blank">financial advisor </a>for guidance.</p><h3 style="text-align: justify;">3. The Importance of Insurance</h3><p style="text-align: justify;">Insurance plays an important role in protecting an individual's financial future. It helps to manage the financial impact of unexpected events such as death, illness, accidents, or property damage. By paying a premium, individuals can transfer the financial risk of such events to an insurance company.</p><h4 style="text-align: justify;">There are several types of insurance that individuals can consider to secure their financial future. These include:</h4><p style="text-align: justify;"></p><ul><li><a href="https://aniketpatkarinvestments.blogspot.com/2022/06/why-should-you-buy-term-insurance-at-a-young-age.html" target="_blank">Life insurance</a> - It provides financial support to your loved ones in the event of your death.</li><li><a href="https://aniketpatkarinvestments.blogspot.com/2022/07/7-reasons-why-employer-health-insurance-might-not-be-enough.html" target="_blank">Health insurance</a> - It helps cover the cost of medical expenses.</li><li>Property insurance - It covers damage or loss to your property, such as your <a href="https://aniketpatkarinvestments.blogspot.com/2022/12/top-reasons-you-should-protect-your-Home-Loan-with-Term-Insurance.html" target="_blank">home</a> or car.</li><li>Car insurance - It covers damage or loss to your vehicle, as well as liability for any accidents you may cause.</li><li>Personal accident insurance - It provides financial assistance in the event of an accident resulting in injury or death.</li><li>Cyber insurance - It is a type of insurance that helps protect individuals and businesses from financial losses resulting from cyber attacks or data breaches. This type of insurance can provide coverage for a variety of cyber-related risks</li></ul><p></p><p style="text-align: justify;">Having adequate insurance coverage is crucial to protect against the financial impact of unexpected events and to ensure that you are prepared for any eventuality. It is important to review your insurance coverage regularly and make sure you have the right amount of coverage to meet your needs. To purchase insurance, it is important to research and compare different policies to find the one that best suits your needs. You can also consult a financial advisor or insurance agent for guidance. </p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjli5H1C34XJU31SPgCOKl0P7m919LurtydVRhc6xNMobSn0IpG6ZQKYzdag5J_n7CGEs4Jy1a2XSlUkUdfcDTH0yCqf-kJ1Ep1u3pZwdnqiFHPuPMREwowdLWUqtyFsaVl3GwRlcc8aGL9jVYLrnChIWhfSfay-MCeMcHUK_jepWPxDM18EWLj6RND/s1280/insurance-g338716417_1280.jpg" style="margin-left: 1em; margin-right: 1em;"><img alt="insurance" border="0" data-original-height="900" data-original-width="1280" height="450" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjli5H1C34XJU31SPgCOKl0P7m919LurtydVRhc6xNMobSn0IpG6ZQKYzdag5J_n7CGEs4Jy1a2XSlUkUdfcDTH0yCqf-kJ1Ep1u3pZwdnqiFHPuPMREwowdLWUqtyFsaVl3GwRlcc8aGL9jVYLrnChIWhfSfay-MCeMcHUK_jepWPxDM18EWLj6RND/w640-h450/insurance-g338716417_1280.jpg" title="insurance" width="640" /></a></div><p style="text-align: justify;">In conclusion, financial planning and security are essential for achieving long-term financial goals and maintaining financial well-being. Investing in mutual funds and securing insurance coverage can help to protect your financial future and provide peace of mind.</p><p style="text-align: justify;">As we celebrate Republic Day and reflect on the importance of freedom, it's a great opportunity to take control of your financial future. By creating a plan, setting financial goals, and taking steps to achieve them, you can work towards financial freedom and put your finances in a framework.</p><p style="text-align: justify;">However, it's important to remember that financial planning can be complex and it can be helpful to seek professional advice from a financial advisor. A financial advisor can help you create a personalized plan that takes into account your unique financial situation, goals, and risk tolerance. They can also provide guidance on <a href="https://aniketpatkarinvestments.blogspot.com/2021/08/best-investment-ideas-for-beginners.html" target="_blank">investment options</a>, insurance coverage, and <a href="https://aniketpatkarinvestments.blogspot.com/2022/01/8-best-tax-saving-investment-options.html" target="_blank">tax planning</a>.</p><div style="text-align: justify;"><br /></div>Aniket Patkarhttp://www.blogger.com/profile/02215989324767435904noreply@blogger.com0Pune, Maharashtra, India18.5204303 73.8567437-9.7898035361788445 38.700493699999996 46.830664136178846 109.0129937tag:blogger.com,1999:blog-3662466771038419723.post-49257579668229504212023-01-21T17:57:00.010+05:302023-01-23T23:19:57.560+05:305 financial resolutions to kick off this new year<p style="text-align: justify;">The start of a new year is a great time to set goals for you and your family, especially related to your finances. You can set a <a href="https://aniketpatkarinvestments.blogspot.com/2021/08/setting-smart-financial-goals.html" target="_blank">goal</a> that's specific to you or you might set it as part of an overall goal to improve your financial health. You might be setting goals to start a business, save for a vacation, plan for your <a href="https://aniketpatkarinvestments.blogspot.com/2021/10/how-to-plan-and-invest-for-your-childs-higher-education.html" target="_blank">children's education</a>, <a href="https://aniketpatkarinvestments.blogspot.com/2021/10/importance-of-retirement-plan-and-how-to-build-one.html" target="_blank">Retirement corpus</a> or even buy a house. With a little bit of planning and discipline, you can achieve financial freedom and stability early in life. However, it's easy to lose track of financial goals as the year progresses, which is why it's important to have a plan in place. </p><div class="separator" style="clear: both; text-align: justify;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi21HNXeQdFJMLFe_yxRDtCEKgRRk6EcxtridRVpU8s83iaJJBcema_4YDQf50qYzg9JK19VTsawm2yXZaTYT7I48drG6o4WoKwjHIUnNL3XvZxLBoo1icKi0K6oJU09NTW-Hi5edmjuzTGGWdWkouQopxjLrDFJGaQovdkbqEHZqHt2RrlEcs18OzG/s1920/Resolution.jpg" style="margin-left: 1em; margin-right: 1em;"><img alt="5 financial resolutions to kick off this new year" border="0" data-original-height="1281" data-original-width="1920" height="428" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi21HNXeQdFJMLFe_yxRDtCEKgRRk6EcxtridRVpU8s83iaJJBcema_4YDQf50qYzg9JK19VTsawm2yXZaTYT7I48drG6o4WoKwjHIUnNL3XvZxLBoo1icKi0K6oJU09NTW-Hi5edmjuzTGGWdWkouQopxjLrDFJGaQovdkbqEHZqHt2RrlEcs18OzG/w640-h428/Resolution.jpg" title="5 financial resolutions to kick off this new year" width="640" /></a></div><div style="text-align: justify;"><br /></div><p style="text-align: justify;">Here are 5 financial resolutions to kick off the new year and help you meet your financial goals. </p><h3 style="text-align: left;">1.Review monthly Expenses</h3><p style="text-align: justify;">Start the year by reviewing your monthly expenses. Write all your monthly incomes (salary, business, etc.) and each daily expense. Use a jointly shared Google spreadsheet between your family members and keep it in Google Drive. This way, you will be able to track your expenses very easily and set priorities for future financial goals and monthly investments needed for it. After assessing your monthly expenses you must try to reduce these expenses. </p><h3 style="text-align: left;">2.Invest money for the future & Start saving now.</h3><p style="text-align: justify;"><a href="https://aniketpatkarinvestments.blogspot.com/2021/08/saving-and-investing-difference-and.html" target="_blank">Start investing</a> early as only saving will not help you beat inflation. Invest in different assets and diversify your portfolio. Proper <a href="https://aniketpatkarinvestments.blogspot.com/2022/02/Asset-Allocation-And-Diversification-For-Long-Term-Wealth-Creation.html" target="_blank">Asset allocation</a> is important. To not lose track, automate your investment process. Use mediums such as <a href="https://aniketpatkarinvestments.blogspot.com/2021/08/how-mutual-fund-sip-magic-works-for-investor.html" target="_blank">Systematic investment plans (SIP)</a>. <a href="https://aniketpatkarinvestments.blogspot.com/2021/11/Should-You-Invest-in-Stocks-or-Mutual-Funds.html" target="_blank">Direct equity </a>or <a href="https://aniketpatkarinvestments.blogspot.com/2021/08/what-is-mutual-fund-and-how-it-will.html" rel="nofollow">Mutual funds</a> have the potential to give you higher returns compared to other investment avenues. Also, check different <a href="https://aniketpatkarinvestments.blogspot.com/2022/01/8-best-tax-saving-investment-options.html" target="_blank">tax-saving investments</a>.</p><h3 style="text-align: left;">3.Build an Emergency Fund</h3><p style="text-align: justify;">You should have sufficient funds kept aside for emergencies. An emergency fund helps you avoid having to liquidate your long-term investments. Keeping aside an emergency fund of five to six months of living expenses is known to be safe and also in safe liquid assets.</p><h3 style="text-align: left;">4.Assess & plan to get out of debt.</h3><p style="text-align: justify;"><a href="https://aniketpatkarinvestments.blogspot.com/2021/08/should-i-invest-or-pay-off-debt.html" target="_blank">Review your different debts</a>, such as Credit card bills, <a href="https://aniketpatkarinvestments.blogspot.com/2022/12/top-reasons-you-should-protect-your-Home-Loan-with-Term-Insurance.html" target="_blank">home loans</a>, personal loans, etc. It is good if you are already managing your debt smartly, consider taking steps to reduce it further. Target high-interest-rate debt first. Reducing the number of loans you carry can help you simplify your financial life. Pay your credit card bills on time. Try not to buy anything with a Credit card, and Prioritize your shopping needs.</p><h3 style="text-align: left;">5.Secure your family with insurance cover</h3><p style="text-align: justify;">You and your family are one unfortunate emergency away from a financial crisis that's why adequate insurance coverage is very important. Purchase an insurance policy to protect your assets in an unanticipated event or death. Types of insurance coverage include mainly life & health coverage. Buy a pure <a href="https://aniketpatkarinvestments.blogspot.com/2022/06/why-should-you-buy-term-insurance-at-a-young-age.html" target="_blank">Term insurance</a> plan to secure your family. Buy this as early as possible to have a super low premium. Even if you already have <a href="https://aniketpatkarinvestments.blogspot.com/2022/07/7-reasons-why-employer-health-insurance-might-not-be-enough.html" target="_blank">health insurance</a> from your employee, it is always advisable to buy separate family floater health insurance. Employee health insurance is generally not customized to your needs.</p><p style="text-align: justify;">By setting these financial resolutions and following through with them, you can work towards achieving financial freedom and stability. Remember to keep track of your expenses regularly and make adjustments to your plan as needed. </p><p style="text-align: justify;">In this article, we have covered the most important resolutions that you can consider for your financial well-being in the new year. However, if you are looking for more in-depth information and tips on how to achieve financial goals, check out our blog for more articles and resources. </p>Aniket Patkarhttp://www.blogger.com/profile/02215989324767435904noreply@blogger.com0Pune, Maharashtra, India18.5204303 73.8567437-9.7898035361788445 38.700493699999996 46.830664136178846 109.0129937tag:blogger.com,1999:blog-3662466771038419723.post-42392415216337385312022-12-11T21:01:00.000+05:302022-12-11T21:01:57.046+05:30 Top reasons you should protect your Home Loan with Term Insurance<p style="text-align: justify;">Buying a home is everyone's dream. Among many <a href="https://aniketpatkarinvestments.blogspot.com/2021/08/setting-smart-financial-goals.html" target="_blank">financial goals</a>, this one takes sometimes many years of saving up money, curbing unnecessary expenditures, securing a home loan, and paying regular EMIs. </p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhFgrmy3GOxAK3bt4gEpsuR_lxz4tfUccZBFgcJPsu2AIojNo9ppgsYxiJ9YymcIJYfr4e9jHZaFV-caLCE6NcV0h_S9hyDnAMjPUe8SFEvoAdaE1vlmdRGHt3JIGeVNB2SOuQzDcjluMpVNAehLIDM5y9oiz-wzFqQI1LCBml0cYgS2WF1dCa0zITe/s1920/home%20loan.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="1080" data-original-width="1920" height="360" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhFgrmy3GOxAK3bt4gEpsuR_lxz4tfUccZBFgcJPsu2AIojNo9ppgsYxiJ9YymcIJYfr4e9jHZaFV-caLCE6NcV0h_S9hyDnAMjPUe8SFEvoAdaE1vlmdRGHt3JIGeVNB2SOuQzDcjluMpVNAehLIDM5y9oiz-wzFqQI1LCBml0cYgS2WF1dCa0zITe/w640-h360/home%20loan.jpg" width="640" /></a></div><p style="text-align: justify;">Nowadays, it is almost impossible for young salaried families to buy a house on their salary income. Most people take home loan to help them achieve their dream of buying their own home. It is important to note here that the lender will not provide the full amount required to buy a home. Apart from that, you have to pay 20% down payment, stamp duty, and other registration charges. The lender will provide with up to 80% of the total value of the property. </p><p style="text-align: justify;">They will let you choose a loan term that ranges from 15 to 30 years. If you choose a longer term out of convenience, they will charge you hefty interest every year. You will have to pay the loan back over time with the help of big <a href="https://aniketpatkarinvestments.blogspot.com/2021/10/what-should-you-do-with-your-emi-money-after-repaying-your-Home-loan.html" target="_blank">EMI</a>s. </p><p style="text-align: justify;">The EMI for your home loan generally should not be more than 40% of your monthly income. This will ensure that you are not stretching your budget beyond reason.</p><h3 style="text-align: justify;">Cover your home loan</h3><p style="text-align: justify;">Though it is not mandatory to purchase any sort of insurance and secure your home loan. Paying your EMIs when you have a stable income is easy. But, have you thought about how your family will survive if something happens to you? If you’re the main earner? to whom do your liabilities get transferred? </p><p style="text-align: justify;">Your all liabilities will be transferred to your family and if they are not able to repay your liabilities the property or things for which loans are taken will get possessed by the financial institution. </p><p style="text-align: justify;">This will put your loved ones in a complete financial crisis and could leave them without a home. With all this in mind, securing your home loan with an insurance plan makes complete sense.</p><p style="text-align: justify;">Your insurance plan provides them with financial security when they need it the most. If you aren't around to provide for your family anymore, the insurance policy payout will help them repay the loan.</p><h3 style="text-align: justify;">Why Term Insurance?</h3><p style="text-align: justify;">There are different ways in which you can secure your home loan. There are specific loan insurance products available in the market. But, most people opt for a pure-term plan instead. Top reasons you should protect your Home Loan with <a href="https://aniketpatkarinvestments.blogspot.com/2022/06/why-should-you-buy-term-insurance-at-a-young-age.html" target="_blank">Term Insurance plan</a>,</p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh4_VUQ8qmMB9jefBQmO00pz-h_PqOvPVY-bMwvQqyf8ofWSROX0qCLo_gUDM2AKt3CxaZmWRGfwTnJPqojbL_P7FD_FH6nrSAuYs8EZB7VTqJqBfAzCN07dqa-KXsZpQSy_qnljMMXCUzmV7n2_BE93EfrR-Q7f_S4a4a5m_jkHXHeH_cIkhBZfJUB/s1280/insurance.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="960" data-original-width="1280" height="480" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh4_VUQ8qmMB9jefBQmO00pz-h_PqOvPVY-bMwvQqyf8ofWSROX0qCLo_gUDM2AKt3CxaZmWRGfwTnJPqojbL_P7FD_FH6nrSAuYs8EZB7VTqJqBfAzCN07dqa-KXsZpQSy_qnljMMXCUzmV7n2_BE93EfrR-Q7f_S4a4a5m_jkHXHeH_cIkhBZfJUB/w640-h480/insurance.jpg" width="640" /></a></div><h4 style="text-align: justify;">Higher Cover for Affordable Premiums</h4><p style="text-align: justify;">Term plans are pure protection plans. They do not offer any additional maturity benefits, this feature makes them the most affordable life insurance product in the market. You can get a life cover of Rs. 2 crores for just Rs. 1,000 per month with a term insurance plan. Generally, it is advisable to opt for a life cover that is a little more than your home loan amount. The payout from the term policy will allow your nominee to pay off the loan/liabilities and have financial stability in future life. </p><h4 style="text-align: justify;">Benefit Amount</h4><p style="text-align: justify;">If you opt for a loan cover insurance product, the cover amount depends on the pending loan payments. So, the cover amount decreases over time. also, it covers only the loan and no life. </p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi4rkdiOcHLTRqGRJ3xGwuKjxmRXEl3fpluywugodahukpo4Rz12c-HIB0twl_3lsy25q8BmIS3xAbEurYUQhF_YF973W7M3TC2JisZU8O8F_aiaz53sxVxSaJIee3zftjE76ClPkVMOcDBxcVz9yBl6TQh4LDGyizb0Xjk2isNIJUTTc-OCnEILFpJ/s1280/home%20loan%20insurance-.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="887" data-original-width="1280" height="444" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi4rkdiOcHLTRqGRJ3xGwuKjxmRXEl3fpluywugodahukpo4Rz12c-HIB0twl_3lsy25q8BmIS3xAbEurYUQhF_YF973W7M3TC2JisZU8O8F_aiaz53sxVxSaJIee3zftjE76ClPkVMOcDBxcVz9yBl6TQh4LDGyizb0Xjk2isNIJUTTc-OCnEILFpJ/w640-h444/home%20loan%20insurance-.jpg" width="640" /></a></div><div class="separator" style="clear: both; text-align: justify;"><span style="text-align: left;">If something happens to the policyholder towards the end of the loan repayment term, the sum assured would not amount to much. So your family will not get any benefit financially other than closing loan/liability. </span></div><p style="text-align: justify;">When you purchase a term plan, the sum assured remains the same during policy period, irrespective of your loans or other liabilities. Since these policies offer a fixed benefit, they are often viewed as the safer option to secure your home loan as well as life and will be paid with the whole sum assured.</p><h4 style="text-align: justify;">Loan Transfer Support</h4><p style="text-align: justify;">At some point, you may choose to switch your home loan from one lender to another because of the low-interest rate or better service. If you do this, it could change your interest rate and EMI amounts. Since a loan insurance policy depends on the loan and repayment, there could be a lot of paperwork to complete the loan transfer. Thankfully, term plans are not dependent on these details. </p><p style="text-align: justify;">So even if you transfer your loan from one lender to another, your term plan will continue to provide the same amount of cover.</p><h4 style="text-align: justify;">Beneficiary</h4><p style="text-align: justify;">For home loan insurance plans, the lender becomes the beneficiary. So, the insurance payout goes to the lender if anything happens to the policyholder before they finish repaying the loan. The family will not get any financial benefit except the closing of the loan.</p><p style="text-align: justify;">With a term plan, the beneficiary can be a family or family member. The policyholder chooses a beneficiary at the time of purchasing the policy. The beneficiary get the whole amount of sum assured and he/she can choose how to use it.</p><h4 style="text-align: justify;">Delayed EMIs/ EMI Pause</h4><p style="text-align: justify;">As we saw during the pandemic, as per government guidelines and banker's support, home loan taker could have paused their EMIs for a certain period to get help surviving the financial crisis. In case the home loan taker delays an EMI payment, they become accountable to pay an additional interest amount. Unfortunately, the home loan insurance plan does not increase the sum assured amount to accommodate the new interest. In case something happens to the policyholder, his/her family members will have to pay the additional interest amount from their pocket. Considering such a scenario, Policyholders should pick a sum assured amount slightly more than the value of the home loan. This will help them cover the additional interest.</p><p style="text-align: justify;">Individuals who are taking a home loan should consider their options carefully before choosing between home loan insurance and term insurance. Those who already have adequate life cover through the term life insurance plan can opt for a separate home loan protection plan as necessary. If they do not have any life coverage yet, opting for a pure-term plan might be the better choice.</p><div><br /></div>Aniket Patkarhttp://www.blogger.com/profile/02215989324767435904noreply@blogger.com0Pune, Maharashtra, India18.5204303 73.8567437-9.7898035361788445 38.700493699999996 46.830664136178846 109.0129937tag:blogger.com,1999:blog-3662466771038419723.post-16237172505160711422022-08-15T22:45:00.018+05:302022-08-15T22:58:02.933+05:30How new earners can start their journey to create long-term wealth<p style="text-align: justify;">The earlier one starts their journey towards wealth creation, the more time he or she gets to grow and benefit from the power of compounding. This helps achieve even big financial goals with a considerably lower investment.</p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhGDKeQQOZEpTCajg4ybMEI3mAfkeYbyzcbwvpYfUrQT-jUdomnJ77g7FE_AkSeQFzf9B7e8_--9EMgSXkY4q3YHuwEoXEgbL1nFYRqLe9WIhcVxT3zZwnh8PUDCCW1huwxVxk-uViKlgcAmwUwIzleJ6jP9tITHEVsXCtWpNFuu7onYC1iMISUM4Dc/s6000/pexels-mikhail-nilov-6592659.jpg" style="margin-left: 1em; margin-right: 1em;"><img alt="young earners" border="0" data-original-height="4000" data-original-width="6000" height="426" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhGDKeQQOZEpTCajg4ybMEI3mAfkeYbyzcbwvpYfUrQT-jUdomnJ77g7FE_AkSeQFzf9B7e8_--9EMgSXkY4q3YHuwEoXEgbL1nFYRqLe9WIhcVxT3zZwnh8PUDCCW1huwxVxk-uViKlgcAmwUwIzleJ6jP9tITHEVsXCtWpNFuu7onYC1iMISUM4Dc/w640-h426/pexels-mikhail-nilov-6592659.jpg" title="young earners" width="640" /></a></div><div style="text-align: center;"><i><span style="color: #999999;">Photo courtesy pexels-mikhail-nilov</span></i></div><p style="text-align: center;"><span style="color: #999999;"><span style="text-align: left;"></span></span></p><blockquote style="text-align: justify;"><blockquote><span style="color: #073763;">All the returns in life, whether in wealth, relationships, or knowledge, come from compound interest. - Naval Ravikant</span></blockquote></blockquote><p></p><p></p><p style="text-align: justify;">The lack of financial literacy among new earners often leaves them ignorant about the importance of savings, and investment for long-term wealth creation. Salaries earned during the initial years are often spent on immediate lifestyle, entertainment & travel leaving investments for wealth creation for later years. However, savings and investments made during the initial working years can have a long-term compound impact on their financial well-being. </p><p style="text-align: justify;">Here are some steps new earners can follow while starting their journey to create long-term wealth,</p><h3 style="text-align: justify;">Write down Daily Expenses</h3><p style="text-align: justify;">Writing your daily expenses will ensure that you know where your money goes. This will help you control your spending habits. Spend your money wisely.</p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgLyzpa9Zc_pdrX79Xe0_26UbkCtyc6dDLs41Kes9IGkmpG4Ky1RyIW_N9ujLYodXfjuCtlPvNqGasLVyHyvB9lkFOlR7wu1Wm8vgas9cM0PIMPDZt7Zyn80JNSLYO6rjS59z-zKKoz4vqELXKYom3GW_WbvA4FUDR818RxXrYzmyyU4l5Wijpi_pwT/s1280/pexels-rodnae-productions-7491011.jpg" style="margin-left: 1em; margin-right: 1em;"><img alt="daily expenses" border="0" data-original-height="853" data-original-width="1280" height="426" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgLyzpa9Zc_pdrX79Xe0_26UbkCtyc6dDLs41Kes9IGkmpG4Ky1RyIW_N9ujLYodXfjuCtlPvNqGasLVyHyvB9lkFOlR7wu1Wm8vgas9cM0PIMPDZt7Zyn80JNSLYO6rjS59z-zKKoz4vqELXKYom3GW_WbvA4FUDR818RxXrYzmyyU4l5Wijpi_pwT/w640-h426/pexels-rodnae-productions-7491011.jpg" title="daily expenses" width="640" /></a></div><i><div style="text-align: center;"><i><span style="color: #999999;">Photo courtesy pexels-rodnae-productions</span></i></div></i><h3 style="text-align: left;"><span style="text-align: justify;">Prepare a financial plan </span></h3><p style="text-align: justify;">Financial planning is the process of creating a wealth management plan to achieve your <a href="https://aniketpatkarinvestments.blogspot.com/2021/08/setting-smart-financial-goals.html" target="_blank">financial (SMART) goals</a> based on one’s income, investment horizon, and risk appetite. A financial plan provides clear direction to one’s investments with a disciplined approach and ensures regular investments at optimal risk.</p><p style="text-align: justify;">One should start the process of creating a financial plan by estimating the amounts required for each financial goal with the predefined rate of return & time horizon to beat the inflation rate. Calculate the required monthly amount to be invested for that financial goal. A perfect financial plan also considers Life insurance cover (pure term plan), Health insurance cover, and emergency fund needs.</p><h3 style="text-align: justify;">Asset class selection for long-term goals</h3><p style="text-align: justify;">Many new earners are ignorant about investment and if they think about it, they tend to avoid equities for long-term financial goals and prefer fixed <a href="https://aniketpatkarinvestments.blogspot.com/2021/08/best-investment-ideas-for-beginners.html" target="_blank">income instruments</a> such as bank fixed deposits(FD), public provident fund (PPF), and National Savings Certificates(NSC), etc. which are generally advised by their parents & uncles. However, the rate of return generated by these fixed income instruments cannot beat inflation.</p><p style="text-align: justify;">Generally, Equity as an asset class has the capability to beat both fixed income instruments and inflation over the long term. Hence, young earners should start their equity journey by investing in equity, either in stocks directly or in mutual funds. <a href="https://aniketpatkarinvestments.blogspot.com/2021/08/what-is-mutual-fund-and-how-it-will.html" target="_blank">Mutual funds</a> provide a combination of professional management and diversification at a much lower cost.</p><p style="text-align: justify;">New earners should invest in equity mutual funds for any long-term (more than 5 years) financial goal. Equities are very volatile in the short term so it is recommended that they should invest in fixed income instruments like high-yield bank FDs for the short term.</p><h3 style="text-align: justify;">Invest early through SIP</h3><p style="text-align: justify;">New earners tend to postpone their long-term investments like <a href="https://aniketpatkarinvestments.blogspot.com/2021/10/importance-of-retirement-plan-and-how-to-build-one.html" target="_blank">retirement planning</a> and focus more on lifestyle expenses. These Essential and big financial goals are considered by them as something that can be worked out later. However, the earlier one starts investing, the more time investments get to grow and get the benefit of the power of compounding. This will help achieve big financial goals with a much lower monthly investment also it will get you more time to average out on any losses.</p><p style="text-align: justify;">New earners can use the <a href="https://aniketpatkarinvestments.blogspot.com/2021/08/how-mutual-fund-sip-magic-works-for-investor.html" target="_blank">systematic investment plan (SIP)</a> mode because it is the best way for disciplined regular investment, it also ensures rupee cost-averaging by purchasing more units when prices decline. This eliminates the necessity of timing the market for investments and monitoring your portfolio from time to time.</p><p style="text-align: justify;">The longer you stay invested, the more money you make because returns compound. Morgan Housel in his book 'Psychology of Money' recommends that you take advantage of compounding by finding investments that perform consistently over time. This strategy will make you the most money because of the power of compound interest. How long you stay invested is the most important factor determining your investment success, even more than other factors that seems more important like annual returns. </p><p style="text-align: justify;">Housel explains this point with the stories of James Simons and Warren Buffett. Hedge fund executive James Simons is arguably the world’s best investor since 1988, his annual returns have compounded at 66%; three times the rate of Buffett’s investments. However, Buffett is 75% wealthier than Simons. This is because Simons only started achieving his 66% rate when he was 50, while Buffett has been earning 22% a year since he was 10 years old. Buffett is wealthier not because he’s a better or more intelligent investor, but because he’s been investing for a much longer period.</p><h3 style="text-align: justify;">Appropriate Insurance cover</h3><p style="text-align: justify;">The primary reason for buying life insurance policies is to provide replacement income to dependents in case of a policyholder’s untimely demise. Ideally, life cover should be more than 15 times one’s average annual income. However, many end up buying moneyback policies and endowment policies that offer inadequate life cover and generate inadequate poor returns.</p><p style="text-align: justify;"><a href="https://aniketpatkarinvestments.blogspot.com/2021/08/Why-we-cannot-consider-Insurance-as-an-investment.html" target="_blank">Young earners should not consider insurance as an investment</a> and separate investment from life insurance by buying pure term policies for life cover and investing in mutual funds for wealth creation since Term policies provide large life cover at a very low premium. <a href="https://aniketpatkarinvestments.blogspot.com/2022/06/why-should-you-buy-term-insurance-at-a-young-age.html" target="_blank">Buying a Term insurance plan at a young age has benefits</a> such as low premium due to young age & being healthy, covering your other liabilities at a low cost, covering your loved ones early, etc.</p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi3ckNn5fynVbrwzCuOm_mBZnMiiSDzjBTxEa-QSnHpHltDo4zXTbDw9b7UVrD3LRkhOmxtG3KJD74usW8DIWjLx_s4Zoz7t38n6Qucp_kD7WRatjSMX7YqI6-octuLwHkaI9k-QRiSNxN1gFbnMJgghDhXBtS5tnvuCOWQBJp8_56QOEzSGbuAilqb/s5184/pexels-kindel-media-7688374.jpg" style="margin-left: 1em; margin-right: 1em;"><img alt="insurance" border="0" data-original-height="3888" data-original-width="5184" height="480" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi3ckNn5fynVbrwzCuOm_mBZnMiiSDzjBTxEa-QSnHpHltDo4zXTbDw9b7UVrD3LRkhOmxtG3KJD74usW8DIWjLx_s4Zoz7t38n6Qucp_kD7WRatjSMX7YqI6-octuLwHkaI9k-QRiSNxN1gFbnMJgghDhXBtS5tnvuCOWQBJp8_56QOEzSGbuAilqb/w640-h480/pexels-kindel-media-7688374.jpg" title="term insurance" width="640" /></a></div><i><div style="text-align: center;"><span style="color: #999999;"><i style="text-align: left;"><span style="text-align: center;">Photo courtesy </span></i><i>pexels-kindel-media</i></span></div></i><p style="text-align: left;"><span style="text-align: justify;">Young earners should also buy health insurance policies with adequate cover to be prepared for medical emergencies like hospitalization considering rising healthcare costs. While many employers cover their employees under group health insurance policies, the cover provided by such policies is usually inadequate to meet hospitalization costs.</span></p><p style="text-align: justify;">These policies also lapse on changing jobs, leaving employees without medical cover till their new employer provides them with health insurance. <a href="https://aniketpatkarinvestments.blogspot.com/2022/07/7-reasons-why-employer-health-insurance-might-not-be-enough.html" target="_blank">Buying separate health policies at a young age while being healthy will enable one to cover a higher number of diseases at a lower premium</a>.</p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiuq1vsvX6Nb3SxkC_PbjzAel2bpLhLGw_JpWdRj51ypPrEhh2x58LSnt8G0TQUOo3mFwCrKluOU740vUHC9i4RpTc1wnoe1uh-WCfWYWoZvaZ20IQa1aM-1EUe1IykHnjk946nkzG7v5An5Ee8E4FA00W5hCCnZ663tVjDpIRdrc10RZaASINN78wO/s6016/pexels-olya-kobruseva-7163953%20(1).jpg" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="4016" data-original-width="6016" height="428" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiuq1vsvX6Nb3SxkC_PbjzAel2bpLhLGw_JpWdRj51ypPrEhh2x58LSnt8G0TQUOo3mFwCrKluOU740vUHC9i4RpTc1wnoe1uh-WCfWYWoZvaZ20IQa1aM-1EUe1IykHnjk946nkzG7v5An5Ee8E4FA00W5hCCnZ663tVjDpIRdrc10RZaASINN78wO/w640-h428/pexels-olya-kobruseva-7163953%20(1).jpg" width="640" /></a></div><i><div style="text-align: center;"><span style="color: #999999;"><i style="text-align: left;"><span style="text-align: center;">Photo Courtesy </span></i><i>pexels-olya-kobruseva</i></span></div></i><h3 style="text-align: left;"><span style="text-align: justify;">Emergency fund</span></h3><p style="text-align: left;">New earners should create an adequate fund to deal with financial emergencies arising from job loss, disabilities, illness, or other unforeseen unfavorable life events. Without an adequate emergency fund, one would be forced to liquidate long-term investments made for financial goals or to take personal loans at higher interest rates. This can adversely impact the financial well-being and long-term wealth creation objectives of a young earner.</p><p style="text-align: justify;">Young earners should build an emergency corpus of 6 to 9 months of their monthly expenses. As financial emergencies can knock on our door any day, emergency funds should be held in savings accounts that allow instant withdrawals. Nowadays banking apps can help create FDs from mobile itself with which one also can park their emergency funds in multiple high-yield fixed deposits in smaller amounts.</p><h3 style="text-align: justify;">Consult with Financial Advisor</h3><p style="text-align: justify;">Well-educated young earners even postgraduates can be financially illiterate. Even if they are the best in their field but being financially literate is a different thing. Knowing how to save and invest for growing that hard-earned money is more important than knowing how to earn the money. We go to Doctor for medical reasons, we go to a lawyer for law/court-related advice, we go to the mechanic or garage for repairing cars but we hesitate to take advice from a Financial advisor or investment expert. Financial Experts can guide young investors in their wealth creation journey.</p><p style="text-align: justify;">In conclusion, new earners should start their journey toward their financial goals with proper financial planning as early as possible.</p><div><br /></div>Aniket Patkarhttp://www.blogger.com/profile/02215989324767435904noreply@blogger.com0Pune, Maharashtra, India18.5204303 73.8567437-9.7898035361788445 38.700493699999996 46.830664136178846 109.0129937tag:blogger.com,1999:blog-3662466771038419723.post-28695167166013626212022-08-14T14:19:00.001+05:302022-08-14T15:45:59.764+05:30 7 Investment wisdom from Rakesh Jhunjhunwala<p style="text-align: justify;">Rakesh Jhunjhunwala, the Big Bull of Dalal Street, who became one of India's biggest stock market investors to date, died at 62 in Mumbai. The stock market veteran often called 'Warren Buffett of India', was suffering from diabetes and kidney-related ailments.</p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEidndpB9K_M5a9jo-gxwDMmL2kEGkrpHMdlzhxx8X4UMIl_gBvx7ibE9vX3QprG-H6th3MZJ6FE6uzXNvDh4ujT4vuBsuGoM__GOSf8xTi0YFQBFLIToSc6AUi4ry04-QwjdTfdFm79B7eYUA50fFxnlcFqTyE9k9ZiMyE9nNFOmjZKUm2LtsWrfSmm/s1080/Rakesh%20jhunjhunwala.png" style="margin-left: 1em; margin-right: 1em;"><img alt="7 Investment wisdom from Rakesh Jhunjhunwala" border="0" data-original-height="1080" data-original-width="1080" height="640" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEidndpB9K_M5a9jo-gxwDMmL2kEGkrpHMdlzhxx8X4UMIl_gBvx7ibE9vX3QprG-H6th3MZJ6FE6uzXNvDh4ujT4vuBsuGoM__GOSf8xTi0YFQBFLIToSc6AUi4ry04-QwjdTfdFm79B7eYUA50fFxnlcFqTyE9k9ZiMyE9nNFOmjZKUm2LtsWrfSmm/w640-h640/Rakesh%20jhunjhunwala.png" title="7 Investment wisdom from Rakesh Jhunjhunwala" width="640" /></a></div><p style="text-align: justify;">According to Forbes, Rakesh Jhunjhunwala had a net worth of around $5.5 billion. An ace investor, Rakesh Jhunjhunwala started investing at an early age and has dominated the Indian stock markets for decades. </p><p style="text-align: justify;">In his time, Jhunjhunwala shared many words of wisdom. Below are 7 Investment wisdom from Rakesh Jhunjhunwala,</p><h3 style="text-align: left;">1. Continuous learning is the key</h3><p style="text-align: justify;">You cannot make money on borrowed knowledge. If you want to make money learn the skills needed for it. Study fundamentals of business and asset/stock before investing in it. Hastily taken decisions always result in heavy losses. Take your own time before putting money in any stock.</p><h3 style="text-align: left;">2. Overdiversification will not save you</h3><p style="text-align: justify;">These days, many investors invest in lots of stocks for <a href="https://aniketpatkarinvestments.blogspot.com/2022/02/Asset-Allocation-And-Diversification-For-Long-Term-Wealth-Creation.html" target="_blank">diversification</a>. It is not possible to study and monitor a huge portfolio of stocks. Choose selected stocks or asset classes for investment which has real potential to grow which you can monitor and stay invested for the long term. </p><h3 style="text-align: left;">3. Patience is important in stock market</h3><p style="text-align: justify;">You should give your investment enough time to grow because the stock market rewards ‘patient’ investors who invest for the long term. The power of compounding will need time to play its role. You cannot get rich in a short period of time.</p><h3 style="text-align: left;">4. Learn from your mistakes</h3><p style="text-align: justify;">No matter how brilliant you are in planning your investment and <a href="https://aniketpatkarinvestments.blogspot.com/2022/02/Asset-Allocation-And-Diversification-For-Long-Term-Wealth-Creation.html" target="_blank">asset allocation</a>; there will be occasions when you would end up picking the wrong asset or stock! </p><p style="text-align: justify;">Even if you don't have a well-developed risk management system, the basic principle is no creditor should ever call you asking for his money, and if he does, you should be able to pay him immediately. Prepare for losses, losses are part of a stock market investor's life. Learn from your <a href="https://aniketpatkarinvestments.blogspot.com/2021/08/top-18-common-investment-mistakes-to.html" target="_blank">investment mistakes</a>.</p><h3 style="text-align: left;">5. Go against the tide</h3><p style="text-align: justify;">Buy when others are selling and sell when others are buying. Don't go with market momentum and panic when the market is falling. Take benefit of low prices when the market is down and buy more. Keep your emotions aside while investing. Emotional decisions in investment are a sure way to make a loss in stock markets.</p><h3 style="text-align: left;">6. Don't invest based on tips</h3><p style="text-align: justify;">Never invest at unreasonable valuations. Never run for companies that are in limelight. Investing in some asset class or stock based on tips or media hype will take you on the path of losing your hard-earned money.</p><h3 style="text-align: left;">7. Risk is an essential part of investing</h3><p style="text-align: justify;">Stock markets are full of risk but if you don't take the risk, you will not get anything. Everyone has a different risk appetite & investors should consider it while investing.</p><p style="text-align: justify;">The legend is no more in us but his wisdom will guide us through our investment journey always in the future.</p>Aniket Patkarhttp://www.blogger.com/profile/02215989324767435904noreply@blogger.com0tag:blogger.com,1999:blog-3662466771038419723.post-85522142632869978062022-07-09T23:29:00.004+05:302023-01-26T15:40:24.657+05:307 Reasons why employer health insurance might not be enough<p style="text-align: justify;">You already have one respected job or recently landed one that pays you well and comes with several perks. Once you accept the offer, you get information from the company HR that the company has tied up with a leading insurance provider for health insurance cover for all employees and it is already covered in your CTC.</p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgRv4peCH88N4CRouyKMr5dP7hcRGCXbOddSzjkuVD_jsQzZPn309W1UQmGkkF1x8j_TLuQWyEMxt7YHiSh2WDGfat-1qgSjbIMV7kg1amTxK7Gl1VWyMAWFZGkuQe7jVtAqOt_6CIcIPlaxBMsMj1yYVMO467zCmTpWeAoWVYOmkqVjNbxvXAZLdlM/s1080/Why%20health%20insurance.jpg" style="margin-left: 1em; margin-right: 1em;"><img alt="7 Reasons why employer health insurance might not be enough" border="0" data-original-height="1080" data-original-width="1080" height="640" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgRv4peCH88N4CRouyKMr5dP7hcRGCXbOddSzjkuVD_jsQzZPn309W1UQmGkkF1x8j_TLuQWyEMxt7YHiSh2WDGfat-1qgSjbIMV7kg1amTxK7Gl1VWyMAWFZGkuQe7jVtAqOt_6CIcIPlaxBMsMj1yYVMO467zCmTpWeAoWVYOmkqVjNbxvXAZLdlM/w640-h640/Why%20health%20insurance.jpg" title="7 Reasons why employer health insurance might not be enough" width="640" /></a></div><p style="text-align: justify;">You think that you have free health insurance - and you don't have to spend time, effort, or put yourself through the difficult task of finding and buying the best personal health insurance plan because you already have one - right?</p><p style="text-align: justify;">There are many medical emergencies where your company's health insurance can fall short. And, when you or your family needs actual financial cover in hospitalization, it might be too late to go back and buy a personal health insurance plan.</p><p style="text-align: justify;">These medical emergencies are hard to imagine but occur more often than you'd think. - Below are reasons why you should not entirely rely on your company's health insurance plan for your healthcare needs.</p><h2 style="text-align: justify;">7 Reasons why employer health insurance might not be enough</h2><h3 style="text-align: justify;">1. It will discontinue as soon as you move or leave this company: </h3><p style="text-align: justify;">Your company health insurance policy is a group insurance plan tied to the company you are currently working with. This means that once you leave this job, you will be left without a cover or change the insurer according to the company. If you choose to pursue higher studies or start working full time on your side hustle, importantly if you retire you might end up without health insurance. This is seriously risky - especially considering that you will be older by the time you decide to take such a decision.</p><h3 style="text-align: justify;">2. Policy premiums may get expensive: </h3><p style="text-align: justify;">As you grow older the risk of getting a lifestyle disease like diabetes or hypertension increases. Once you suffer from a chronic lifestyle disease, the insurer may increase premiums by 30-40% to cover the additional risk. </p><h3 style="text-align: justify;">3. Policy may get rejected: </h3><p style="text-align: justify;">There's always a risk that your proposal might be declined altogether, and you might not get a policy because of your preexisting diseases which increases the risk for the insurer to cover.</p><p style="text-align: justify;">Imagine when you are moving closer to your retirement, and realize that you will not get a health insurance plan for an affordable cost anymore. At that time, you've to make the choice - of either going without a health cover or paying an expensive premium for a mediocre cover!</p><p style="text-align: justify;">The best time to extract the best health insurance cover from an insurer is when you are young and healthy when you don't need it at all! </p><h3 style="text-align: justify;">4. A company medical insurance policy is a group insurance policy: </h3><p style="text-align: justify;">Company policy is designed considering the budget limitations of your company. This is not a personalized insurance plan as per the employee's need but a customized best possible deal for the employee group at the least possible cost. </p><h3 style="text-align: justify;">5. Employer can end the cover anytime</h3><p style="text-align: justify;">It is important to note here that the Health insurance policy provided by an employer is just another perk of your job and not a mandatory feature. The management can choose to remove certain benefits, make you pay the premium, or discontinue the policy altogether when faced with a financial situation.</p><h3 style="text-align: justify;">6. It cannot be converted to Individual Policy: </h3><p style="text-align: justify;">If an employee quits or the employer discontinues the policy, it cannot be converted into an individual policy. The policy is an agreement between the company and the insurer, and accepting the proposal of converting it into an individual policy solely depends on the Insurance company.</p><h3 style="text-align: justify;">7. Limited coverage: </h3><p style="text-align: justify;">Most insurance policies offered by employers are sufficient only for small illnesses. Company insurance also has a cap for different types of illnesses, and the expenses more than that limit need to be paid by the employee. Non-medical expenses are not covered in the company insurance policy which generally is almost 20-25% of the total bill. Many times not all dependents in the family get covered in company policy.</p><p style="text-align: justify;">I hope that you understood the need for you to invest in a personal health insurance policy, and not entirely rely on the plan provided by your company. A family floater health insurance cover, as well as features and benefits that are tailored to your medical history and health requirements for all your family members, especially your parents, need to be bought.</p>Aniket Patkarhttp://www.blogger.com/profile/02215989324767435904noreply@blogger.com0tag:blogger.com,1999:blog-3662466771038419723.post-22338930381253964882022-06-26T18:02:00.004+05:302022-12-24T00:18:42.056+05:30Why should you buy Term insurance at a young age?<p style="text-align: justify;">Term life insurance is the last thing on our minds when we are young. Young people think that since we are young, single, and healthy, we do not require term insurance. Also, we have fewer responsibilities, we do not need insurance, and so on. However, contrary to that, a term life insurance plan is necessary and has its own benefits when we buy it early.</p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiA8xDCGyGXQxovSeIzsN-HEOC3WzjJi4uMVsthoKeEPjz4MnESp4Jv3qPK8PVDl8I_fySJrV9IUiwsA7ubAqCSnaJ0CqXB1HbpiiejejpU_67AN9Z377a7JgVHrBLTAvVD2az7atgmDpU9Wy8hGIuUjUqVE56nEZ18ysReDT4e9fsZhRbHophTaQQW/s1080/1.Why%20at%20young%20age_.jpg" style="margin-left: 1em; margin-right: 1em;"><img alt="why should you buy term insurance at young age" border="0" data-original-height="971" data-original-width="1080" height="576" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiA8xDCGyGXQxovSeIzsN-HEOC3WzjJi4uMVsthoKeEPjz4MnESp4Jv3qPK8PVDl8I_fySJrV9IUiwsA7ubAqCSnaJ0CqXB1HbpiiejejpU_67AN9Z377a7JgVHrBLTAvVD2az7atgmDpU9Wy8hGIuUjUqVE56nEZ18ysReDT4e9fsZhRbHophTaQQW/w640-h576/1.Why%20at%20young%20age_.jpg" title="why should you buy term insurance at young age" width="640" /></a></div><p>Here we will see 7 main benefits, why should you buy Term insurance at a young age.</p><h3 style="text-align: left;">1. Low & affordable Premium</h3><p>The great benefit of buying term life insurance early is to avoid paying a higher premium. The cost of term life insurance increases exponentially as you get older. Since you are healthier and have fewer responsibilities at a young age, insurance companies take these characteristics into account when determining your term life insurance premium with the same life cover and other plan features for a lower price than older age groups.</p><h3 style="text-align: left;">2. The total cost is low</h3><p>Since the premium is low, the total cost of a premium for a covered period also gets low. </p><h3 style="text-align: left;">3. Family & dependents get covered early</h3><p>If you wait too long to buy term insurance, you risk leaving your family vulnerable to financial difficulties in any unfortunate demise. Even if you are not married, your parents may find it challenging to manage their bills if they are financially dependent on you. Furthermore, if you have liabilities like a car loan, an education loan, or a home loan, your family members will be responsible for repaying them. This could put them under even more financial burden. If you buy term life insurance early on, you won't have to worry about it.</p><h3 style="text-align: left;">4. Pocket-friendly option to cover home loan</h3><p>Today, the young generation buys a home at an early age with a home loan. In any unfortunate demise, the liability of paying that big home loan is on family members. Sometimes buying home insurance may seem costly, since it covers only the home loan amount. Term insurance can be a pocket-friendly option in that case which can cover any liabilities you have with additional cover for your loved ones.</p><h3 style="text-align: left;">5. Additional Benefits </h3><p>Insurers provide additional add-ons/riders such as accidental death benefits, and critical illness cover with lesser additional cost to people at a young age. </p><h3 style="text-align: left;">6. Tax benefits</h3><p>The most significant advantage is that term plans provide a yearly tax benefit under Section 80C of the Income Tax Act, which exempts premium payments up to Rs. 1,50,000 per year.</p><h3 style="text-align: left;">7. No Rejection Due to Any Pre-Existing Illness</h3><p>Your odds of having your term policy application get rejected on health grounds as a person in your 20s with few major health difficulties are mostly negligible.</p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiyIyiqB97epZydbNJNBaNKYNUAtcKw68Gll6M55rGXlvvZEELsK7PvulG_-84DRxoJbV-Us6Rg89EzDAgH7gJlsfPrgEDgDvJxrBysa58YViC3MlVB6dSJORKmeoETNr6RmWy62Sl0H9_d33J-kMChosWF_TxKXb91FsbBeqkRYkkyUWyKNe3g-HPn/s1079/5.why%20wait_.jpg" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="966" data-original-width="1079" height="358" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiyIyiqB97epZydbNJNBaNKYNUAtcKw68Gll6M55rGXlvvZEELsK7PvulG_-84DRxoJbV-Us6Rg89EzDAgH7gJlsfPrgEDgDvJxrBysa58YViC3MlVB6dSJORKmeoETNr6RmWy62Sl0H9_d33J-kMChosWF_TxKXb91FsbBeqkRYkkyUWyKNe3g-HPn/w400-h358/5.why%20wait_.jpg" width="400" /></a></div><h3 style="text-align: left;">Conclusion</h3><p>In essence, why lose these many benefits? Term life insurance is a necessary financial decision that everyone must take at a young age. It lays a strong financial foundation that not just helps you in achieving your life goals in time but also in effectively protecting against uncertainties.</p>Aniket Patkarhttp://www.blogger.com/profile/02215989324767435904noreply@blogger.com0tag:blogger.com,1999:blog-3662466771038419723.post-53152175868912782132022-03-21T00:56:00.000+05:302022-03-21T01:00:24.299+05:30The dilemmas of first-time investors<p style="text-align: justify;">Most of us have understood the importance of investing our hard-earned money, rather than just saving it and keeping it in banks. The financial world takes lots of initiatives to improve financial literacy among the general public. There are many good and bad advice circulating in media, newspapers. Don’t let common misconceptions distract you from your <a href="https://aniketpatkarinvestments.blogspot.com/2021/08/setting-smart-financial-goals.html" target="_blank">financial goal</a>.</p><div class="separator" style="clear: both; text-align: justify;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEhojMNW8RwRQ99TF3L3oA9GFmzK9r6yEb7ZMZw5TuAwDQ3rSwqgkX1LJTQk0bBZb7m-LMdBUEs3Z1htdJeFOBQ1pAZMT-1o2MosAwaE3sEnNsaBtc7OqWb3al31bG0OSV5jhxLKcks2qG9CYE67nkKReDdRg4Np1yC4x1B0SibbjdG4Xj76SOLRYn7V=s640" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="425" data-original-width="640" height="426" src="https://blogger.googleusercontent.com/img/a/AVvXsEhojMNW8RwRQ99TF3L3oA9GFmzK9r6yEb7ZMZw5TuAwDQ3rSwqgkX1LJTQk0bBZb7m-LMdBUEs3Z1htdJeFOBQ1pAZMT-1o2MosAwaE3sEnNsaBtc7OqWb3al31bG0OSV5jhxLKcks2qG9CYE67nkKReDdRg4Np1yC4x1B0SibbjdG4Xj76SOLRYn7V=w640-h426" width="640" /></a></div><br /><p style="text-align: justify;">Let’s look at some dilemmas first-time investor goes through and the explanations that can help them to fix the dilemmas and avoid doing <a href="https://aniketpatkarinvestments.blogspot.com/2021/08/top-18-common-investment-mistakes-to.html" target="_blank">common investment mistakes</a>.</p><h4 style="text-align: justify;">1.No right time to enter the market</h4><p style="text-align: justify;">No one can give a guarantee that the market will perform well. You can make predictions based on your experience or analysis of the market but even the most seasoned market experts will not be able to tell you the right time to enter/exit the market. The time you stay invested in the market is more important than timing the market. When you invest, the ideal approach should be to start investing early and for the long-term to ensure capital appreciation and wealth creation. The compounding will play its role automatically as you stay longer in the stock market. <a href="https://aniketpatkarinvestments.blogspot.com/2021/08/how-mutual-fund-sip-magic-works-for-investor.html" target="_blank">SIP</a>s can help generate extraordinary returns.</p><h4 style="text-align: justify;">2.Balancing between diversification and over-diversification</h4><p style="text-align: justify;">Meaningful Portfolio <a href="https://aniketpatkarinvestments.blogspot.com/2022/02/Asset-Allocation-And-Diversification-For-Long-Term-Wealth-Creation.html" target="_blank">diversification</a> is important since putting all your eggs into one basket is a risk. You cannot have a portfolio with a particular category of asset class or investment instrument. The objective of diversification is to mitigate or manage the risk of loss by ensuring exposure across multiple asset classes. Over-diversification may lead to a reduction in returns rather than a reduction in risks. </p><h4 style="text-align: justify;"><span style="text-align: left;">3.Value over anything else</span></h4><p style="text-align: justify;">Investing in companies that promise value and growth in the long-term is the ideal approach. Investing in securities that appreciate exponentially in a short time frame without any actual growth in the company may turn out to be one of the riskiest things. Value investing aims to identify opportunities in profitable and cash-generating businesses. </p><h4 style="text-align: justify;">4.Calculated Risk is good</h4><p style="text-align: justify;">We need to understand that risk and returns go hand in hand. Investors think that taking a high risk will give them high returns, but that’s not always true. No investment comes with ‘no risk’. </p><h4 style="text-align: justify;"><span style="text-align: left;">5.Asset allocation is important</span></h4><p style="text-align: justify;">Today, investors have many options. To ensure maximum probability of meeting financial goals, focus on ‘<a href="https://aniketpatkarinvestments.blogspot.com/2022/02/Asset-Allocation-And-Diversification-For-Long-Term-Wealth-Creation.html" target="_blank">asset allocation</a>’. You need to decide the ratio of your exposure to equity, debt, hybrid, and physical assets depending on your risk profile, financial goals, corpus, age, etc. It will surely help investors increase returns & also minimize the risk since different asset classes react differently across market cycles.</p><h4 style="text-align: justify;">6.<a href="https://aniketpatkarinvestments.blogspot.com/2021/11/Should-You-Invest-in-Stocks-or-Mutual-Funds.html" target="_blank">Stocks or Mutual funds</a></h4><p style="text-align: justify;">If you do not have the time and expertise to study and monitor a portfolio of stocks, then it is better that you invest in <a href="https://aniketpatkarinvestments.blogspot.com/2021/08/what-is-mutual-fund-and-how-it-will.html" target="_blank">mutual funds</a>. If your corpus is small, then equity mutual funds are more meaningful since they give you the benefit of diversification and professional fund management at a low cost. Equities & Mutual funds, both can beat inflation and create wealth over the long term.</p><h4 style="text-align: justify;">7.Long term versus short term investing</h4><p style="text-align: justify;">The short-term financial goals can be fulfilled with fixed income instruments or balanced mutual funds while long-term financial goals can be fulfilled with diversified direct stocks or equity mutual fund investments. </p><h4 style="text-align: justify;">8.DIY or consult a financial advisor</h4><p style="text-align: justify;">New investors should start an overall financial plan with a professional planner. DIY investing is not advisable unless you have gained the knowledge in financial planning & investment field. Investment and financial planning are complex and solutions can be different for every individual on a case-by-case basis.</p><p style="text-align: justify;">A financial advisor will help set financial goals and plan investments according to the investor's risk profile. The fees or commission the investor pays to <a href="https://aniketpatkarinvestments.blogspot.com/2021/08/Direct-vs-Regular-investment-in-Mutual-Funds--Role-of-Mutual-Fund-Distributor.html" target="_blank">Advisor or Distributor</a> will be worth considering potential mistakes made in absence of proper advice.</p><p><br /></p><p><br /></p>Aniket Patkarhttp://www.blogger.com/profile/02215989324767435904noreply@blogger.com0tag:blogger.com,1999:blog-3662466771038419723.post-8897587750172711302022-02-12T18:57:00.006+05:302022-02-12T19:42:16.539+05:30Asset Allocation And Diversification For Long Term Wealth Creation<p style="text-align: justify;">Even beginner in investing knows some fundamental principles of sound investing. How do you think you learned them? Through real-life experiences that have nothing to do with the stock market.</p><table cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody><tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEjCH9i9nE8BRdhdmeSKy7BOAy0pEg1F8CzQzLk6f7iMUKpzoUeQqVcpLLOn8A5_ilGKLEO9ZCnpdzJoJ-9Kb3fb-1LeRdY6Rdj-XGeY3VuEg9EQ5e91XGcmY04vL6ApnAhc9mznf_a6rO0rgWJZVpcZGF-AFLJQaLP6uIKNG2_zDrFQjgRYczij1Tbs=s1920" style="margin-left: auto; margin-right: auto;"><img alt="asset allocation & diversification" border="0" data-original-height="1080" data-original-width="1920" height="360" src="https://blogger.googleusercontent.com/img/a/AVvXsEjCH9i9nE8BRdhdmeSKy7BOAy0pEg1F8CzQzLk6f7iMUKpzoUeQqVcpLLOn8A5_ilGKLEO9ZCnpdzJoJ-9Kb3fb-1LeRdY6Rdj-XGeY3VuEg9EQ5e91XGcmY04vL6ApnAhc9mznf_a6rO0rgWJZVpcZGF-AFLJQaLP6uIKNG2_zDrFQjgRYczij1Tbs=w640-h360" title="asset allocation & diversification" width="640" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;"><i>Example of asset allocation & diversification</i></td></tr></tbody></table><p style="text-align: justify;">For example, have you ever noticed that street vendors often sell seemingly unrelated products - such as cold weather hoodies, woolen clothes, and light cotton summer wear? Initially, that may seem odd. After all, how would a person buy both clothes at the same time? Probably never - and that’s the point. Street vendors know that when it’s cold, it’s easier to sell cold-weather clothes but harder to summer wear. And when it’s summer, the reverse is true. By selling both items - in other words, by diversifying the products - the vendor can reduce the risk of losing money on any given day earning something respectable.</p><p style="text-align: justify;">If that seems logical to you, you are starting to understand asset allocation and diversification. The article talks about Asset Allocation and Diversification & how it helps create long term wealth managing Risk.</p><h3 style="text-align: left;">Asset Allocation</h3><p style="text-align: justify;">Asset allocation involves spreading your investment among <a href="https://aniketpatkarinvestments.blogspot.com/2021/08/best-investment-ideas-for-beginners.html" target="_blank">different asset categories</a>, such as stocks, mutual funds, bonds, gold, real estate, <a href="https://aniketpatkarinvestments.blogspot.com/2021/08/Why-National-Pension-System-is-one-of-the-best-options-for-Retirement-planning.html" target="_blank">NPS</a>, and cash to balance the risk and earn high respectable returns over the long term. The asset allocation that works best for you will depend largely on, the time horizon (long is better) and your risk appetite.</p><h4 style="text-align: left;">Time Horizon</h4><p style="text-align: justify;">Time horizon is the expected period you will be investing money to achieve a specific financial goal. An investor with a longer time horizon can comfortably take more risk with more volatile asset classes because he or she can wait while those slow economic ups and downs of markets. An investor with a long time horizon also balances his portfolio over the period and gets time to correct any error he makes while investing even he gets any small losses. But an investor saving up for a foreign trip after 5 years, would likely take less risk because he or she has a shorter time span.</p><h4 style="text-align: left;">Risk Appetite</h4><p style="text-align: justify;">Risk appetite is your capability and readiness to lose some or all of your original investment if there is a greater possibility of high returns. An aggressive investor, or one with a high-risk appetite, is more likely to risk losing money in order to get better returns. A conservative investor, or one with a low-risk appetite, tends to prefer investments that will preserve his or her original investment. </p><h3 style="text-align: left;">Risk versus Reward</h3><p style="text-align: justify;">When it comes to investing, risk and reward are inseparably interlinked. All investments involve some risk. If you intend to invest in stocks, bonds, or mutual funds - it’s important that you understand before you invest that you could lose some or all of your money.</p><p style="text-align: justify;">The reward for taking on risk is the potential for high investment returns. If you have long-term <a href="https://aniketpatkarinvestments.blogspot.com/2021/08/setting-smart-financial-goals.html" target="_blank">financial goals</a>, you are likely to make more money by carefully investing in asset categories with greater risk, like stocks or mutual funds, rather than restricting your investments to assets with less risk like cash, FDs, Postal schemes, etc. On the other hand, investing solely in FDs, cash investment equivalents may be appropriate for short-term financial goals.</p><h3 style="text-align: left;">Investment avenues</h3><p style="text-align: justify;">While no one can recommend any specific investment asset category will benefit you the most, you should know that there are lots of investment products exists - including stocks, mutual funds, corporate and Government bonds, exchange-traded funds, Gold, Real estate, etc.</p><p style="text-align: justify;">For many financial goals, investing in a mix of these categories can be a good strategy. Let’s have a closer look at the features of the major asset categories.</p><h4 style="text-align: left;">Stocks</h4><p style="text-align: justify;">If we see history, Stocks have the highest potential to beat inflation and get high returns involving great risk. As an asset category, stocks are a portfolio’s main driving element offering the greatest potential for growth. The volatility of the stocks market makes them a very risky investment asset class in the short term. Investors that have been willing to wait and sustain the volatile returns of stocks over long periods of time generally have been rewarded with great returns. The only thing is Investor needs a good financial advisor or he should learn to do a fundamental analysis of the company he is investing in. Otherwise, the risk of losing money also is great if investor depends on tips and financial news channels. Another thing is to get successful investing in stocks needs a big diversified portfolio of stocks which is very difficult to manage for the normal retail investor.</p><h4 style="text-align: left;">Bonds</h4><p style="text-align: justify;">Bonds are generally less volatile than stocks but offer respectable returns. As a result, an investor approaching a financial goal might find it wise to increase his or her bond holdings relative to his stock holdings. You should keep in mind that certain categories of bonds offer high returns similar to stocks. There are mainly two types of Bonds, Corporate bonds and Government bonds.</p><h4 style="text-align: left;">Cash & equivalents</h4><p style="text-align: justify;">Cash and cash equivalents - such as Senior citizens' savings deposits, National Saving Schemes, Fixed deposits are the safest investments but offer the lowest returns than other major asset categories. The chances of losing money on an investment in this asset category are generally extremely low. The principal worry for investors investing in cash equivalents is the Risk of inflation since this investment class does not have the potential to beat inflation.</p><h4 style="text-align: left;">Mutual Funds</h4><p style="text-align: justify;"><a href="https://aniketpatkarinvestments.blogspot.com/2021/08/what-is-mutual-fund-and-how-it-will.html" target="_blank">Mutual Funds</a> is a pool of money managed for the investor by the Fund Manager investing in a big diversified portfolio of stocks having certain predefined objective and philosophy. The investor can take the benefit of professional management at a low cost. The options like <a href="https://aniketpatkarinvestments.blogspot.com/2021/08/how-mutual-fund-sip-magic-works-for-investor.html" target="_blank">Systematic Investment Plans (SIP)</a> can give you help you get discipline and automation in your investment by deducting a certain fixed amount of money automatically from your bank amount for investment. This is the best investment avenue for investors who don't have the experience and time to manage their money by themselves. They can go direct or through a <a href="https://aniketpatkarinvestments.blogspot.com/2021/08/Direct-vs-Regular-investment-in-Mutual-Funds--Role-of-Mutual-Fund-Distributor.html" target="_blank">Mutual Fund distributor/advisor</a>. Mutual funds have another important benefit that you can have the choice to diversify your money with different types of mutual funds such as Large-cap funds, large & midcap funds, small cap funds, debt funds, hybrid funds, flexicap funds, etc.</p><h4 style="text-align: left;">Gold</h4><p style="text-align: justify;">Gold is an evergreen and popular investment class for Indians. We buy gold as jewelry on different auspicious occasions, as a gift, etc. We can also buy coins, gold biscuits as an investment. There are other options like paper Gold or Gold ETFs which reduce the risk of physically storing the gold.</p><h3 style="text-align: left;">Why Asset Allocation Is So Important</h3><p style="text-align: justify;">By including asset categories in your portfolio with investment returns that move up and down under different market conditions, an investor can protect himself against considerable losses. Historically, the returns of the major asset categories have not moved up and down at the same time. Market conditions & demands that cause one asset category to do well may cause another asset category to have average or poor returns. By spreading your investment in more than one asset category, you’ll reduce the risk of losing money and your portfolio’s overall investment returns will have respectable gains over a long period of time. If one asset category’s investment return falls, you’ll easily balance your losses in that asset category with better returns in another asset category.</p><p style="text-align: justify;">Determining the appropriate asset allocation for a financial goal is a complex task. Basically, you’re trying to pick a mix of assets that has the highest probability of meeting your goal at a level of risk you can live with. As you get closer to meeting your goal, you’ll need to be able to balance the portfolio.</p><p style="text-align: justify;">If you know your time horizon and risk appetite - and have some investing experience - you may feel comfortable creating your own portfolio with the right asset allocation. There is no one right asset allocation that is right for every financial goal for a particular individual.</p><p style="text-align: justify;">Some financial experts believe that determining your asset allocation is the most important decision that you’ll make with respect to your investment portfolio. It is important to consider asking a financial advisor to help you determine your initial asset allocation and suggest rebalance for the future. But before you take the help of anyone to support you with these enormously important decisions, be sure to do a thorough check of his or her credentials. He or she should be licensed & registered to respective financial institutions.</p><h3 style="text-align: left;">Diversification</h3><p style="text-align: justify;">The practice of spreading money among different investment asset classes helps reduce risk is known as diversification. By picking the right group of investments as per your risk appetite & investment horizon, you may be able to reduce your losses and fluctuations in your investment returns.</p><p style="text-align: justify;">In addition, asset allocation is an important factor in deciding whether you will meet your financial goal & beat inflation. If you don’t include enough riskier asset classes in your portfolio, your investments may not earn a large enough return to meet your goal. For example, if you are saving for a long-term goal, such as <a href="https://aniketpatkarinvestments.blogspot.com/2021/10/importance-of-retirement-plan-and-how-to-build-one.html" target="_blank">retirement</a>, most financial experts agree that you will likely need to include at least some stocks or equity mutual funds in your portfolio. </p><h3 style="text-align: left;">The Connection Between Asset Allocation and Diversification</h3><p style="text-align: justify;">Diversification is a strategy that can be neatly summed up as, “don’t put all your eggs in one basket.” The strategy involves spreading your money among various investment avenues in the hope that if one investment loses money, the other investments will help balance overall returns.</p><p style="text-align: justify;">A diversified portfolio should be diversified at two levels: between asset categories and within asset categories. So in addition to allocating your investments among stocks, bonds, cash equivalents, mutual funds etc., you will also need to spread out your investments within each asset category. The key is to identify investments in segments of each asset category that may perform differently under different market conditions.</p><p style="text-align: justify;">One way of diversifying your investments within an asset category is to identify and invest in different market caps of companies and industry sectors. But the stock portion of your investment portfolio won’t be diversified if you only invest in four or five stocks. You will need more than twenty carefully selected & studied individual stocks having growth potential to be truly diversified. That is why debate happens often "<a href="https://aniketpatkarinvestments.blogspot.com/2021/11/Should-You-Invest-in-Stocks-or-Mutual-Funds.html" target="_blank">Mutual Funds vs Stocks</a>".</p><p style="text-align: justify;">Because achieving diversification can be so difficult, some investors may find it easier to diversify within each asset category through investing in mutual funds rather than through individual investments. Mutual funds make it easy for investors to own a small portion of many types of asset classes.</p><p style="text-align: justify;">We cannot predict the "Black Swan" events as explained by Nassim Taleb, a finance professor, writer, and former Wall Street trader. Taleb wrote about the idea of a black swan event in his book. Taleb asserted that because black swan events are impossible to predict due to their extreme rarity but they may have catastrophic consequences. It is important for people to always assume a "Black Swan" event like a pandemic, world financial crash is a possibility and investors should try to plan accordingly. Some financial experts believe that diversification may offer some protection in such situations.</p><p style="text-align: justify;"><br /></p>Aniket Patkarhttp://www.blogger.com/profile/02215989324767435904noreply@blogger.com0tag:blogger.com,1999:blog-3662466771038419723.post-86121509246662808822022-01-15T21:45:00.008+05:302022-01-15T21:45:56.195+05:308 Best Tax Saving Investment Options<p style="text-align: justify;">Only 3 months are remaining to end this financial year and taxpayers and now in a hurry to invest in tax-saving options. Tax saving investments can help you save on taxes and grow your income. The <a href="https://aniketpatkarinvestments.blogspot.com/2021/09/7-Different-types-of-ITR-Income-Tax-Return-forms-Which-Should-I-File.html" target="_blank">income tax</a> act provides deductions for various investment options in a particular financial year. </p><p style="text-align: justify;">Below are some best investment options that can help you to grow your money with the benefit of tax planning. </p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEh05rcPdnSxhwNIq3wkQqOiI9a3AvyWsFBfGIbDCKXNrurWNbIeVFB0IDmv-rwxkWoF8cMEhznvSJHCy6iWU5px4W62oExLtL9iUC5WNyQC_bloAFaqWl9cOwgOzoh-pBfGattcIH3Vq1qPHlUi8xFqIrn_FhFVCsLu-5eEHv6nnACUJ7h9FBrAxfFE=s1593" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img alt="income tax, save tax, ELSS" border="0" data-original-height="1071" data-original-width="1593" height="430" src="https://blogger.googleusercontent.com/img/a/AVvXsEh05rcPdnSxhwNIq3wkQqOiI9a3AvyWsFBfGIbDCKXNrurWNbIeVFB0IDmv-rwxkWoF8cMEhznvSJHCy6iWU5px4W62oExLtL9iUC5WNyQC_bloAFaqWl9cOwgOzoh-pBfGattcIH3Vq1qPHlUi8xFqIrn_FhFVCsLu-5eEHv6nnACUJ7h9FBrAxfFE=w640-h430" title="income tax, save tax, ELSS" width="640" /></a></div><br /><h3 style="text-align: justify;">1. ELSS Mutual Funds</h3><p style="text-align: justify;">Equity markets are looking unstable and many analysts predict correction is bound to happen. 100% Equity comes with market risk still ELSS mutual funds are the preferred choice of investors to save the tax. ELSS <a href="https://aniketpatkarinvestments.blogspot.com/2021/08/what-is-mutual-fund-and-how-it-will.html" target="_blank">mutual funds</a> have given high returns in past years and have the shortest (3 years) lock-in among all tax saving options. </p><p style="text-align: justify;">ELSS funds have almost all the characteristics required to call them a good investment option. Some of them are the potential to give high returns, transparency, low cost, flexibility to invest, tax saver, etc.</p><p style="text-align: justify;">ELSS funds are somewhat risky due to their exposure to equity which is volatile. They will get tax benefits under Sec 80C. Individuals to invest in ELSS fund as per their risk profile. Investors can consult with their financial advisor or mutual fund distributor before investing in Mutual Funds. You can either invest though <a href="https://aniketpatkarinvestments.blogspot.com/2021/08/how-mutual-fund-sip-magic-works-for-investor.html" target="_blank">SIP (Systematic Investment Plan)</a> or lumpsum.</p><h3 style="text-align: justify;">2. NPS (National Pension System)</h3><p style="text-align: justify;">The <a href="https://enps.nsdl.com/eNPS/NationalPensionSystem.html" target="_blank">NPS</a> is a defined contribution scheme launched by the Government of India. It is a contributory pension system where the subscriber contributes to the fund over their working life and at retirement draw the corpus so created to buy an annuity that will provide regular income in retirement.</p><p style="text-align: justify;"><a href="https://aniketpatkarinvestments.blogspot.com/2021/08/Why-National-Pension-System-is-one-of-the-best-options-for-Retirement-planning.html" target="_blank">NPS</a> has the flexibility in investing such as to choose different Pension funds from available, contribution percentages in each asset class (E- Equity, G- Government Bonds, C- Corporate Bonds, A- Alternative investments), to choose active fund management or from available plans.</p><p style="text-align: justify;">The main purpose of NPS is <a href="https://aniketpatkarinvestments.blogspot.com/2021/10/importance-of-retirement-plan-and-how-to-build-one.html" target="_blank">retirement planning</a> & hence it has a very long lock-in period but the additional tax deduction & tax-free returns are very beneficial for high-income earners. The entire 60% of the corpus withdrawn at the time of retirement is tax-free. The scheme can help save tax under different sections. </p><p style="text-align: justify;"></p><ul><li>Contributions of up to Rs 1.5 lakh can be claimed as a deduction under the overall Sec 80C. </li><li>Investor also get additional deduction of up to Rs 50,000 under Sec 80CCD(1b). </li></ul><p></p><p style="text-align: justify;">The investor can consult with Registered Retirement Advisor or invest individually.</p><h3 style="text-align: justify;">3. EPF (Employee Provident Fund)</h3><p style="text-align: justify;">Mostly all companies automatically deduct contributions for <a href="https://www.epfindia.gov.in/" target="_blank">EPF</a> from monthly salary and add Company's contribution to the same. EPF contributions get tax benefits under sec 80C. Partial Withdrawals can be done after 5 years with certain conditions. EPF returns are exempt under tax laws unless withdrawn before 5 years of service.</p><h3 style="text-align: justify;">4. PPF (Public Provident Fund)</h3><p style="text-align: justify;">This is one of the popular tax-saving options that have safety, and taxability but the interest rate is low around 7%. <a href="https://www.indiapost.gov.in/Financial/pages/content/post-office-saving-schemes.aspx" target="_blank">PPF</a> is better than fixed deposits because of its tax-free nature. Investors can open an account in the Post Office branch or designated branches of PSU banks. The investment tenure of the scheme is 15 years. On maturity, this can be extended every five years.</p><h3 style="text-align: justify;">5. Senior Citizens’ Saving Scheme</h3><p style="text-align: justify;">Best way to save tax for senior citizens. What makes it more attractive is Exemption for Rs 50,000 interest. The <a href="https://www.indiapost.gov.in/Financial/pages/content/post-office-saving-schemes.aspx" target="_blank">Senior Citizens’ Saving Scheme (SCSS)</a> is the best investment option for people above 60. An account can be opened in a Post Office or at banks. The scheme offers a higher return than the PPF. </p><h3 style="text-align: justify;">6. Sukanya Samriddhi Yojana</h3><p style="text-align: justify;">This scheme offers higher interest than the PPF, but it has limited eligibility and purpose.</p><p style="text-align: justify;">The <a href="https://www.indiapost.gov.in/Financial/pages/content/post-office-saving-schemes.aspx" target="_blank">Sukanya Samriddhi Yojana</a> is a good way to save for taxpayers with a daughter below 10 years. It gives around 7.6% interest rate, the highest among all small savings schemes. Just like the PPF, the interest earned is tax-free but there is an annual cap of Rs 1.5 lakh on the investment. Accounts can be opened in any post office or banks with a minimum investment of Rs 1,000. A parent can open an account in the name of a maximum of two daughters, but the combined investment in the two accounts cannot exceed Rs 1.5 lakh in a year & the maturity proceeds have to be used for her education and marriage.</p><h3 style="text-align: justify;">7. NSCs</h3><p style="text-align: justify;"><a href="https://www.indiapost.gov.in/Financial/pages/content/post-office-saving-schemes.aspx" target="_blank">National Savings Certificates</a> is a Government-backed ultra-safe option but dropping interest rates and taxability have led it to unpreferable for investors. These used to be some of the most popular tax-saving instruments. NSCs offer very low rates that are only marginally higher than what banks are offering on their tax-saving fixed deposits. The only advantage of the NSCs is that it comes with a sovereign guarantee. The returns are also assured and there’s a short lock-in of five years. The money does not get locked up for several years. The interest earned on the NSC is also eligible for deduction under Section 80C in the following years. </p><h3 style="text-align: justify;">8. Life insurance policies</h3><p style="text-align: justify;">These continue to be the most deficient way to save taxes. You can get a tax deduction under 80C but it is mostly nonpreferred for flexibility and returns. <a href="https://aniketpatkarinvestments.blogspot.com/2021/08/Why-we-cannot-consider-Insurance-as-an-investment.html" target="_blank">Life insurance is not to be seen as an investment</a>. We can save tax with insurance policies but this purpose is best accomplished through a pure protection term plan. Term plans will benefit the nominee, your loved ones after the death of the actual investor. </p>Aniket Patkarhttp://www.blogger.com/profile/02215989324767435904noreply@blogger.com0tag:blogger.com,1999:blog-3662466771038419723.post-13114510477291833482021-12-29T00:10:00.003+05:302021-12-29T00:10:35.224+05:3011 Ways to Start Fresh Financially in 2022<p style="text-align: justify;">The New Year is almost here, it’s time to review your budget, debt, and investments and importantly check them against your <a href="https://aniketpatkarinvestments.blogspot.com/2021/08/setting-smart-financial-goals.html" target="_blank">financial goals</a>. The new year comes with new opportunities to set new goals for the year ahead. If you’re considering setting new goals for health, career; consider adding financial resolutions as well. You should be more disciplined to achieve financial freedom early in life and for that you should embrace <a href="https://aniketpatkarinvestments.blogspot.com/2021/08/good-habits-for-financial-freedom.html" target="_blank">good financial habits</a>.</p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEiq0S594riyHRgC99BlFV7QwtsP2wDQ1yhfRdNjHUF1QSUPldGp2RjoX3yNHc-Hx4tOeMECRc0cc4TRxt8V3dhW245u-_btZKN84fHJBXXoXpXQscBCVJUtAzO1-KA8q2PgV378HXCARMWm-YktzIWSRSUg5jQQJ5HQyr1B66LtRjA9fVFbNera4di9=s1280" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img alt="budget, 2022 resolution, financial resolution" border="0" data-original-height="854" data-original-width="1280" height="428" src="https://blogger.googleusercontent.com/img/a/AVvXsEiq0S594riyHRgC99BlFV7QwtsP2wDQ1yhfRdNjHUF1QSUPldGp2RjoX3yNHc-Hx4tOeMECRc0cc4TRxt8V3dhW245u-_btZKN84fHJBXXoXpXQscBCVJUtAzO1-KA8q2PgV378HXCARMWm-YktzIWSRSUg5jQQJ5HQyr1B66LtRjA9fVFbNera4di9=w640-h428" title="2022 resolution, financial resolution" width="640" /></a></div><br /><p style="text-align: justify;"><span style="text-align: left;">Here are 11 ways to kick off the year with a fresh perspective to help meet your financial goals,</span></p><h3 style="text-align: left;">1.Review Your Household Expenses</h3><p style="text-align: justify;">Start the year by reviewing your expenses. Write your average monthly income (salary, business, etc.), as well as your fixed and variable expenses. This is important to determine your financial priorities for 2022. For example, maybe you’re thinking of taking a trip to some exotic place in the summer, maybe you’re planning to save even more for retirement & other financial goals, or increase SIP amount in Mutual Funds. Understanding your top priorities can help you develop the ideal budget for you. </p><h3 style="text-align: left;">2.Reduce your expenses</h3><p style="text-align: justify;">After assessing your monthly budget you must be knowing about streams of high expenses. Try to go out less for dinner. Eat home cook food & expenses on ordered food. Assess your online shopping expenses, which was important and which was done just because there was an offer.</p><p style="text-align: justify;">Reduce your expenses on Fuel. Try walking wherever possible. Don't use a vehicle for a small distance. </p><h3 style="text-align: left;">3.Take a look at your Emergency Fund</h3><p style="text-align: justify;">Pandemic already has taught a lesson, how the emergency fund is important. If you haven’t made a provision already, now’s a good time to that you should have sufficient savings kept aside for emergencies. An emergency fund also can help you to avoid having to liquidate portfolio assets at low prices during volatile markets. Having an emergency fund of five to six months of living expenses is known to be safe and that also in a safe liquid asset or kept in a savings bank account. </p><h3 style="text-align: left;">4.Assess Your Debt</h3><p style="text-align: justify;">Check your different debts. Credit card bills, home loan, personal loans, etc. It is good if you are already <a href="https://aniketpatkarinvestments.blogspot.com/2021/08/should-i-invest-or-pay-off-debt.html" target="_blank">managing your debt smartly</a>, consider taking steps to reduce it further. Target high-interest rate debt first. Reducing the number of loans you carry can help you simplify your financial life. It will also ease your stress. You may want to ask your Financial Advisor about possible strategies. Our credit score plays a critical role in determining how easy you will get financing and other financial services in the future. Pay your credit card bills on time.</p><p style="text-align: justify;">Try not to buy anything with a Credit card. Prioritize your shopping needs.</p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEgwqFqXLygn2C8plzxNVrW7gvD2TCVzSdFfagq8SG7vw3FgfFv0KifMb27-8z7SrByw2oe0u6Ki0OGqUp8pR8I4RDuQLAkoCAWSywsELM4dXW8_Jkkol1X6cRva7bOILSf1HfQC7zZyunLXy2JbNCSFczxHL6XVPiNEJXbtm50EvPm5Oc-ovQ7zDmED=s1280" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img alt="expenses, shopping, credit card, online shopping" border="0" data-original-height="918" data-original-width="1280" height="460" src="https://blogger.googleusercontent.com/img/a/AVvXsEgwqFqXLygn2C8plzxNVrW7gvD2TCVzSdFfagq8SG7vw3FgfFv0KifMb27-8z7SrByw2oe0u6Ki0OGqUp8pR8I4RDuQLAkoCAWSywsELM4dXW8_Jkkol1X6cRva7bOILSf1HfQC7zZyunLXy2JbNCSFczxHL6XVPiNEJXbtm50EvPm5Oc-ovQ7zDmED=w640-h460" title="expenses, shopping, credit card, online shopping" width="640" /></a></div><h3 style="text-align: justify;"><span style="text-align: left;">5.Check your insurance cover</span></h3><p style="text-align: justify;">Check if you have adequate <a href="https://aniketpatkarinvestments.blogspot.com/2021/08/Why-we-cannot-consider-Insurance-as-an-investment.html" target="_blank">insurance</a> cover. Purchase an insurance policy to protect your assets in an unanticipated event or death. Types of insurance coverage include mainly life & health cover. Buy a pure Term insurance plan with adequate cover. Buy this as early as possible to have a low premium amount. If you already have health insurance from your employee then assess if it is sufficient or needs a top-up.</p><h3 style="text-align: left;">6.Prioritize Your Health & mental wellness</h3><p style="text-align: justify;">Today everyone is living this fast & monotonous life facing lots of pressure on all fronts. Take a break from this routine often. Go Travel, walk, do cycling, go on a forest trail, read a book, follow your hobbies. Spend more time with your family. </p><p style="text-align: justify;">Spare some time daily for exercise. Walk or Run daily. Install Health & exercise apps that will help you motivate and track your progress. </p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEjVLiHqT0G5_6jAAX60CtilltaRTIY5nqcZ7OpilrWcPbB_2GuLBf4iwBirs8pjNlos5mpld-_0JBFdW11sc9t18PrtU9Ukq9dq-NoXH9eYHVEnX6i6fICAVjjmu3vXmpY-WogQ0EmOWEvOM7aqAHfLCrzRqUewJDavxHEWzSbwB7Wu-2dN-tL4ylVp=s1280" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img alt="health, exercise, wellbeing" border="0" data-original-height="850" data-original-width="1280" height="426" src="https://blogger.googleusercontent.com/img/a/AVvXsEjVLiHqT0G5_6jAAX60CtilltaRTIY5nqcZ7OpilrWcPbB_2GuLBf4iwBirs8pjNlos5mpld-_0JBFdW11sc9t18PrtU9Ukq9dq-NoXH9eYHVEnX6i6fICAVjjmu3vXmpY-WogQ0EmOWEvOM7aqAHfLCrzRqUewJDavxHEWzSbwB7Wu-2dN-tL4ylVp=w640-h426" title="health, exercise, wellbeing" width="640" /></a></div><h3 style="text-align: left;">7.Review your Financial Goals & their progress</h3><p style="text-align: justify;">Check whether you are on track for your financial goals. Check your monthly average expenses and your previously calculated <a href="https://aniketpatkarinvestments.blogspot.com/2021/10/importance-of-retirement-plan-and-how-to-build-one.html" target="_blank">Retirement corpus</a> is still valid or there is a drastic change in it. If there is a difference & you are off track, have a talk with your <a href="https://aniketpatkarinvestments.blogspot.com/2021/08/Direct-vs-Regular-investment-in-Mutual-Funds--Role-of-Mutual-Fund-Distributor.html" target="_blank">Financial Advisor </a>to figure out how you can get back on track. If you are on track with your financial goals, talk with your Financial Advisor about how can you increase your investment for previously missed financial goals. </p><h3 style="text-align: left;">8.Reduce your bank accounts</h3><p style="text-align: justify;">Having multiple bank accounts generally causes trouble maintaining. Multiple debit cards, multiple accounts. Keep track of the minimum balance for each Bank. Struggle to keep track of all transactions and get statements while filing the income tax return. Keep one private and one Government bank saving account. Keep the bank account that requires the lowest minimum quarterly balance. Try to keep maximum 2-3 bank accounts.</p><h3 style="text-align: left;">9.Automate your investments & invest more</h3><p style="text-align: justify;">Keeping track of all savings and investments being a salaried or business person is difficult. One of the smart ways to save and invest is to automate your investment amounts. Use the benefit of <a href="https://aniketpatkarinvestments.blogspot.com/2021/08/how-mutual-fund-sip-magic-works-for-investor.html" target="_blank">Systematic investment plans (SIP)</a> and National Automated Clearing House (NACH) e-mandates for your automated investment needs.</p><p style="text-align: justify;">Only saving will not help you beat inflation, You need to invest and diversify your portfolio. <a href="https://aniketpatkarinvestments.blogspot.com/2021/11/Should-You-Invest-in-Stocks-or-Mutual-Funds.html" target="_blank">Direct equity or Mutual funds</a> have the potential to give you higher returns. Every year increase your investment amount by a minimum 10%.</p><h3 style="text-align: left;">10.Work on your will</h3><p style="text-align: justify;">If you have a will already, update it if necessary. If you are yet to make one, schedule an appointment with a lawyer to write one. Do remember, proper distribution of your wealth after you is one important thing. </p><p style="text-align: justify;">Pandemic has already taught a lesson. Times like these teach us to consider what can be done to protect our loved ones.</p><h3 style="text-align: left;">11.Check nominee details</h3><p style="text-align: justify;">Check your bank accounts, investments (Demat account, Mutual Funds, etc.) have correct nominee details. There is a significant unclaimed amount with AMCs because investors have not mentioned or have incorrect details of their nominees. Adding a beneficiary or nominee to your investments is critical to ensure your assets go to the person you want to have them.</p><div><br /></div>Aniket Patkarhttp://www.blogger.com/profile/02215989324767435904noreply@blogger.com0tag:blogger.com,1999:blog-3662466771038419723.post-49789955893818610232021-12-19T00:11:00.002+05:302021-12-22T21:00:50.024+05:3010 cognitive biases that can lead to investment mistakes<p style="text-align: justify;">As we move ahead in this information era, it’s more and more important for investors to understand the unconscious drivers that affect the way we make decisions about the money.</p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEihPEpu1ZnEfnVvsXg-GZIL8YHrtdULg2TQ3oKd47wKp6QLQWWaJkJ6vMXViAmFuD5HMPU7wtenKJcDh7U3pczjYJnGAEk7DdPkDSy2FNaOYo-CW1LF-qSZ4W8wWOP126pQ6kH1Tq1WmFMMEuyMqAQdupem0qQqChEnw891soNyEY_hN5vVy-YumQ1F=s1604" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="1079" data-original-width="1604" height="430" src="https://blogger.googleusercontent.com/img/a/AVvXsEihPEpu1ZnEfnVvsXg-GZIL8YHrtdULg2TQ3oKd47wKp6QLQWWaJkJ6vMXViAmFuD5HMPU7wtenKJcDh7U3pczjYJnGAEk7DdPkDSy2FNaOYo-CW1LF-qSZ4W8wWOP126pQ6kH1Tq1WmFMMEuyMqAQdupem0qQqChEnw891soNyEY_hN5vVy-YumQ1F=w640-h430" width="640" /></a></div><p style="text-align: justify;">We start by looking at how our senses often mislead us into thinking that things are going on out there when they’re only going on in our heads. Our brains are adapted to the world around us, and they function in a way that gives us the best chance of survival, but these behaviors are often not appropriate when we are investing. Believing that we can predict markets in a desperate attempt to keep our brains pleased.</p><p style="text-align: justify;">We believe it is essential to understand that we need to overcome common human cognitive or psychological biases to be a successful investor over the long term since these biases often lead to inferior decisions and investment mistakes. </p><p style="text-align: justify;">Cognitive biases are a common human tendency and we all tend to take shortcuts, be overconfident in our decision-making process. We need to understand cognitive biases to make better decisions which will eventually lower the risk and improve investment returns over time. Below are 10 cognitive biases that can lead to <a href="https://aniketpatkarinvestments.blogspot.com/2021/08/top-18-common-investment-mistakes-to.html" target="_blank">investment mistakes</a>.</p><h3 style="text-align: justify;"><span style="text-align: left;">1. Confirmation bias</span></h3><p style="text-align: justify;">It is the natural human tendency to seek the information that confirms an existing opinion, conclusion, or hypothesis. Confirmation bias is a major reason for common investment mistakes as investors are often overconfident as they keep obtaining information that seems to confirm or support the decisions they have made. This overconfidence can result in a false sense that nothing will go wrong, which actually increases the risk of being unprepared when something does go wrong.</p><p style="text-align: justify;">In particular, we can generate imaginary patterns using personal investing experiences. We start imagining that we can see trends where none really exist. Visual illusions are a type of imaginary pattern, so we can’t entirely trust our instincts. Many investors detect imaginary patterns & develop behavior that looks a lot like superstition because people are surprisingly getting inclined to bring them luck. Most of the time it is not that damaging, but when these superstitions start overriding rational investment decisions they can lead us into the serious money-losing territory. </p><p style="text-align: justify;">To minimize the risk of confirmation bias, we should continually reevaluate our investment decisions and question our assumptions with facts.</p><h3 style="text-align: justify;"><span style="text-align: left;">2. Anchoring bias or Recency Bias</span></h3><p style="text-align: justify;">Anchoring is the tendency to base our thoughts and beliefs on a piece of recent specific information that may have little or nothing to do with the situation at hand. </p><p style="text-align: justify;">Investors are generally biased by recent information, by recency, but recent events are often not a good basis for making long-term investment decisions. Our investment decisions should be considering long-term investment scenarios & not with short-term market events.</p><p style="text-align: justify;">From an investment perspective, one obvious anchor is the recent trends on that asset. Tim Richards writes in his book, "Recency is particularly implicated in a range of investor misbehaviors because we tend to overweight the importance of the most recent events and to downplay more distant ones. This can have some strange and counterintuitive results, including the so-called gambler’s fallacy. Mostly, markets are also random, so a few days of a stock going up or down is likely to have no cause whatsoever, but recency effects such as the gambler’s fallacy seem to bias some people into expecting a change of direction. However, others will develop exactly the opposite hypothesis and assume that a particular sequence will carry on, presumably forever". People usually base their decisions on current news on television and newspaper but we should actually base our investment decisions on whether or not the price is cheaper than its actual value. The information shown in news can be tempting but the data should be studied over the lifetime of that asset before taking an investment decision.</p><h3 style="text-align: left;">3. Loss aversion effect</h3><p style="text-align: justify;">Loss aversion is the tendency of people who greatly prefer avoiding losses than thinking about obtaining gains. The loss-aversion tendency makes you break one of the important rules of economics; the measurement of 'opportunity cost'. We cannot avoid great <a href="https://aniketpatkarinvestments.blogspot.com/2021/08/best-investment-ideas-for-beginners.html" target="_blank">investment opportunities</a> because we have fear of potential losses.</p><p style="text-align: justify;">If you want to be a successful investor, you must be able to properly measure opportunity cost & risk associated with it. We should not justify wrong past investment decisions due to our tendency to avoid losses. Investors who become anchored due to loss aversion will pass on great investment opportunities to retain existing loss-making investments in the hope of avoiding their losses.</p><p style="text-align: justify;">A decision to keep or sell an existing investment must be calculated against its opportunity cost and risk involved in it.</p><h3 style="text-align: left;">4. Incentive-caused bias</h3><p>Here we can see the power that rewards and incentives can have on human behavior, often leading to folly. Mostly every investment opportunity may have incentives in place to encourage people to participate. </p><p>Buffett wrote in his 2000 shareholder letter that “Nothing sedates rationality like large doses of effortless money". </p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEgcQhg2KmfWWM3lpiTItBMT8oWVgghls-wcxVVgeNjj1kQKpwXAPgyNLmUi3nBsr-B7NsVN2-5da-m918NdtNHFwv2aiLFxyO_FYIUlIjAbPowKIfvGBT5N2wwy__x-zxkbX9e1ct31iqoKlJQpkJAahRNXxQe6_wsjB_GuKf1PQ6KVEQxNfMmovzG4=s1629" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="1080" data-original-width="1629" height="424" src="https://blogger.googleusercontent.com/img/a/AVvXsEgcQhg2KmfWWM3lpiTItBMT8oWVgghls-wcxVVgeNjj1kQKpwXAPgyNLmUi3nBsr-B7NsVN2-5da-m918NdtNHFwv2aiLFxyO_FYIUlIjAbPowKIfvGBT5N2wwy__x-zxkbX9e1ct31iqoKlJQpkJAahRNXxQe6_wsjB_GuKf1PQ6KVEQxNfMmovzG4=w640-h424" width="640" /></a></div><p>We should evaluate the incentives and rewards systems in place to assess whether or not they are likely to benefit us to make rational long-term sustainable investment decisions. </p><h3 style="text-align: left;">5. Oversimplification tendency</h3><p style="text-align: justify;">Many times people want clear and simple explanations to understand complex matters. Some matters are inherently complex or uncertain and cannot owe simple explanations. Common investment mistakes are made when people try to oversimplify complex matters.</p><p style="text-align: justify;">Albert Einstein once said, “Make things as simple as possible, but no more simple. Staying within your ‘circle of competence is a key to successful investing. </p><p style="text-align: justify;"></p><blockquote>Buffet writes in his 1996 shareholder letter, "What an investor need is the ability to correctly evaluate selected businesses. Note that word ‘selected’: You don’t have to be an expert on every company or even many. You only have to be able to evaluate companies within your circle of competence".</blockquote><p></p><p style="text-align: justify;">We have to accept the fact that investing is complex and we should be disciplined to try to ensure we do not overly simplify the inherent complexity of it.</p><p style="text-align: justify;">If we cannot understand the complexity of an investment asset, we simply should not invest, no matter how compelling the ‘simplified’ investment case may appear. </p><h3 style="text-align: left;">6. Hindsight bias</h3><p style="text-align: justify;">Hindsight bias is a tendency to conveniently see beneficial past events as predictable and bad events as not predictable. Hindsight bias may cause misshaping of memories of what was known or believed before an event occurred, and is a significant origin of overconfidence regarding an individual's ability to predict the outcomes of future events.</p><p style="text-align: justify;">We generally read many explanations for inferior investment performance that blame the unpredictability and volatility of the markets. But not all investments can be attributed to an unpredictable event or market volatility but rather to errors of judgment. </p><p style="text-align: justify;">Hindsight bias is a dangerous state of mind as it clouds your neutrality in assessing past investment decisions and hinders your ability to learn from past mistakes. To reduce hindsight bias, we should spend significant time studying the investment decision based on facts.</p><h3 style="text-align: left;">7. Restraint bias</h3><p>Restraint bias is the tendency to overestimate one’s ability to show restraint or level of control in the face of temptation or our impulsive behaviors.</p><p>For many people, money is the greatest temptation. The issue for many investors is how much they should invest in an asset when they believe they have identified a ‘sure winner’. Many investors stick to their 'best investment ideas' but those may not be best for everyone.</p><p>To overcome our natural tendency to buy more and more of our best ideas, we should assess the risk involved in it and diversify our portfolio with combinations of investment assets that may minimize the risk. </p><h3 style="text-align: left;">8. Herd mentality or Bandwagon effect</h3><p style="text-align: justify;">The Herd mentality or bandwagon effect describes attaining comfort in something because many other people believe the same. </p><p style="text-align: justify;">To be a successful investor, you must be able to analyze and think individually & independently. Speculative projections are typically the result of herd mentality. We should not find comfort in what other people are doing or thinking related to a particular investment asset. We should always assess what is beneficial for us with respect to our financial goals and risk appetite.</p><h3 style="text-align: left;">9. Ignorance bias</h3><p style="text-align: justify;">Humans tend to over or underestimate probability in decision-making. Most of the time we conveniently ignore the inconvenient facts. Most people are inclined to oversimplify and assume a single-point estimate when making investment decisions. </p><p style="text-align: justify;">The error investors make is to over or underestimate the risk of probable events. There is always a probability that ‘black swan’ events will happen but overcompensating every probable event can be costly for investors. We should seek to mitigate the risk of ‘black swan’ events by diversifying our investment portfolio. The issue for investors is panicking when the probability of such an event is usually correlated with the amount of press or market coverage on a particular event. </p><p style="text-align: justify;"></p><blockquote>Buffett once said: “The worst mistake you can make in stocks is to buy or sell stocks based on current headlines.”</blockquote><p></p><h3 style="text-align: left;">10. Overconfidence bias</h3><p style="text-align: justify;">Overconfidence bias is a puzzling limitation of our mind, our excessive confidence in what we believe we know, and our apparent inability to realize the full extent of our ignorance and the uncertainty of the world we live in. We are inclined to overestimate how much we understand the world and to underestimate the role of probability in events. Overconfidence is fed by the imaginary inevitability of hindsight. </p><p style="text-align: justify;">Humbleness is very important in investing and a great way to help mitigate the effects of overconfidence bias. Individuals should be objective when evaluating their past investments in order to understand which event, the decision gave them success and which not.</p><p style="text-align: justify;">It is important to remember that the movements of markets are not in our control and we should not attempt to create imaginary methods to predict them. Embrace uncertainty: it’s always there, it’s just that we don’t always accept it or realize it. Remember that the best investors tend to sit on their hands & do nothing when uncertainty is high. Most investors are mindless while investing. We need to be mindful & focused on our <a href="https://aniketpatkarinvestments.blogspot.com/2021/08/setting-smart-financial-goals.html" target="_blank">financial goals</a> & <a href="https://aniketpatkarinvestments.blogspot.com/2021/10/importance-of-retirement-plan-and-how-to-build-one.html" target="_blank">Retirement planning</a>. We should not hesitate to take advice from <a href="https://aniketpatkarinvestments.blogspot.com/2021/08/Direct-vs-Regular-investment-in-Mutual-Funds--Role-of-Mutual-Fund-Distributor.html" target="_blank">Financial experts or advisors</a> if we have some doubts but making investment decisions with keeping bias in mind will always lead to the wrong investment decision.</p>Aniket Patkarhttp://www.blogger.com/profile/02215989324767435904noreply@blogger.com0tag:blogger.com,1999:blog-3662466771038419723.post-35965864484822917752021-11-30T00:08:00.002+05:302021-12-22T21:04:48.175+05:3010 Important Key Terms You Must Know Before Investing In Mutual Funds<p style="text-align: justify;"><a href="https://aniketpatkarinvestments.blogspot.com/2021/08/what-is-mutual-fund-and-how-it-will.html" target="_blank">Mutual funds</a> are an attractive investment option, where you have the flexibility to invest in different types of funds and assets of your choice, including equities, debt, or gold. AMCs provide professional management through expert fund managers and allow the investor to build a strong corpus to meet their <a href="https://aniketpatkarinvestments.blogspot.com/2021/08/setting-smart-financial-goals.html" target="_blank">financial goals</a>. Let us try to understand a few important key terms you must know before investing in Mutual Funds.</p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEinEZbJqxXrnOTo9C2OLFzYTee0L6XkbB_RsV5w9j7nRjjujEuB0pEdRFzg1dAN2VgdQLZ8gZE-9QK1_DH_9EiafboNRw5ileUj1jQ-5AiQhckUAJ8WuDXpshEUYgctFb_JHxZkSdtGuVz5SeVNafZpK9-8JR16zfC9e9LmEDIi12P3MvmnV1PHFwBV=s865" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="486" data-original-width="865" height="360" src="https://blogger.googleusercontent.com/img/a/AVvXsEinEZbJqxXrnOTo9C2OLFzYTee0L6XkbB_RsV5w9j7nRjjujEuB0pEdRFzg1dAN2VgdQLZ8gZE-9QK1_DH_9EiafboNRw5ileUj1jQ-5AiQhckUAJ8WuDXpshEUYgctFb_JHxZkSdtGuVz5SeVNafZpK9-8JR16zfC9e9LmEDIi12P3MvmnV1PHFwBV=w640-h360" width="640" /></a></div><h3 style="text-align: justify;"><span style="text-align: left;">1. The Association of Mutual Funds in India </span></h3><p style="text-align: justify;"><a href="https://www.amfiindia.com/" target="_blank">AMFI</a> is dedicated to developing the Indian Mutual Fund Industry on professional, healthy and ethical lines and to enhance and maintain standards in all areas to protect and promote the interests of mutual funds and their unitholders.</p><p style="text-align: justify;">AMFI, the association of all the Asset Management Companies of <a href="https://www.sebi.gov.in/" target="_blank">SEBI</a> registered mutual funds in India, was incorporated on August 22, 1995, as a non-profit organization. As of now, 45 Asset Management Companies that are registered with SEBI, are its members. </p><p style="text-align: justify;">Some of the objectives are,</p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEgoLn3liJKRIyiJlpeSNuNFElC7rRBdkOcCs5wDBX7AZ6Q_-_5sKhtChJ6DrFzCm1yOToXHxb_TyfxxZ6wjLH3OFL0EQSZeZWtvmjGM-Ot5UN8mZREpZF0QiP7qn0XhDEE8htWMGLa_PGuMBZewm-wHt6cp-OaxTf7TbGnhwilGuZCYo-NrOekYZ4Cq=s1920" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img alt="amfi objectives" border="0" data-original-height="1080" data-original-width="1920" height="360" src="https://blogger.googleusercontent.com/img/a/AVvXsEgoLn3liJKRIyiJlpeSNuNFElC7rRBdkOcCs5wDBX7AZ6Q_-_5sKhtChJ6DrFzCm1yOToXHxb_TyfxxZ6wjLH3OFL0EQSZeZWtvmjGM-Ot5UN8mZREpZF0QiP7qn0XhDEE8htWMGLa_PGuMBZewm-wHt6cp-OaxTf7TbGnhwilGuZCYo-NrOekYZ4Cq=w640-h360" title="amfi objectives" width="640" /></a></div><h3 style="text-align: left;">2.Assets Under Management (AUM) </h3><p>Assets Under Management (AUM) is the total market value of the investments (assets) that an asset management company is managing, on behalf of its investors.</p><h3 style="text-align: left;">3.Asset Management Company or Fund House</h3><p style="text-align: justify;">Asset Management Company (AMC) is the institution that works as Investment Manager of the Mutual Fund that manages the pool of investor money on behalf of the investors. An AMC carries out all purchase and sale of securities in the portfolio of various Mutual Fund schemes launched by the Mutual Fund.</p><p style="text-align: justify;">Fund house is just another name for an Asset Management Company (AMC). Fund house is used more commonly by people when they are referring to an AMC and can be used interchangeably. </p><h3 style="text-align: left;">4.Benchmark </h3><p style="text-align: justify;">Mutual Fund performance should never be viewed in isolation. The performance of a Mutual Fund or any investment should be evaluated against a standard known as the benchmark. </p><p style="text-align: justify;">The benchmark for a fund is selected at the time the fund is launched and the selection of the benchmark is based on the investment objective of the fund. This benchmark, comprising of either stock, bonds, money market instruments, or other securities, indicates the kind of investment choices the fund will make as part of its stated investment objective. Hence, you as an investor can expect the scheme to perform better than its benchmark over a given time frame.</p><p style="text-align: justify;">Investors would have no measure to compare the performance of different funds, that have different investment objectives, and follow different investment strategies. Thus, a benchmark helps bring in standardization in the comparison of the performance of different funds, following the same benchmark or in evaluating how a fund has performed against its own benchmark.</p><h3 style="text-align: left;">5.Compound Annual Growth Rate(CAGR) & Extended Internal Rate of Return (XIRR)</h3><p>CAGR is the most common mutual fund return measure used when a fund’s performance is discussed.</p><p>CAGR is a representation of the compounded growth of your mutual fund investments. It shows the fund’s average annual growth or decline over a particular period of time.</p><p>Let’s check the below example,</p><p>CAGR = [(Ending Value/Beginning Value) ^ (1/N)]-1</p><p>e.g., the initial value of your investment is Rs 10,000, and the final value is Rs 25,000 in three years (N= 5 years). CAGR is calculated as:</p><p>CAGR = [(25,000/10,000)^(1/5)] – 1</p><p>CAGR = 20.11%.</p><p>CAGR can be a good measure for lumpsum purchases in Mutual Funds, but where there are different cash inflows and cash outflows, like in <a href="https://aniketpatkarinvestments.blogspot.com/2021/08/how-mutual-fund-sip-magic-works-for-investor.html" target="_blank">SIP</a>s, CAGR is may not be the right measure.</p><p>That is because each installment in a SIP is a new investment, and therefore you have amounts invested for different time duration. For example, in a 3-year SIP, your first installment will be invested for 3 years, second for 2 years 11 months, and so on. What it translates into is that each amount compounds for a different period. In XIRR, the CAGR of each installment is calculated, and then they are added together to give you the overall CAGR.</p><h3 style="text-align: left;">6.Close-Ended Schemes & Open-ended schemes</h3><p style="text-align: justify;">Close-Ended Mutual Fund schemes are open for investing only during the NFO (New Fund Offer) period.</p><p style="text-align: justify;">Neither can new investors enter a close-ended scheme nor can existing investors exit the scheme until its maturity. However, for providing interim liquidity to investors, the scheme is listed on a stock exchange post-NFO where its units can be traded. The units may sell at a premium or discount price to the NAV of the fund depending on market conditions, the investor's expectations of the future performance of the fund, and demand and supply of units of the fund.</p><p style="text-align: justify;">On the other hand, open-ended schemes are open for investing & redeeming invested amounts throughout its life.</p><h3 style="text-align: left;">7.Growth, Dividend Payout & Dividend Reinvest</h3><p style="text-align: justify;">Mutual Fund schemes have three options to grow your money, namely 'growth', dividend reinvest', and 'dividend payout'. Investors can choose different options depending on their financial requirements. </p><p style="text-align: justify;">The objective of a Growth Option is the long-term growth of capital. In a growth option, all gains made by the Mutual fund are reinvested into the scheme. This increases the NAV of the scheme since the profit is retained by the scheme instead of being distributed to the investors. When the fund makes a profit, the NAV of the scheme increases and vice-versa.</p><p style="text-align: justify;">The only way an investor in a growth plan can realize a profit is to sell his/her investment in the scheme. The return in a growth plan is calculated by taking the difference in NAV on the purchase date & sale date as there are no intermediate payments like dividends, interests, gains, bonuses, etc.</p><p style="text-align: justify;">A growth option investor generally gets higher capital gains at the time of redemption as compared to an investor who has opted for the dividend option. A growth plan is suitable for those who are looking for the growth of their capital over the long term and don’t look forward to intermediate payouts from the fund.</p><p style="text-align: justify;">In the case of the Dividend Payout option, you receive any dividend declared by the companies included in the portfolio of your scheme. Within the dividend option, you can either choose to receive the dividend payouts or reinvest the declared dividend back into the scheme. </p><p style="text-align: justify;">Dividend Payout options lets you receive any profit/surplus declared by the Mutual Fund scheme during the time you remain invested in the scheme. </p><p style="text-align: justify;">A Mutual Fund scheme invests in different types of securities like stocks, bonds, gold, and even international securities. Some of these securities pay dividends while others may pay interest and some others may pay bonuses. The profits/surplus made by the scheme can be distributed among the scheme’s investors at the discretion of the fund managers. In the case of the dividend payout option, you will receive the profits made by the scheme whenever the fund manager decides to distribute this profit among investors. The NAV of a dividend scheme falls to the extent of dividend declared on the ex-dividend date i.e. the next business day after the dividend has been declared.</p><p style="text-align: justify;">In the case of the 'Dividend Reinvestment option', you can reinvest the dividend made by the scheme during the intermediate period back into the scheme. If a fund manager does decide to distribute the profits, the declared profits in the form of dividends are not paid to investors when they opt for the dividend reinvest option but are rather reinvested in buying more units of the fund. Unlike a growth option where the value or NAV of your holding grows, here the number of units held by you grows since the dividend amount is used to buy more units of the scheme.</p><h3 style="text-align: left;">8.Expense Ratio </h3><p style="text-align: justify;">A Mutual Fund has some operational costs while running its business. As per SEBI guidelines, certain expenses that are incurred by the Mutual Fund in managing a scheme must be attributed to the scheme only. For instance, an AMC must pay a salary to the fund manager & his team of the Mutual Fund scheme, the Mutual Fund distributors' commission, marketing expenses for promoting the scheme to investors. As per the SEBI guideline on expenses, all such expenses for managing and operating the specific scheme must be allocated to the scheme.</p><p style="text-align: justify;">A Mutual Fund scheme invests the pool of investor money in certain securities of the Portfolio. The value of this portfolio is the value of securities held by the scheme. On the other hand, the scheme has certain operational expenses as explained above. Apart from the expenses listed above, the scheme also attracts transaction costs while buying and selling securities in its portfolio regularly. All these costs together account for the total expense of the Mutual Fund scheme.</p><p style="text-align: justify;">To ensure that Mutual Funds don’t overspend to manage their schemes, SEBI has set guidelines for what the expense ratio of a scheme can be. The expense ratio is the percentage of the scheme’s assets that are used up in managing and operating the scheme. All the expenses we spoke about earlier are paid for by the scheme’s assets. SEBI has set limits for the expense ratio for each type of Mutual Fund, so that fund houses are cautious in their spending. As per an order issued by SEBI on September 18, 2018, Mutual Funds are allowed to charge a Total Expense Ratio (TER) that is linked to their type of fund and Assets Under Management (AUM). Generally, it decreases as AUM increases.</p><h3 style="text-align: left;">9.Exit Load </h3><p style="text-align: justify;">Some Mutual Fund schemes charge an exit load on redemptions or cancellations within a stipulated time period.</p><p style="text-align: justify;">Exit Load is like a fine for premature redemptions because it is meant to discourage investors from selling their Mutual Fund investments too soon. Mutual Fund investments are meant for the long-term. Since Mutual Funds are subject to market fluctuations, they are best suited for medium to long-term goals. Hence, most Mutual Fund schemes charge an exit load if investors sell their investment within the specified period.</p><p style="text-align: justify;">Exit load is charged as a percentage and is applied to the redemption amount. If the exit load is 1% then you’ll receive 99% of your redemption amount if you sell your investment before the stipulated period. Exit load as a percentage is applied on the NAV applicable to your redemption. If the NAV at the time of redemption is 1000, you will receive only 990 for each unit of Mutual Fund investment you decide to redeem.</p><h3 style="text-align: left;">10.Mutual Fund units </h3><p style="text-align: justify;">Mutual Fund Units are in a way like shares of a company that trades in the market and represent the extent of ownership you have in the Mutual Fund as an investor. As you know, Mutual Funds are investment vehicles that invest in different securities across asset classes like equity, debt, international securities, gold, etc. The amount of money you invest in a Mutual fund decides the number of units of the fund you would be allotted. If an investor invests 1,0000 in a scheme and the NAV for that day is 100, the investor will be allotted 100 units of the scheme (= Amount invested/Applicable NAV). These 100 units represent the investor’s extent of ownership in the Mutual Fund scheme.</p><p style="text-align: justify;">These units can be expressed need not always be whole numbers, sometimes it can be in decimal as well. </p><p style="text-align: justify;">The current NAV of a scheme represents the cost of one unit of that scheme. NAV can be calculated as,</p><p style="text-align: justify;">NAV = (Assets of the fund-Liabilities of the fund)/Number of outstanding units of the fund.</p><p style="text-align: justify;">The value of your holding in a Mutual Fund can be calculated as the number of units of the scheme held by you multiplied by the current NAV of the scheme.</p><p style="text-align: justify;">Hope you must have understood some of the key terms which will help you understand mutual funds better. </p>Aniket Patkarhttp://www.blogger.com/profile/02215989324767435904noreply@blogger.com0tag:blogger.com,1999:blog-3662466771038419723.post-38027056873792938162021-11-10T14:33:00.013+05:302021-12-23T23:06:41.152+05:30Should You Invest in Stocks or Mutual Funds ?<p><span style="text-align: justify;">Nowadays when</span><span style="text-align: justify;"> </span><a href="https://aniketpatkarinvestments.blogspot.com/2021/10/mutual-fund-investment-strategy-when-market-is-at-all-time-high.html" style="text-align: justify;" target="_blank">stock markets are high</a><span style="text-align: justify;"> </span><span style="text-align: justify;">and everyone wants to make money out of it, one question comes to everyone's mind "Should You Invest in Stocks or Mutual Funds?"</span></p><p style="text-align: justify;">Many investors have made 40-50% returns from stocks in the last few months due to a market bull run. People can think that investing in stocks directly is more beneficial than any other investment avenue but is it true?</p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEg3lEVxNnkIbwDVDlvht52v4hUWuXU_iUoLJ59teOieFg0q5ahj1wroIG2gaTFUUA8Mh-qPjvulZGGG-UJQy2nFN07uadxI1o7Hv1IJus43cutDQAbRbdxSmV4mgCAEg45T0FQgynT7XADqYbdH5yUsXDbZrRc-ZMiaZrvkSa6df9QZWAk0WyfknGCc=s1920" style="margin-left: 1em; margin-right: 1em;"><img alt="mutual funds vs stocks" border="0" data-original-height="1080" data-original-width="1920" height="360" src="https://blogger.googleusercontent.com/img/a/AVvXsEg3lEVxNnkIbwDVDlvht52v4hUWuXU_iUoLJ59teOieFg0q5ahj1wroIG2gaTFUUA8Mh-qPjvulZGGG-UJQy2nFN07uadxI1o7Hv1IJus43cutDQAbRbdxSmV4mgCAEg45T0FQgynT7XADqYbdH5yUsXDbZrRc-ZMiaZrvkSa6df9QZWAk0WyfknGCc=w640-h360" title="mutual funds vs stocks" width="640" /></a></div><h3 style="text-align: justify;">What is stock (equity) investment?</h3><p style="text-align: justify;">Investing in Stocks (equity) is like buying part ownership of a company. </p><h3 style="text-align: justify;">What is Mutual Fund investment?</h3><p style="text-align: justify;">A <a href="https://aniketpatkarinvestments.blogspot.com/2021/08/what-is-mutual-fund-and-how-it-will.html" target="_blank">Mutual Funds</a>, on the other hand, is an investment led by professional managers & their research team. These fund managers invest in various options like equity (Large-cap, mid-cap, small-cap, etc.), G-Sec., Government or corporate bonds depending on the type of mutual fund. </p><p style="text-align: justify;">A mutual fund comprises a pool of money collected from various investors as per the objective of a mutual fund in diversified securities.</p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEhovlcCHfFuRRo5EjYrgMvuZruPxU27R-sZ-m6gTJTGTCpE4-cwtS4vrTvNsYp_f-yPDv-wo71hX88fhLeufvq4h7ZAtz3Uyid7fQ8V72zX7Giafzx0iK3wUOpPNQPG8SL7kbqF2XjIVUsJ1ktzNMM6GCwqgmCAJAVnCXZabdDklo_hvTH6QoStSKK4=s1080" style="margin-left: 1em; margin-right: 1em;"><img alt="mutual funds vs stocks" border="0" data-original-height="1080" data-original-width="1080" height="640" src="https://blogger.googleusercontent.com/img/a/AVvXsEhovlcCHfFuRRo5EjYrgMvuZruPxU27R-sZ-m6gTJTGTCpE4-cwtS4vrTvNsYp_f-yPDv-wo71hX88fhLeufvq4h7ZAtz3Uyid7fQ8V72zX7Giafzx0iK3wUOpPNQPG8SL7kbqF2XjIVUsJ1ktzNMM6GCwqgmCAJAVnCXZabdDklo_hvTH6QoStSKK4=w640-h640" title="mutual funds vs stocks" width="640" /></a></div><h3 style="text-align: justify;">Risk, Time & Effort</h3><p style="text-align: justify;">There are two ways to invest in the Stock market, one is direct and another is with mutual funds. </p><p style="text-align: justify;">Direct investment in stocks is far riskier than mutual funds. For beginners, it's riskier because they generally don't know how, when, and where to invest. They pick stocks for their portfolio by watching financial news channels, listening to so-called Market gurus (influencers!) on YouTube channels, or with "tips". These multiple sources generally misguide them to make one of the <a href="https://aniketpatkarinvestments.blogspot.com/2021/08/top-18-common-investment-mistakes-to.html" target="_blank">common investing mistakes</a>, "Doing Too Little study before investing". We have to make a note here that a "good" stock portfolio contains 25 to 30 stocks from diversified sectors and has a different market cap. Can anyone build such a stock portfolio with tips and news? NO. </p><p style="text-align: justify;">Building such a stock portfolio requires a study of the balance sheet of different potential companies, the experience of a different market cycle, knowledge of financial terms and ratios, etc. Now, Building such a stock portfolio is not enough. We have to monitor it, maintain it over a long period of time. Monitoring this big volatile portfolio dynamically is impossible for beginner investors. </p><p style="text-align: justify;">On top of that stock investors need to check how the overall economy is doing. A company can be making all the right decisions, but that doesn't stop the stock from declining if bad news hits the industry, or if a broad recession causes the entire economy to collapse. Market momentum is equally important. If the investor is not going with the hard way, there is Risk. </p><p style="text-align: justify;">There is another aspect that even if investor understand all the things but he doesn't have time to take the efforts, there is a convenient way available. </p><p style="text-align: justify;">The choice is straightforward and that is to invest through mutual funds. Mutual funds have the advantage of reducing the risk by diversifying a portfolio by investing in a large number of stocks with the help of the Professional management of the Fund manager and his team. </p><p style="text-align: justify;">Investors still need to research for best-suited mutual funds, but there's less effort involved. You or your advisor decide what type of mutual fund you need, whether it's an index fund, sector fund, market cap (Large, mid, small-cap, multi-cap) fund, <a href="https://aniketpatkarinvestments.blogspot.com/2021/09/What-are-Index-funds-and-should-you-invest-in-them.html" target="_blank">Index fund</a>, or a debt fund. You should also look at the historical performance of a mutual fund and compare it to similar funds that track the same index or benchmark although it's not necessary that the fund will continue its historical performance but it can help us make a decision. You don't need to worry about the percentage of a particular stock in the mutual fund or when to sell them. The mutual fund manager & his team will research individual investments and decide what and when to trade.</p><p style="text-align: justify;">Everyone wants superior returns from equity. But, in terms of what one does, the two paths are completely different.</p><h3 style="text-align: justify;">Cost of Investing</h3><p style="text-align: justify;">An investor has to pay a small fee to mutual fund managers unlike in the case of stocks that an individual buys on his own. Active management comes with a cost but investor gets the benefit of Economies of scale. Fund managers transact on large scale because of that the transaction cost reduces drastically.</p><p style="text-align: justify;">In the case of stocks, apart from the brokerage fees and security transaction tax, individual investors also have to pay the charges for a Demat account which is not needed in the case of mutual funds. The transaction costs which we discussed above are the costs of brokerage and security transaction tax. </p><p style="text-align: justify;">If you have to build, monitor & dynamically manage a big portfolio at the individual level then costs might be higher. Apart from that if we add a risk factor in these costs, it can multiply exponentially for any wrong decisions made by the investor.</p><p style="text-align: justify;">Overall, stocks are cheaper to invest in & Mutual funds charge a fee for the fund manager’s services but the investor's success also depends on the investor's capability to handle his investment.</p><h3 style="text-align: justify;">Disciplined Investing</h3><p style="text-align: justify;">A major advantage of investing in mutual funds is discipline achieved through <a href="https://aniketpatkarinvestments.blogspot.com/2021/08/how-mutual-fund-sip-magic-works-for-investor.html" target="_blank">SIP (Systematic Investment Plan)</a>. </p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEjNKxYAW7gHVov1vNP4UwNztOGrsOxbS4UV3KTbIMdFE-M_bnb4BfKfva-_pC-_fFwUl1L1QW7xXBVPwCvgkYSms8inDCDYM0OtrH-STRuVOS6tYiCRGdoB-gDFuXIYDMdJgD_oBFzhaAjc0exzJXAvrzFfjWvoL83sYlyoh04h9SLlZZH02PdqYcW7=s1920" style="margin-left: 1em; margin-right: 1em;"><img alt="SIP (Systematic Investment Plan)" border="0" data-original-height="1080" data-original-width="1920" height="360" src="https://blogger.googleusercontent.com/img/a/AVvXsEjNKxYAW7gHVov1vNP4UwNztOGrsOxbS4UV3KTbIMdFE-M_bnb4BfKfva-_pC-_fFwUl1L1QW7xXBVPwCvgkYSms8inDCDYM0OtrH-STRuVOS6tYiCRGdoB-gDFuXIYDMdJgD_oBFzhaAjc0exzJXAvrzFfjWvoL83sYlyoh04h9SLlZZH02PdqYcW7=w640-h360" title="SIP (Systematic Investment Plan)" width="640" /></a></div><p style="text-align: justify;">SIP is a method of investing systematically and consistently with a specific amount in a mutual fund. In SIP, a fixed predefined amount of money gets deducted from your account every month on a fixed date. This amount is invested in a mutual fund of your preference. Thus, you don’t have to invest yourself every time. You should start investing early through SIP so that Power of Compounding will play its role to give you more returns. You can take help from your Investment advisor or Mutual Fund Distributor to get an idea of the actual SIP amount required as per your financial goals. you can also find the SIP Calculator on different websites.</p><p style="text-align: justify;">Doing so with stocks, on the other hand, is much tougher as every transaction needs to be carried out manually by the investor. Nowadays as the technology is advanced, we can invest in preselected 'Baskets of stocks' or 'smallcase' where we get an option of selected stocks for SIP. The only thing here is that the minimum SIP amount in 'smallcase' is much higher than the SIP amount in Mutual Fund.</p><h3 style="text-align: justify;">Tax Benefits</h3><p style="text-align: justify;">Both Stocks and Mutual Funds attract <a href="https://aniketpatkarinvestments.blogspot.com/2021/09/7-Different-types-of-ITR-Income-Tax-Return-forms-Which-Should-I-File.html" target="_blank">tax</a> on their returns (depending on how much time you hold them) but An ELSS is an Equity Linked Savings Scheme, that allows an individual or HUF a deduction from the total income of up to Rs. 1.5 lacs under Sec 80C of Income Tax Act 1961.</p><h3 style="text-align: justify;">Diversification & Flexibility </h3><p style="text-align: justify;">One of the major advantages of investing in mutual funds is that one can have a diversified portfolio by investing in small and flexible amounts (beginning with as low as Rs. 100).</p><p style="text-align: justify;">On the other hand, if one tries to build a diversified portfolio with stocks by buying them directly, they would need a relatively large sum of money to start.</p><h3 style="text-align: justify;">Advisor's role</h3><p style="text-align: justify;">There are many PMS, Investment Advisors, <a href="https://aniketpatkarinvestments.blogspot.com/2021/08/Direct-vs-Regular-investment-in-Mutual-Funds--Role-of-Mutual-Fund-Distributor.html" target="_blank">Mutual Funds Distributors</a> are available for investors to get advisory services, portfolio management services. Investors can take help of these services at nominal cost to make well-informed decisions for their long-term investments. The cost of commission or these services are always less than the cost of wrong decisions.</p><h3 style="text-align: justify;">Linking Investments with Financial Goals</h3><p style="text-align: justify;">Linking your investments with your <a href="https://aniketpatkarinvestments.blogspot.com/2021/08/setting-smart-financial-goals.html" target="_blank">SMART Financial goals</a> is important if you are investing in stocks or Mutual Fund. Without linking Goals with investment is like driving without a destination. </p><h3 style="text-align: justify;">Conclusion</h3><p style="text-align: justify;">You can invest in equity markets Direct or through Mutual Funds, the quality of holdings and time spent in the markets matter more. If we have to talk about <a href="https://aniketpatkarinvestments.blogspot.com/2021/08/mutual-funds-vs-stocks.html" target="_blank">mutual funds vs stocks</a>. Long-term investment in both stocks and Mutual Funds is good to achieve your financial goals. Embrace <a href="https://aniketpatkarinvestments.blogspot.com/2021/08/good-habits-for-financial-freedom.html" target="_blank">good financial habits</a> and start investing. These two investment avenues have the potential to beat inflation and can help in your Retirement planning.</p><p style="text-align: justify;"><br /></p>Aniket Patkarhttp://www.blogger.com/profile/02215989324767435904noreply@blogger.com0tag:blogger.com,1999:blog-3662466771038419723.post-25615780054395504492021-10-26T23:43:00.002+05:302021-12-22T22:44:09.927+05:30What should you do with your EMI money after repaying your Home loan?<p style="text-align: justify;">You finally have repaid your loan. Home loan is a big burden for most people and getting it repaid is a reason to celebrate. But with the home loan paid off, your EMIs will also stop. This will increase your savings resulting in more money left every month.</p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEjQLMeN95rKmSQV8w-17kYclD4DYkO-3rVdeoa0FyokJLTkplOET8K85fCCc3NGgzNtXKSXeDWNjbT_7MW01-gYwHzkOobcqGsGt9mF29CBb5soFi3NQN1jqysV4mpRII5_wbsDEPFdRvkuM7BdhnOwowmN8Px5_UFRNclHVbdB94PcuVgGqqqL2xGz=s2048" style="margin-left: 1em; margin-right: 1em;"><img alt="EMI, Mutual Funds, investment after Home loan get repaid" border="0" data-original-height="1536" data-original-width="2048" height="480" src="https://blogger.googleusercontent.com/img/a/AVvXsEjQLMeN95rKmSQV8w-17kYclD4DYkO-3rVdeoa0FyokJLTkplOET8K85fCCc3NGgzNtXKSXeDWNjbT_7MW01-gYwHzkOobcqGsGt9mF29CBb5soFi3NQN1jqysV4mpRII5_wbsDEPFdRvkuM7BdhnOwowmN8Px5_UFRNclHVbdB94PcuVgGqqqL2xGz=w640-h480" title="Apartment, Home, Home loan, investment" width="640" /></a></div><br /><h3 style="text-align: left;">What should you do with your EMI money after repaying your Home loan?</h3><p style="text-align: justify;">Many people think that now I have paid the loan, I will buy a second flat and will take a home loan, again. Buying your first house for residential use is a good idea. But buying the next one for investment should only be considered if you have that much surplus money & you already have taken care of your other financial goals. So what should you do with that extra money each month? Below are some suggestions.</p><h3 style="text-align: left;">Embrace good financial habits</h3><p style="text-align: justify;">The home loan is ended and you have more money to spend that does not mean, you have to go around shopping for unnecessary things, do hoteling, etc. <a href="https://aniketpatkarinvestments.blogspot.com/2021/08/good-habits-for-financial-freedom.html" target="_blank">Embrace good Financial habits</a>. Save more, spend less & invest your money.</p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEgwQWiJBdL2fg2V3s97jpS_tcImT2BHNUApacCyplBa_TJpwR7-YVpZyHKwFzMvwHuHvowAnTyGVhUUKs7rdmbb-BokdAy9ukBzUgMcpOkNBphDg1vX8zgB9kOc7jSVBBC9HbOkYtJ2wyMi2XUPMMqifDDDJXZGj8PPg5VbPhbj256NEtQstXsYYXd2=s1280" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="853" data-original-width="1280" height="426" src="https://blogger.googleusercontent.com/img/a/AVvXsEgwQWiJBdL2fg2V3s97jpS_tcImT2BHNUApacCyplBa_TJpwR7-YVpZyHKwFzMvwHuHvowAnTyGVhUUKs7rdmbb-BokdAy9ukBzUgMcpOkNBphDg1vX8zgB9kOc7jSVBBC9HbOkYtJ2wyMi2XUPMMqifDDDJXZGj8PPg5VbPhbj256NEtQstXsYYXd2=w640-h426" width="640" /></a></div><br /><h3 style="text-align: justify;"><span style="text-align: left;">Make Provision for Emergency Fund</span></h3><p style="text-align: justify;">If you don’t have an emergency fund or if it is not big enough, then it’s time to use your remaining extra money to top up your emergency fund. This may seem an unnecessary step but is essential. Emergencies don’t wait for us to accumulate emergency funds! Generally, it is good to have 5-6 months' salary as an emergency fund.</p><h3 style="text-align: left;">Pay High-Interest Rate debts</h3><p style="text-align: justify;">In case you have other high-interest debt (a personal loan, car loan, or credit card outstanding), start clearing that off. </p><h3 style="text-align: left;">Set SMART Goals</h3><p style="text-align: justify;">Setting Goals is an important aspect of life. <a href="https://aniketpatkarinvestments.blogspot.com/2021/08/setting-smart-financial-goals.html" target="_blank">Set SMART goals</a>. Goals should be Specific, time-bound, realistic, measurable, and achievable. Goals can be to save and accumulate Retirement Corpus, make provision for children's higher education, achieve financial freedom early in life, etc. Investment should be linked with your Financial goals. </p><h3 style="text-align: left;">Stop Procrastinating</h3><p>Do not keep postponing investment decisions. Start early to get the benefits of compounding. Time is money.</p><h3 style="text-align: left;">Invest wisely</h3><p style="text-align: justify;"><span style="font-weight: normal;">If you are a first-time investor. Don't hesitate to take the help of a Financial advisor or <a href="https://aniketpatkarinvestments.blogspot.com/2021/08/Direct-vs-Regular-investment-in-Mutual-Funds--Role-of-Mutual-Fund-Distributor.html" target="_blank">Mutual Fund Distributor (for Mutual Fund investment)</a>. You should stop scrolling for financial advice online and hire a 'human' financial advisor because the cost of choosing the wrong investment is greater than the advisor's cost (fees/commission). </span></p><p style="text-align: justify;">Invest in diversified asset classes like <a href="https://aniketpatkarinvestments.blogspot.com/2021/08/what-is-mutual-fund-and-how-it-will.html" target="_blank">Mutual Funds</a> (Large-cap, Midcap, small-cap, Flexi cap, Hybrid, Debt, etc), Stocks, Gold, FD, etc. </p><p style="text-align: justify;">If you don't have time to study before investing or monitor your investment frequently, <a href="https://aniketpatkarinvestments.blogspot.com/2021/08/how-mutual-fund-sip-magic-works-for-investor.html" target="_blank">you can start SIP (Systematic Investment Plan)</a> in a Mutual fund. Ignore the news, YouTube videos, etc. about investment options that will make you rich in a month. Remember it is important to stay in the market for the long term with well-studied investment decisions. Monitor your investment minimum yearly to check if your investment is on track.</p><p style="text-align: justify;">Don't get stressed out with these suggestions. Balance your life & be simple. Don't forget to enjoy your life with little things that matter.</p>Aniket Patkarhttp://www.blogger.com/profile/02215989324767435904noreply@blogger.com1tag:blogger.com,1999:blog-3662466771038419723.post-36329179481702580112021-10-20T00:52:00.007+05:302021-12-22T23:11:59.264+05:30How to plan and invest for your child's higher education<p>Parents are determined to give their children the best. There is no better investment than education. In today's competitive world, the best education in premier institutes or universities can set your child apart. A premier institute or university can serve as a milestone in your child's career. How to plan and invest for your child's higher education is what this article talks about.</p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEifrkqYj50MB7WDylRIFtf7CSOfAxICQXoS1xW8GtAhjwUsQkbaSsZuvQ6ZR19YxpCwzoDYYPXf8W4gE6v5iDpg6YPQYuuBXyGwJ9kG4zCxVQnymIUb2wzlvA0XK7WtozbevOGco2TUqVTTqLzTwXmLsHz7qcLE5cNg0CZnnzfA4ATeDvBhTREH87DA=s1280" style="margin-left: 1em; margin-right: 1em;"><img alt="children's education, financial planning, education, children, child, investment, mutual funds" border="0" data-original-height="853" data-original-width="1280" height="426" src="https://blogger.googleusercontent.com/img/a/AVvXsEifrkqYj50MB7WDylRIFtf7CSOfAxICQXoS1xW8GtAhjwUsQkbaSsZuvQ6ZR19YxpCwzoDYYPXf8W4gE6v5iDpg6YPQYuuBXyGwJ9kG4zCxVQnymIUb2wzlvA0XK7WtozbevOGco2TUqVTTqLzTwXmLsHz7qcLE5cNg0CZnnzfA4ATeDvBhTREH87DA=w640-h426" title="Investment for child's education" width="640" /></a></div><p>When you plan to save and invest money, the process becomes simpler. </p><p>Many parents want nowadays that their child should get education in the premier institute and demanding courses such as Doctors, MBA etc. Despite higher costs, parents are even considering foreign education for their children. Lack of money for children’s higher education can spoil their dreams & parents need to plan in advance to avoid this. Education abroad or with premier institutes in India is not cheap and parents need to save and invest in order to accumulate enough money and not to depend on funds by students loans or other means. </p><h4 style="text-align: left;">Fix your time horizon</h4><p>The first and important thing is fixing the time horizon. Calculate the years or period to your child's graduation and post-graduation. You can decide the time horizon with the approximate number of years in mind. </p><p>A longer time horizon is better for you to plan & invest. It also benefits in a way that we get extra time to fix errors or losses due to our wrong decisions. Start investing for this goal at the earliest. With time on your side, you can see the power of compounding play its role.</p><h4 style="text-align: left;">Need of a separate higher education saving & investing for children</h4><p>Savings funds can be divided into two parts – Optional and essential. Optional (less priority) savings funds are the ones driven by a goal that can be optional or we can say a 'wish'. These wishes could be a particular car, second house, your bucket list vacation, electronic gadget, etc.</p><p>Essential savings funds are for goals that are unavoidable. These include your emergency fund, your retirement corpus, and child's higher education fund, etc.</p><p>Simply said, you can postpone the optional goals without much of an effect on your family’s well-being, but that isn’t a possibility with the goals of your essential funds.</p><h4 style="text-align: left;">How do you set a goal amount for higher education?</h4><p>Parents often have this question in their mind, "how to set a goal amount for a child's higher education?". List down the best opportunities for your child. Check the current cost of those opportunities with respect to the institute, course, university, location (India or abroad, same state or different state). For example, approximate tuition fees in UK & Europe are in the range of 5 to 25 Lakh, in US these are in 5 to 50 Lakh while in Australia 5 to 15 Lakh. In addition, we also have to consider living expenses, books & stationary, Food, Health insurance, Travel etc. along with adjustments for inflation. Expert Financial planner or advisor can also help you calculate the goal amount.</p><p>Once you have the goal amount and time horizon is with you half of the efforts are done.</p><h4 style="text-align: left;">Education inflation</h4><p>Education inflation is the rise in the cost of education over time. As per trend generally, education inflation is significantly more than household inflation in many countries. It would be smart to target an amount a little higher than the inflation-adjusted target cost.</p><p>A great example of this could be that nowadays kindergarten fees are around 1 lakh to 2 lakh. A decade ago people did their whole Engineering Graduation at this cost.</p><h4 style="text-align: left;">Exchange Rate</h4><p>Exchange rates are another important factor that comes into the picture when you want to send your child to study abroad. The value of the rupee has gone down over the past few decades and if the trend continues, The cost of studying abroad is going to increase more than the inflation-adjusted rate. </p><h4 style="text-align: left;">Diversification in Investment</h4><p>To minimize risk and maximize returns, the best way is to diversify your investment. Remember that the diversification should be aligned with your age and risk profile. Put your eggs in a different basket. Invest in Stocks, <a href="https://aniketpatkarinvestments.blogspot.com/2021/08/what-is-mutual-fund-and-how-it-will.html" target="_blank">Mutual funds</a>, FDs, Gold, etc.</p><h4 style="text-align: left;">The best investment avenues</h4><p>In all <a href="https://aniketpatkarinvestments.blogspot.com/2021/08/best-investment-ideas-for-beginners.html" target="_blank">investment avenues</a>, Mutual funds can be considered as the best way to save and invest for a child's education. Mutual Funds are a little riskier compared to fixed deposits but have the potential to deliver great returns beating inflation to reach your goal. These schemes are run by experienced Fund managers who have spent most of their careers in the world of finance. They work with a team whose only goal is to deliver high returns. To add to their credibility, there are top names in banking who run their own mutual funds and have delivered consistent returns for decades under regulations of SEBI.</p><p>Having an investment horizon of at least 10 years will benefit you with Rupee cost averaging and compounding to help achieve the target amount. The monthly <a href="https://aniketpatkarinvestments.blogspot.com/2021/08/how-mutual-fund-sip-magic-works-for-investor.html" target="_blank">systematic investment plan (SIP)</a> amount should be such that your equity investment grows to achieve the target amount beating the taxes & inflation in a given time horizon. As you get closer to needing the funds, move the corpus to a debt fund or FD to safeguard the capital. </p><p>Investing in mutual funds for your children’s higher education could deliver returns that beat inflation with lesser risk than a direct jump into the stock markets. You can either go though by yourself investing 'direct' or go <a href="https://aniketpatkarinvestments.blogspot.com/2021/08/Direct-vs-Regular-investment-in-Mutual-Funds--Role-of-Mutual-Fund-Distributor.html" target="_blank">through Mutual Fund Distributor investing with 'Regular' option</a>. Investing with Mutual Fund Distributor has its own benefits like convenience, help in financial planning, setting goals, MF portfolio management etc.</p><h4 style="text-align: left;">What if my calculation gets wrong or if you couldn't achieve your goal amount?</h4><p>If your calculation gets wrong and you couldn't achieve the goal amount despite your efforts, there are affordable education loans that can help you with your remaining needs. Since you already have done most of the work by saving and investing wisely, the remaining needed amount will not be an issue for you.</p><h4 style="text-align: left;">Advice to young parents</h4><p>The main factor for young parents is 'time'. Start early, start right away for investment. Discipline and <a href="https://aniketpatkarinvestments.blogspot.com/2021/08/good-habits-for-financial-freedom.html" target="_blank">good financial habits</a> can help you reach all your goals ensuring you give the best opportunities to your children. A university degree can provide your children with a platform that can catapult their careers to new highs. For parents, I believe that’s an investment worth far more than anything.</p>Aniket Patkarhttp://www.blogger.com/profile/02215989324767435904noreply@blogger.com0tag:blogger.com,1999:blog-3662466771038419723.post-58538344214447180152021-10-16T21:01:00.006+05:302021-12-23T23:12:59.210+05:30Importance of Retirement plan and how to build one<p><span style="text-align: justify;">You may have dreams, the bucket list to fulfill after retirement. Whatever your dreams or bucket lists are, you need to plan for them now. Because once you retire, you will no longer earn a regular income, and to sustain your daily expenses. To live your post-retirement years, you will need to build a corpus.</span></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEjczBUz4_O6JcJ6N2vZrr33nJKA5dQE6p7sYDY3LxtyYuXEjV_aO7EEFVWpc9c747OIWTm2fmfa-bAF-76KNgw6ZfBu1HdRQzf10ayX8-0LJ-PN0rH2ROzMNnTn5d1a6h1-vETQgMtDvW7ugwJRGCJbfjxEsvOx0SWznhZOnoQBGl-vPVeDZzwjrMHC=s2038" style="margin-left: 1em; margin-right: 1em;"><img alt="retirement, investment, financial planning, mutual funds" border="0" data-original-height="2038" data-original-width="1920" height="640" src="https://blogger.googleusercontent.com/img/a/AVvXsEjczBUz4_O6JcJ6N2vZrr33nJKA5dQE6p7sYDY3LxtyYuXEjV_aO7EEFVWpc9c747OIWTm2fmfa-bAF-76KNgw6ZfBu1HdRQzf10ayX8-0LJ-PN0rH2ROzMNnTn5d1a6h1-vETQgMtDvW7ugwJRGCJbfjxEsvOx0SWznhZOnoQBGl-vPVeDZzwjrMHC=w602-h640" title="importance of retirement planning" width="602" /></a></div><p style="text-align: justify;">To remain independent, you need to save and invest for your future from now. Keep this in mind, savings in the bank will not be enough. Mainly because of the inflation factor. </p><p style="text-align: justify;">As life expectancy improves, so will the need for retirement planning. Money is important, but time has its own value. Pandemic has caused financial trouble for many and the time lost due to it is considerable, and therefore the need for getting back on track quickly is very important.</p><p style="text-align: justify;">We will see importance of Retirement plan and how to build one in this article as this is one of the important aspect of our life.</p><h3>Why do you need Retirement Planning?</h3><p style="text-align: justify;">It is easy to bear your expenses as long as you are earning your monthly salary. But post-retirement, you need to have enough money saved to live the rest of your life and maintain the same or better lifestyle.</p><h4>Monthly expenses: </h4><p style="text-align: justify;">All of us have to bear the necessary monthly expenses even after retirement. Many people do not get pensions or gratuities post-retirement as they work in the private sector and even for those who do receive them; the amount is generally not big enough to cover all of their expenses. Of course, EPF (Employee Provident fund) builds some retirement corpus but it's not enough to sustain. By planning and building a respectable retirement corpus, you can ensure that your family's standard of living is not compromised post-retirement.</p><h4>To cover medical expenses: </h4><p style="text-align: justify;">As we get older, the number of health issues and emergencies also increases. We are aware of the fact that how expensive medical expenses these days are. Mediclaim or health insurance policies mostly cover all medical expenses when you get hospitalized but not medicines, tests. Therefore, your retirement corpus must be large enough to cover your and your family's medical expenditure to avoid a financial emergency in post-retirement life.</p><h4>To deal with inflation: </h4><p style="text-align: justify;">Inflation is the rise in the rates of goods and services which we use daily. It reduces the purchasing power or value of your hard-earned money. There has been a constant rise in the price of goods and services and it will continue to be on a rise until you reach the retirement age. This means that you would have to pay more for everything in the future. From grocery to travel, it is all going to cost you relatively more in the future. It would be impossible for you to achieve all your retirement goals without a full-proof retirement plan.</p><h4>To deal with emergencies: </h4><p style="text-align: justify;">Life is unpredictable and uncertain. Some situations have the power to create financial as well as emotional turmoil in your life such as job loss, critical illness, natural calamities, loss of loved ones, financial difficulties in the life of relatives, and so on. Having a respectable corpus to take care of such emergency events can always come to your rescue. It is important while you approach retirement that you have a sufficient emergency fund. This will help manage emergencies better and not hinder your long-term goal of retirement.</p><h4>To meet your retirement goals: </h4><p style="text-align: justify;"><a href="https://aniketpatkarinvestments.blogspot.com/2021/08/setting-smart-financial-goals.html" target="_blank">Retirement goals</a> are the main objectives that we wish to achieve in our post-retirement years. These could be living a lavish life, traveling and exploring new places, or taking up hobbies that you have always wanted to pursue. However, if you do not plan and save for retirement while you are working, you cannot sustain yourself in your post-retirement years. Hence, it is essential to have a strong Retirement Plan that will make you aware of what is your current financial status, and what steps you need to take to achieve this goal.</p><p style="text-align: justify;">With a strong plan, you will be able to handle various factors such as surpluses, shortfalls, and emergencies. You understand how and when you will achieve your retirement goals. You will get control of your cash flows, your earnings and expenses, and what level of risk you need to take to achieve all your goals.</p><p style="text-align: justify;">In short, a retirement plan will let you understand your life goals and also define the path to achieve them.</p><h3>Steps to prepare the Retirement Plan</h3><h4>Step-1: Decide Your Retirement Age</h4><p style="text-align: justify;">People mostly retire at the age of 60 years, but it may vary from person to person. Some may wish to work beyond 60 years of age, while a few even wish to retire at 45.</p><p style="text-align: justify;">Deciding on your retirement age is very important because after this age your regular income will stop or at least reduce considerably (in case you are eligible for pension). You will have to depend on your savings and investments to take care of your expenses post-retirement.</p><p style="text-align: justify;">When you start investing and the retirement age is your timeframe you are left with to plan for retirement. For instance, if you are 30 years old and you wish to retire at the age of 55 years, then years to retirement = 55-30=25 years.</p><p style="text-align: justify;">One of the important factors while deciding your retirement age is life expectancy. In other words, the estimated number of years you are expected to live is based on age, medical condition, family history, and other demographic factors.</p><h4>Step-2: Start Early To Retire Peacefully</h4><p style="text-align: justify;">It's important that plan your retirement as early as possible. With many years in hand, you will have time to correct errors in the financial decision and the power of compounding to help you grow your money.</p><p style="text-align: justify;">Never delay retirement planning or else you might have to compromise on your goals. You might have to depend financially on your children or family. Hence, start early, start now.</p><p style="text-align: justify;">Most individuals who have recently started earning might think that they have too much time for retirement & planning for retirement at this early age may seem like being overly cautious.</p><p style="text-align: justify;">However, you must recognize that being young provides you a benefit that is not available to all, 'time'. </p><p style="text-align: justify;">And if you have just crossed your 30s and haven't even started planning for retirement, then it is still not very late. You still have many years to work, earn and save for your Retirement. But make sure you do it consistently and while spending, be cautious about your needs and wants.</p><h4>Step-3: Determine Your Retirement Corpus</h4><p style="text-align: justify;">Retirement corpus is the amount you require post-retirement to meet your expenses and continue with the same lifestyle or even better pursuing your other personal goals.</p><p style="text-align: justify;">First, write down monthly expenses in various categories such as household, medical, entertainment, hoteling, travel, Home loan EMIs, Personal loan EMIs and children's school/tuition fees, and so on.</p><p style="text-align: justify;">So, you must make an accurate estimate of how much amount you will require, to maintain your present lifestyle after you retire.</p><p style="text-align: justify;">Then calculate the value of current expense at the time of retirement considering the inflation rate factor. This is the amount you will need every year to meet your post-retirement expenses.</p><p style="text-align: justify;">The ideal way is, to spare a portion of your savings towards retirement. This part of your saving should not be disturbed unless you achieve your financial goals or there is such emergency which is not fulfilled with your emergency fund.</p><h4>Step-4: Figure in Crores...Is this achievable?</h4><p style="text-align: justify;">Yes, it is. Generally, the value comes in crores and investors get in shock. You should get this realization of your retirement corpus so that they can start investing seriously. The Financial advisor can help you to set your asset allocation based on risk profile, select appropriate investment avenues within each asset class, help you invest your money with discipline, and regularly monitor the portfolio to make sure that you are on track to accomplish your Retirement goals.</p><h4>Step-5: Cut Down On Unnecessary Expenses</h4><p style="text-align: justify;">Minimize your unnecessary expenses if you are unable to save now to reach the target monthly investment amount. Some of the avoidable expenses are movies in multiplex, impulsive purchases, outdoor food, lavish vacations, Expenses to maintain a rich lifestyle just to show off, etc. Minimizing such expenses can help you invest more and reach closer to your planned corpus. Buy necessary things, Buy assets & not liabilities. You should embrace <a href="https://aniketpatkarinvestments.blogspot.com/2021/08/good-habits-for-financial-freedom.html" target="_blank">good financial habits</a>.</p><h4>Step-6: Plan And Create An Ideal Portfolio Seeking Help of A Financial advisor</h4><p style="text-align: justify;">Depending on your current age and the risk profile, you should define a standard allocation to each asset class.</p><p style="text-align: justify;">It is important to have a diversified investment portfolio across the asset classes. Equities can offer you a better inflation proof returns than fixed-income instruments.</p><p style="text-align: justify;">Remember, every asset class may not be suitable for you & you should not be over-exposed to a single asset class. As they say, You should not put all eggs in one basket.</p><p style="text-align: justify;">As retirement planning is an exhaustive task, don't hesitate to seek the help of a financial advisor. But take care to opt for an independent, honest, unbiased, and competent financial advisor who will help you in every step to plan your retirement.</p><h4>Step-7: Risk Profiling</h4><p style="text-align: justify;">A financial advisor can help you understand your risk profile, whereby the asset allocation can be set and the portfolio can be structured accordingly to achieve your retirement corpus.</p><h4>Step-8: Invest your money consistently</h4><p style="text-align: justify;">Invest your money consistently with discipline avoiding <a href="https://aniketpatkarinvestments.blogspot.com/2021/08/top-18-common-investment-mistakes-to.html" target="_blank">common investment mistakes</a>. Invest in Stocks, <a href="https://aniketpatkarinvestments.blogspot.com/2021/08/what-is-mutual-fund-and-how-it-will.html" target="_blank">Mutual Funds</a>, Gold, FDs, Bonds, ETFs, Real estate, etc. Invest your money studying that asset class. If you don't have time to study or monitor your investment then a Financial advisor, <a href="https://aniketpatkarinvestments.blogspot.com/2021/08/Direct-vs-Regular-investment-in-Mutual-Funds--Role-of-Mutual-Fund-Distributor.html" target="_blank">Mutual fund Distributor</a> can help you invest and manage your portfolio. <a href="https://aniketpatkarinvestments.blogspot.com/2021/08/how-mutual-fund-sip-magic-works-for-investor.html" target="_blank">Systematic Investment Plans (SIP)</a> can help you invest your money with discipline with benefit of Rupee cost averaging and compounding in long term.</p><h4 style="text-align: justify;">Step-9: Check if you are properly insured</h4><p style="text-align: justify;">While doing retirement plan, it is also important that check our insurance needs. The purpose of insurance is not to help you achieve your financial goals but rather to ensure that your family & loved ones get financial support after you pass away. You should have minimum two insurance schemes with you, Term insurance & Health insurance. The Term insurance will insure you respectable big life cover in minimum premium on the other hand health insurance will cover you for any medical emergency.</p><p style="text-align: justify;">Keep in mind, <a href="https://aniketpatkarinvestments.blogspot.com/2021/08/Why-we-cannot-consider-Insurance-as-an-investment.html" target="_blank">Don't buy insurance as an investment</a>.</p><h4>Step-10: Track And Review Your Plan Regularly</h4><p style="text-align: justify;">It's not the end after you start investing with a good plan. Your retirement plan needs to be reviewed regularly (at least once a year) to make sure you are on target to meet your objectives. Any changes such as increased income, expenses, additional goals, retirement age, etc. need to be incorporated into the retirement plan.</p><div style="text-align: justify;">Hope you understood the importance of Retirement plan. When are you planning to build one?</div>Aniket Patkarhttp://www.blogger.com/profile/02215989324767435904noreply@blogger.com0tag:blogger.com,1999:blog-3662466771038419723.post-29347039507298295062021-10-05T20:26:00.003+05:302021-12-26T00:19:29.571+05:30Mutual Fund Investment strategy when market is at all time high<p>The BSE Sensex reached the new milestone, the 60,000 last week. It is natural that investors are excited because the stock exchange continues to rally amid uncertainties from the USA and the Chinese market. The rally was seen not only within the bluechip segment but across broader markets. Nifty Smallcap, Nifty Midcap advanced from their last closing values.</p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgiceLp-49vGdC4GVZEXGDHVdbdh_iu_hitW7nZ9FsVLZZUqyqIqCenN_vPIxR0bKzLPUBAZ0bFylBtK0TzmmfiURRgKrwQopzgizEy7M55qF0crXlD57I_v1aU3k8PhMh0lwftaVOu568/s1485/60000.jpg" style="margin-left: 1em; margin-right: 1em;"><img alt="investment, Sensex, nifty, financial planning, investment strategy" border="0" data-original-height="1080" data-original-width="1485" height="466" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgiceLp-49vGdC4GVZEXGDHVdbdh_iu_hitW7nZ9FsVLZZUqyqIqCenN_vPIxR0bKzLPUBAZ0bFylBtK0TzmmfiURRgKrwQopzgizEy7M55qF0crXlD57I_v1aU3k8PhMh0lwftaVOu568/w640-h466/60000.jpg" title="investment strategy when market is high" width="640" /></a></div><p>Some analysts are noting that the last 10,000 points were crossed during a record time by the Indian stock exchange. The NSE Nifty was nearing its own landmark of 18,000 points. Market Gurus suggests that it's because decreasing concerns of a possible third wave of the Covid-19 pandemic and increased pace of vaccination have contributed to the gains within the markets. Every investor mostly the mutual fund investor is thinking about his ideal strategy during this market condition.</p><p>Sensex at 60000 benchmark is simply an another number. Existing and new investors shouldn't overwhelmed by index levels but should check out valuations of portfolios, stocks & Mutual Funds one has invested or plans to take a position. If the economic recovery is in the process we believe there might be a possible rise in corporate earnings. The investor should review their portfolio for the allocation with respect to future financial goals, rebalance it if required, and stay invested.</p><p>Whenever the market touches such milestones, we've seen tons of new investors start investing and lots of existing ones want to form changes to their portfolios. However, investment advisors believe that milestones in the market should not decide an investor's investment strategy.</p><p>We should not get too excited by these milestones. The milestones in an investor’s personal financial journey is more important and that’s what they look for. </p><p>Investors should continue with their investments as per their financial plan. If required, the investor can do tactical rebalancing & transfer some of the investment from equity to debt asset class. If there's a need to top-up within the emergency corpus, make sure that it's filled. More important, Don't assume that this market would always continue. Don't change your return expectations to a better value. This will impact your financial goals.</p><p>Another important point is that investors tend to invest in new funds when the markets are scaling new highs. Investors should know the types and the number of funds in their portfolio. They should invest only in schemes that have proven their record in several market phases.</p><p>According to advisors, there is no right time to start a <a href="https://aniketpatkarinvestments.blogspot.com/2021/08/what-is-mutual-fund-and-how-it-will.html" target="_blank">mutual fund</a> SIP (systematic investment plan), but there is certainly a right time when one can book profit in one's portfolio. The most perfect time for booking profit in a mutual fund portfolio is when you are near to achieve your <a href="https://aniketpatkarinvestments.blogspot.com/2021/08/setting-smart-financial-goals.html" target="_blank">financial goal</a>. However, there are some other times when an investor should look for booking profit in a mutual fund portfolio. Such moments are financial emergencies or portfolio balancing.</p><p>The investor can reduce his riskier mid and small-cap exposure while rebalancing. This is often also the right time to sell some funds if your portfolio contains a lot of schemes in it. </p><p>When we think about booking profit in mutual funds, it can be seen differently compared to direct equities. The mutual funds are managed by fund managers and they are in a better position to take a call on profit-booking based on their expertise and view. Hence, mutual fund investors can rely on the fund managers to make the best call. However, looking at the current market levels, investors of mid-cap and small-cap funds can consider booking some profits as these indices have increased a lot from the past year.</p><p>Corrections in the market cannot be ruled out in the equity market but then as seen in the past, the equities tend to drift upwards over the long term. As people say in the market, there’s no such time as the best time to invest. Trying to time the market is not a good idea in any scenario. The money should stay more time in the market is what matters. The longer the investor keeps his money invested, the better is the potential to generate a high risk-adjusted return and is also able to beat inflation in the long term. Investor should always try to avoid <a href="https://aniketpatkarinvestments.blogspot.com/2021/08/top-18-common-investment-mistakes-to.html" target="_blank">common investment mistakes</a>.</p><p>The new investors who want to enter the Stock market by seeing the Sensex can start with <a href="https://aniketpatkarinvestments.blogspot.com/2021/08/how-mutual-fund-sip-magic-works-for-investor.html" target="_blank">SIP in Mutual funds</a>. This will help them minimize the risk of studying value stocks. Investing in Mutual funds systematically instead of lumpsum will help them avoid buying everything at a higher price. Rupee cost averaging will play its role in the long term.</p>Aniket Patkarhttp://www.blogger.com/profile/02215989324767435904noreply@blogger.com0tag:blogger.com,1999:blog-3662466771038419723.post-73033304776676499672021-09-18T16:22:00.003+05:302021-11-06T13:41:43.691+05:30What are 10 financial tips for a 21 year old who just passed out of college<p></p><div>A youngster who is about to start his career and fortune building must follow certain financial discipline in his/her life. The extent of this depends on the level of your determination to be successful in life. Here are 10 financial tips for a 21 year old who just passed out of college.</div><ol style="text-align: left;"><li>You should embrace <a href="https://aniketpatkarinvestments.blogspot.com/2021/08/good-habits-for-financial-freedom.html" target="_blank">good financial habits</a>. Write your expenses and control them. keep a check, where your money goes.<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgeri_HoPzbih2XwvHekNSXDIDyQ_mbDCXKQb7xIwO53H7GX9P1ee5TmnWy7NrtoNy8IygVlTPi077K6UgGyvu_EsNt22jnSq7N3B1GUt8DUvcge6whJbGg61Xa_yHetMgbICyu436u5Q8/s2048/budget.jpg" style="margin-left: 1em; margin-right: 1em;"><img alt="good financial habit, budgeting, investment, savings, financial planning" border="0" data-original-height="1367" data-original-width="2048" height="428" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgeri_HoPzbih2XwvHekNSXDIDyQ_mbDCXKQb7xIwO53H7GX9P1ee5TmnWy7NrtoNy8IygVlTPi077K6UgGyvu_EsNt22jnSq7N3B1GUt8DUvcge6whJbGg61Xa_yHetMgbICyu436u5Q8/w640-h428/budget.jpg" title="financial tips for 21 year old" width="640" /></a></div><br /></li><li><a href="https://aniketpatkarinvestments.blogspot.com/2021/08/setting-smart-financial-goals.html" target="_blank">Setting SMART goals</a> is important for your career, financials, and life.<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg89Kq3J9k0ctE3WcbeYFuDOn0WwRkrBOsSBfD2xCkQJRZ5xJ4hfrXlEA_ROk_SAcbqzq00RNVWuNqLXjvJqvxSwj5gSB2dwQj8u5Cpn0GIp7zco5gJWAK8sEvY-YVZglNVcqSc1vGKG0A/s1024/Gray+Simple+Rectangle+Mind+Map.png" style="margin-left: 1em; margin-right: 1em;"><img alt="smart goals, investment, financial goals" border="0" data-original-height="768" data-original-width="1024" height="480" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg89Kq3J9k0ctE3WcbeYFuDOn0WwRkrBOsSBfD2xCkQJRZ5xJ4hfrXlEA_ROk_SAcbqzq00RNVWuNqLXjvJqvxSwj5gSB2dwQj8u5Cpn0GIp7zco5gJWAK8sEvY-YVZglNVcqSc1vGKG0A/w640-h480/Gray+Simple+Rectangle+Mind+Map.png" title="smart financial goals" width="640" /></a></div><br /></li><li><a href="https://aniketpatkarinvestments.blogspot.com/2021/08/saving-and-investing-difference-and.html" target="_blank">Don’t just save but invest your money</a>. The inflation rate reduces your purchasing power so only saving is not enough.<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgRipn4t4BA8wj-NN2HQFbHElBJkbHX_BCBs-4nabof8qBz1JNuB0ugX6DPNgbRpmbJmlOx09ZG3PUMDQWXeax2G1hon7y-3kQ0dnjyit9TL0qODOX61zqlBTfOs3-mcRq0jhZMT-wL6B8/s1920/investment.jpg" style="margin-left: 1em; margin-right: 1em;"><img alt="investment, financial planning, mutual funds" border="0" data-original-height="1080" data-original-width="1920" height="360" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgRipn4t4BA8wj-NN2HQFbHElBJkbHX_BCBs-4nabof8qBz1JNuB0ugX6DPNgbRpmbJmlOx09ZG3PUMDQWXeax2G1hon7y-3kQ0dnjyit9TL0qODOX61zqlBTfOs3-mcRq0jhZMT-wL6B8/w640-h360/investment.jpg" title="investment" width="640" /></a></div><br /></li><li>As a beginner, start investing in Mutual Funds with SIP. <a href="https://aniketpatkarinvestments.blogspot.com/2021/08/how-mutual-fund-sip-magic-works-for-investor.html" target="_blank">Know the magic of SIP</a>. The power of compounding with SIP will help you grow your money. Start early as possible.<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgvaFF-kUuCzxTsn8RtVGmaToSD6j_jrEeQ0-mtRbrqZL1iOHyzToC1SAs0aVF8TLFiAry2SpsOEb4gZ1JlbJRdPJ_4q12wXH9DH2zk4BF8h9oE6CvC5sX9Kh49AEkv8qcYdeIvyMGqMY8/s1920/SIP.png" style="margin-left: 1em; margin-right: 1em;"><img alt="sip, mutual funds" border="0" data-original-height="1080" data-original-width="1920" height="360" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgvaFF-kUuCzxTsn8RtVGmaToSD6j_jrEeQ0-mtRbrqZL1iOHyzToC1SAs0aVF8TLFiAry2SpsOEb4gZ1JlbJRdPJ_4q12wXH9DH2zk4BF8h9oE6CvC5sX9Kh49AEkv8qcYdeIvyMGqMY8/w640-h360/SIP.png" title="mutual fund investment" width="640" /></a></div><br /></li><li>Don’t procrastinate investing decisions because you have debts to clear. <a href="https://aniketpatkarinvestments.blogspot.com/2021/08/should-i-invest-or-pay-off-debt.html" target="_blank">Investing is equally important as clearing debts</a>. Plan clearing your debts. Start with higher interest rate debts.</li><li>Repay the home loans as quickly as possible. The First 5 years are crucial to reducing the burden of the interest rate. So any windfall, bonus, a lottery will go directly to reduce such loan.</li><li>Give a day when you are thinking to buy any big thing. That day will reduce your urge to buy unnecessary things/liabilities. Be sensible and wise while purchasing anything. <a href="https://fb.watch/85vkcLHyWF/" target="_blank">Buy Assets not liabilities.</a><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhE8dVbNxGYk8Yqm0yimk9PzLhE5NJdVnrvLPq9iJhLs7nKKUFEWCY6E7VInlKYMlk1CEWnJeI0XjyADqxUcv7qPkFHvO-G16do7UFK6efSIxBfCJQlFys9Q-9iB_GM2pb_AVGF-xf-bBI/s940/Assets+vs+liabilities.png" style="margin-left: 1em; margin-right: 1em;"><img alt="assets, investment" border="0" data-original-height="788" data-original-width="940" height="536" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhE8dVbNxGYk8Yqm0yimk9PzLhE5NJdVnrvLPq9iJhLs7nKKUFEWCY6E7VInlKYMlk1CEWnJeI0XjyADqxUcv7qPkFHvO-G16do7UFK6efSIxBfCJQlFys9Q-9iB_GM2pb_AVGF-xf-bBI/w640-h536/Assets+vs+liabilities.png" title="asset vs liability" width="640" /></a></div><br /></li><li>Eat out less. Homemade food is good for health anyway. Don't order food from outside even if it is more convenient nowadays. The offers, cashback is a Big lie.<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEisr-DvuM10aTRk69uS9P4U_f02kN0tOwH4lSw57HLgm2OFcxAA-devOD8tCLaVNF0NjfDD2LH_84DqS0XtF8aa7Zkef97IPLbo3dwDRHewfZwYcMgY46rutXU4YZejGpsHtazzyhIz0j8/s1920/no+to+outside+food.png" style="margin-left: 1em; margin-right: 1em;"><img alt="food, junk food, outside food" border="0" data-original-height="1080" data-original-width="1920" height="360" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEisr-DvuM10aTRk69uS9P4U_f02kN0tOwH4lSw57HLgm2OFcxAA-devOD8tCLaVNF0NjfDD2LH_84DqS0XtF8aa7Zkef97IPLbo3dwDRHewfZwYcMgY46rutXU4YZejGpsHtazzyhIz0j8/w640-h360/no+to+outside+food.png" title="eat home made food" width="640" /></a></div><br /></li><li>Keep this in mind, <a href="https://aniketpatkarinvestments.blogspot.com/2021/08/Why-we-cannot-consider-Insurance-as-an-investment.html" target="_blank">Don’t buy insurance as an investment</a>. Insurance has its own purpose. Get one Pure Term Insurance plan which will give you maximum coverage with less premium and one health insurance plan. This is minimum insurance requirement you should think about.<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEieDjZwI5bn4PMYIDCtRl8qIKXvjuj_uiufFcT5FeRAU0UkH2uV6gN3Msw0Jr2PtzcKf5hUW3Ae01hKWLJoyDptFf1BVswcYmax2hgXF_581ibGIsM2PttGusbjBeA9TpyQcZ3FzaVnL_o/s2048/investment+%25281%2529.png" style="margin-left: 1em; margin-right: 1em;"><img alt="mutual funds, investment, insurance" border="0" data-original-height="1448" data-original-width="2048" height="452" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEieDjZwI5bn4PMYIDCtRl8qIKXvjuj_uiufFcT5FeRAU0UkH2uV6gN3Msw0Jr2PtzcKf5hUW3Ae01hKWLJoyDptFf1BVswcYmax2hgXF_581ibGIsM2PttGusbjBeA9TpyQcZ3FzaVnL_o/w640-h452/investment+%25281%2529.png" title="insurance is not investment" width="640" /></a></div><br /></li><li>Considering beginner in investment, <a href="https://aniketpatkarinvestments.blogspot.com/2021/08/Direct-vs-Regular-investment-in-Mutual-Funds--Role-of-Mutual-Fund-Distributor.html" target="_blank">don’t hesitate to get help from Financial Advisor or Mutual Fund Distributor</a> (for Mutual Funds).<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh3Im-D2TKVLvOPCzFzXsgI93UjKFC0lhiTrClbHHKbWxFsFnS17K94wRzYrZT0QFkgzwkj__CnO_oFeZFZw2rqEsgYCkhLAuBMo7GC9W_vfmNlt0_y8pxLjXlKSN1KzJnq499ShSNMEOc/s1920/advise.jpg" style="margin-left: 1em; margin-right: 1em;"><img alt="financial advisor, mutual fund distributor" border="0" data-original-height="1281" data-original-width="1920" height="428" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh3Im-D2TKVLvOPCzFzXsgI93UjKFC0lhiTrClbHHKbWxFsFnS17K94wRzYrZT0QFkgzwkj__CnO_oFeZFZw2rqEsgYCkhLAuBMo7GC9W_vfmNlt0_y8pxLjXlKSN1KzJnq499ShSNMEOc/w640-h428/advise.jpg" title="get help of financial advisor or mutual fund distributor" width="640" /></a></div>There are many other tips and advice like reading or watching shows about personal finance, investment. Advice about getting a good job. Starting a side hustle for passive income. Important is a good start. Only you can change your life for the better.</li></ol><p></p>Aniket Patkarhttp://www.blogger.com/profile/02215989324767435904noreply@blogger.com0tag:blogger.com,1999:blog-3662466771038419723.post-89883811951664274472021-09-11T23:58:00.003+05:302021-12-23T23:13:48.304+05:30What are Index funds and should you invest in them?<p>Index funds have grown in popularity nowadays, as a growing number of investors have adopted passive investing strategies which attract low fees relative to active investment. In this article, we will try to understand what are Index funds and what things we should keep in mind while investing in them.</p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiPvbnXLF03Rgdk0t7YSKwTBuTtL82-rKQvQkQOKKwL8MZQP5OIaF_7cQtPeaYTObYvb1ayAckJASor0rv0DOPP1Qf5P8I6IuGESiKj8_sc62Vq3bMPixHv31WAC17Yz0vBWbosIKB7Suw/s1280/index.jpg" style="margin-left: 1em; margin-right: 1em;"><img alt="index funds, mutual funds" border="0" data-original-height="960" data-original-width="1280" height="480" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiPvbnXLF03Rgdk0t7YSKwTBuTtL82-rKQvQkQOKKwL8MZQP5OIaF_7cQtPeaYTObYvb1ayAckJASor0rv0DOPP1Qf5P8I6IuGESiKj8_sc62Vq3bMPixHv31WAC17Yz0vBWbosIKB7Suw/w640-h480/index.jpg" title="what are index funds" width="640" /></a></div><h3 style="text-align: left;">What are Index funds?</h3><p>An index fund is an investment product that aims to match or we can say replicate the performance of an index for example the Standard & Poor’s 500 Index, better known as the S&P 500, the Dow Jones Industrial Average (DJIA), Nifty 50, Nifty 100, S&P BSE Sensex. </p><p>SEBI insists that 95% of the entire assets should be in such replicating investment for index funds.</p><p>Index schemes are also referred to as “unmanaged schemes”, since they're passive, or “tracker schemes” since they follow a selected index. Passive investment needs less effort and time of the AMC. All that's required may be a good system that might integrate the whole process of valuation, generation of buy or sell orders. Management fees hence expense ratio for index funds are less than of managed or active schemes.</p><h4 style="text-align: left;">The replicating position in an index fund is created through either of two methods:</h4><p></p><ol style="text-align: left;"><li>It can either be done by maintaining an investment portfolio that replicates the composition of the chosen index. Thus, the stocks in such a fund’s portfolio would be the same as those that are utilized in calculating the index. The proportion of every stock within the portfolio, too, would be the same as the weight of the stock within the calculation of that index.</li><li>This replicating of investment is named 'passive investing'. Index funds are therefore often called “passive funds”. Funds that aren't passive, on the contrary often called “managed funds”, or “active funds”</li></ol><p></p><h3 style="text-align: left;">Working of an index fund</h3><p>"Indexing" is a sort of passive fund management. The fund manager builds a portfolio (A basket of securities and/or derivatives) whose holdings mirror the securities of a specific index rather than actively stock picking and market timing i.e. choosing securities to take a position in and strategizing when to buy and sell them. Schemes that invest in such baskets are often viewed as “active index funds”. The thought is that by replicating the profile of the index, the stock market as an entire, or a broad segment of it & the fund will match its performance also.</p><h4 style="text-align: left;">Advantages</h4><p></p><ul style="text-align: left;"><li>Low expense ratios</li><li>A good option for Diversification</li><li>Ideal investment option for passive investors who believe in buy and hold.</li><li>Better long-term returns</li></ul><p></p><h4 style="text-align: left;">Disadvantages</h4><p></p><ul style="text-align: left;"><li>Vulnerable to market fluctuations & crashes</li><li>Less human interference</li><li>Lack of flexibility</li><li>Limited Returns</li></ul><p></p><h3 style="text-align: left;">Should you Invest in Index Funds?</h3><p>Before you think to invest in index funds, it's important to check your investment horizon, assess your risk appetite, your pre-decided investing strategies. Below are some main points on which you can revolve your thinking regarding Index Fund.</p><h4 style="text-align: left;">Lower Costs</h4><p>One primary advantage that index funds have over their actively managed equivalents is that the lower expense ratio. A fund's expense ratio also referred to as the management expense ratio includes all of the operating expenses like the salary to advisors, analysts, and managers, transaction fees, taxes, and accounting fees.</p><p>Index funds do not need the services of research analysts and other such resources that assist in the stock-selection process since the Index fund managers are simply mimicking the performance of a benchmark index. Managers of index funds trade holdings less often hence fewer transaction fees and commissions. In contrast, actively managed funds have more staff do more transactions, driving up the cost of operation.</p><h4 style="text-align: left;">Risk & Diversification</h4><p>If you are someone who has a conservative or moderate risk appetite and would like to play it safe, then index funds are the proper fit for you. You can invest in an index fund even you have a higher risk appetite and want to diversify your portfolio. However, it's not good to invest in only index funds, especially when the market is at its peak. </p><h4 style="text-align: left;">Returns</h4><p>Returns from index funds are mostly the same as that of the market index. We should keep in mind that even low-risk investments can have low performance.</p><p>Since index funds reflect a part of the stock market or the market itself, the returns from these funds basically match the market’s performance.</p><h4 style="text-align: left;">Low Research</h4><p>It is important to accept the amount of time you can spare to study, research, invest and monitor. researching, and maintaining so far with the market. If you’re someone who wants to stay investing with a predictable rate of return and less amount of hassle, then index funds are fit for you.</p><p>Generally, actively managed funds are better for more experienced investors or those that can dedicate the time to study investment strategies. If you’re someone who wants to outperform the market, comfortable with volatility & taking over a substantial amount of risk, then actively managed funds are more appropriate for you. Active funds are handled by a fund manager who has such resources to make informed decisions about different investment scenarios, predictions on performance, assess risk, and accordingly make changes to your portfolio.</p><h4 style="text-align: left;">Investment Time Horizon</h4><p>Index funds perform better for the long term such as a minimum of 5-10 years. This enables you to get maximum returns as per the market index. The long-term nature of the investment must be taken into consideration before investing to ascertain if this matches your financial and investment goals.</p><p>For example, if you’re looking to get higher returns over a shorter period of your time, this won't be a good investment option for you.</p><h3 style="text-align: left;">Conclusion</h3><p>Index funds are an excellent option to invest in the stock market if you’re new to investing, especially due to the low cost and efforts involved. Predictable results and less volatility will benefit you if you're unwilling to high-risk investing. Invest in Index funds assessing the compatibility with your financial goals & investment horizon.</p>Aniket Patkarhttp://www.blogger.com/profile/02215989324767435904noreply@blogger.com0tag:blogger.com,1999:blog-3662466771038419723.post-3688616655417519372021-09-02T16:59:00.003+05:302021-12-26T00:20:22.569+05:307 Different types of ITR (Income Tax Return) forms, Which One Should I File?<p>All individuals having taxable income or those that satisfy other prescribed conditions are required to file annual tax return (ITR) within the specified due date. There are different type of ITR forms for different individuals satisfying different conditions or eligibility.</p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgT3wZAJ0c3Pmei69Jx6nQjgXvV4C2FydIp9Gvlh4_HQ1PdNGpWN7Do8X5_svPhZ4cARJIlyMDekw1g9X0zYRdK9aL2Ddg4tIQejLzPudBj7bgvuLw4iQOqKv52D0-4IXlrmlmZv7DVh8w/s1280/tax+time.jpg" style="margin-left: 1em; margin-right: 1em;"><img alt="ITR, income tax returns" border="0" data-original-height="929" data-original-width="1280" height="464" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgT3wZAJ0c3Pmei69Jx6nQjgXvV4C2FydIp9Gvlh4_HQ1PdNGpWN7Do8X5_svPhZ4cARJIlyMDekw1g9X0zYRdK9aL2Ddg4tIQejLzPudBj7bgvuLw4iQOqKv52D0-4IXlrmlmZv7DVh8w/w640-h464/tax+time.jpg" title="7 types of ITR (income tax return) forms" width="640" /></a></div><span style="font-family: inherit; font-size: xx-small;"><div style="text-align: center;"><span style="background-color: #e8e8e8; color: #1a1a1a; font-family: inherit;">Photo by </span><span style="background-color: #e8e8e8; box-sizing: border-box; color: #1a1a1a; font-family: inherit; font-weight: 600; margin-bottom: 0px; margin-top: 0px;"><a href="https://www.pexels.com/@n-voitkevich?utm_content=attributionCopyText&utm_medium=referral&utm_source=pexels" style="box-sizing: border-box; margin-bottom: 0px; margin-top: 0px; text-decoration-line: none;">Nataliya Vaitkevich</a></span><span style="background-color: #e8e8e8; color: #1a1a1a; font-family: inherit;"> from </span><span style="background-color: #e8e8e8; box-sizing: border-box; color: #1a1a1a; font-family: inherit; font-weight: 600; margin-bottom: 0px; margin-top: 0px;"><a href="https://www.pexels.com/photo/fashion-space-dark-office-6863261/?utm_content=attributionCopyText&utm_medium=referral&utm_source=pexels" style="box-sizing: border-box; margin-bottom: 0px; margin-top: 0px; text-decoration-line: none;">Pexels</a></span></div></span><p style="text-align: left;">There are 7 types of ITR forms summarized as below.</p><h3 style="text-align: left;">ITR-1</h3><h4 style="text-align: left;">1. Who is eligible to file ITR-1 for AY 2021-22?</h4><p style="text-align: left;">ITR-1 can be filed by a Resident Individual whose:</p><ul style="text-align: left;"><li>Total income does not exceed ₹ 50 lakh during the FY</li><li>Income is from salary, one house property, family pension income, agricultural income (up to ₹5000/-), and other sources, which include:</li><ul><li>Interest from Savings Accounts</li><li>Interest from Deposits (Bank / Post Office / Cooperative Society)</li><li>Interest from Income Tax Refund</li><li>Interest received on Enhanced Compensation</li><li>Any other Interest Income</li><li>Family Pension</li></ul><li>Income of Spouse (other than those covered under Portuguese Civil Code) or Minor is clubbed (only if the source of income is within the specified limits as mentioned above).</li></ul><p></p><h4 style="text-align: left;">2. Who is not eligible to file ITR-1 for AY 2021-22?</h4><p style="text-align: left;"><span style="font-weight: normal;">ITR-1 cannot be filed by any individual who:</span></p><p></p><ul style="text-align: left;"><li>is a Resident Not Ordinarily Resident (RNOR), and Non-Resident Indian (NRI)</li><li>has total income exceeding ₹ 50 lakh</li><li>has agricultural income exceeding ₹ 5000/-</li><li>has income from lottery, racehorses, legal gambling etc.</li><li>has taxable capital gains (short term and long term)</li><li>has invested in unlisted equity shares</li><li>has income from business or profession</li><li>is a Director in a company</li><li>has tax deduction under section 194N of Income Tax Act</li><li>has deferred income tax on ESOP received from employer being an eligible start-ups</li><li>owns and has income from more than one house property</li><li>is not covered under the eligibility conditions for ITR-1</li></ul><p></p><h3 style="text-align: left;">ITR-2</h3><h4 style="text-align: left;">Who is eligible to file ITR-2 for AY 2021-22?</h4><p style="text-align: left;">ITR-2 can be filed by individuals or HUFs who:</p><p></p><ul style="text-align: left;"><li>Are not eligible to file ITR-1 (Sahaj)</li><li>Do not have income from profit and gains of business or profession and also do not have income from profits and gains of business or profession in the nature of:</li><ul><li>interest</li><li>salary</li><li>bonus</li><li>commission or remuneration, by whatever name called, due to, or received by him from a partnership firm</li></ul><li>Have the income of another person like spouse, minor child, etc., to be clubbed with their income – if income to be clubbed falls in any of the above categories.</li></ul><p></p><h3 style="text-align: left;">ITR-3</h3><h4 style="text-align: left;">Who is eligible to use this Return Form for AY 2021-22?? </h4><p>This Return Form is to be used by an individual or a Hindu Undivided Family who is having income under the head “profits or gains of business or profession” and who is not eligible to file Form ITR‐1 (Sahaj), ITR‐2 or ITR‐4 (Sugam). </p><h3 style="text-align: left;">ITR-4</h3><h4 style="text-align: left;">Who is eligible to file ITR-4 for AY 2021-22?</h4><p>ITR-4 can be filed by a Resident Individual / HUF / Firm (other than LLP) who has:</p><p></p><ul style="text-align: left;"><li>Income not exceeding ₹ 50 Lakh during the FY</li><li>Income from Business and Profession which is computed on a presumptive basis u/s 44AD, 44ADA or 44AE</li><li>Income from Salary / Pension, One House Property, Agricultural Income (up to ₹ 5000/-)</li><li>Other sources which include (excluding winning from Lottery and Income from Race Horses): </li><ul><li>Interest from Savings Account</li><li>Interest from Deposit (Bank / Post Office / Cooperative Society)</li><li>Interest from Income Tax Refund</li><li>Family Pension</li><li>Interest received on enhanced compensation</li><li>Any other Interest Income (e.g., Interest Income from unsecured loan)</li></ul></ul><p></p><h4 style="text-align: left;">2. Who is not eligible to file ITR-4 for AY 2021-22?</h4><p>ITR-4 cannot be filed by an individual /HUF / Firm (other than LLP) who:</p><p></p><ul style="text-align: left;"><li>is a Residents Not Ordinarily Resident (RNOR), and Non-Resident Indian</li><li>has total income exceeding ₹ 50 Lakh</li><li>has agricultural income in excess of ₹ 5,000/-</li><li>is a Director in a Company</li><li>has income from more than One House Property;</li><li>has income of the following nature: </li><li>winnings from lottery;</li><li>activity of owning and maintaining race horses;</li><li>income taxable at special rates u/s 115BBDA or Section 115BBE;</li><li>has held any unlisted equity shares at any time during the previous year</li><li>has deferred income tax on ESOP received from employer being an eligible start-up</li><li>is not covered under the eligibility conditions for ITR-4</li></ul><p></p><h3 style="text-align: left;">ITR-5</h3><h4 style="text-align: left;">Who is eligible to use this Return Form? </h4><p>This Form can be used by a person being a firm, Limited Liability Partnership (LLP), Association of Persons (AOP), Body of Individuals (BOI), Artificial Juridical Person (AJP) referred to in clause (vii) of section 2(31), the local authority referred to in clause (vi) of section 2(31), representative assessee referred to in section 160(1)(iii) or (iv), Primary Agricultural Credit Society, Co‐operative Bank other than a primary agricultural credit society or a primary co‐operative agricultural and rural development bank, Primary Co-operative Agricultural and Rural Development Bank, any other cooperative society, a society registered under Societies Registration Act, 1860 or under any other law of any State, trust other than trusts eligible to file Form ITR‐7, the estate of a deceased person, the estate of an insolvent, business trust referred to in section 139(4E), investments fund referred to in section 139(4F) and Any other AOP /BOI. However, a person who is required to file the return of income under section 139(4A) or 139(4B) or 139(4D)shall not use this form.</p><h3 style="text-align: left;">ITR-6</h3><h4 style="text-align: left;">Who is eligible to use this Return Form? </h4><p>This Return Form can be used by a company as per section 2(17) of the Income Tax Act, This form is filed by a company other than a company which is required to file a return in Form ITR‐7. As per section 2(17) of Income Tax Act, company means: ‐ (i) Indian Company (Domestic Company) (ii) Body corporate incorporated by or under the laws of a country outside India (iii) Any institution, association or body, whether incorporated or not & whether Indian or Non‐Indian which is declared by general or special order of the board to be the company, etc.</p><h3 style="text-align: left;">ITR-7</h3><h4 style="text-align: left;">Who is eligible to use this Return Form? </h4><p>This Return Form can be used by persons including companies who are required to furnish returns under section 139 (4A) or section 139 (4B) or section 139 (4C) or section 139 (4D). The category of persons whose income is unconditionally exempt under various clauses of section10, and who are not mandatorily required to furnish their return of income under the provisions of section 139, may use this form for filing return. </p><div>Hope you have better idea now about different ITR forms. You can more information on <a href="https://www.incometax.gov.in/iec/foportal/downloads/income-tax-returns" target="_blank">Income Tax site</a>.</div>Aniket Patkarhttp://www.blogger.com/profile/02215989324767435904noreply@blogger.com0