Saving and Personal Finance

Financial Planning is area of expertise, comes with learning and experience. If you can devote time to understand it, nothing like it, but if you don’t please take help of personal finance expert by paying him his fee. 

There are some of the best platform available to invest few thousand.

Saving Bank Account (will earn 3 to 6% return on investment but easiest liquidity and safe.

Fixed Term Deposit at Banks (will earn 6 to 8% return, need to keep longer, safest and lesser liquidity)

Invest in commodity like gold ( return depend on inflation, need longer stay up to 3 to 5 years, less liquid, risky because theft, you need bank locker)

Mutual Fund Equity (subject to market risk, Large cap may give return up to 6 to 10% if you can hold your investment for 5 to 7 years.

Stock Market (blue chip) or IPO: Risky and need investment period longer 3 to 10 years the return could be up to 20 or 30% in some companies, also you may get regular dividend income.

Property (It requires large investment) but you can start by paying initial down payment and rest by Home lone EMIs. Risky need longer investment 10 to 20 years, risky but sometime you get return as high as 35%

Bitcoin or Cryptocurrency: I do not know, not legal, do not consider it as investment as yet. High risk, High return.

“6 steps to create a successful long-term financial plan”.

Step 1. Write down your short term financial Goals.

Step 2. Make and note down your short term financial plan A.

Step 3. Make and note down your short term financial contingency plan.

Step 4. Write down your long term financial Goals.

Step 5. Make and note down your long term financial plan A.

Step 6. Make and note down your long term financial contingency plan.

If you are long term planner, you should also have contingency plan.

If you are long term planner, you should also have contingency plan.

Strategy Personal Investment

Returns are proportional to risk taking capabilities. (Thumb rule for risk taking capability is 100 - your age) Example Age 25 Score is 75% take higher risk. Age 50 Score is 50% take average risk (Neither high nor low) Age 70 Score is 30% take low risk. Age 100 score Zero Risk, make a will and give power to younger ones (your legal heir). Zero risk comes automatically, when you don’t invest or take out all your investments.

Mutual funds make it easier for you to build wealth. All you need to do is invest your money in a fund of your choosing, and your fund manager takes care of the rest.

A mutual fund is a product that pools money from many people and invests it in a wide variety of stocks, bonds, and other investments. They are managed by people called ‘fund managers,’ who are experts at managing money and investments.

Learn from own mistake.

I was visiting a financial consultant: Raviraj Investment, Chembur, and Mumbai. This was year 2008.

A great advertisement of one of mutual fund from Birla Sunlife Mutual fund was there on the display wall.

It was as a past performance, promise to declare 150% dividend on NAV, on book closer.

This was tax saving mutual fund scheme, lock in period 3 years.

I was having sum total of Rs. 36000/- in my saving bank account.

I enquired about this from said broker, he said all is good, it was boom period in share market.

I applied and invested sum.

I got benefit of in my income tax return, and my deduction from salary was reduced by Rs.7, 200/-

It was big share market crash, in same year after my investment.

I got dividend pay-out of 4,800/- 150% of the NAV of that time.

No dividend after that.

I redeemed them in 2012 after three years, less than 20,000/-

I lost money in this scheme due to market correction.

Now I invest with SIP.

Never invested Birla - Sun life after this.

Only Large Equity MF having AUM more than 10000 crore.

My money got doubled in SBI Magnum tax gain growth invested (Nav 49) after market crash and redeemed after 3 years (Nav 102) lock in period.

Advice: Timing is not possible in stock investment; be regular and disciplined investor.

The factors, I look forward before deciding on which mutual fund to invest in are:

1.  Risk factor

2.  Time Factor: What is Return of Investment (ROI) in how much time?

3.  The importance of any mutual fund is basically for small investors. Investments in mutual fund is like hiring an Investment consultant by giving small fee. The fund manager who are expert by qualification and experience (mostly a team of Investors as fund managers) take right kind of decision to further invest the fund provided by you in form of mutual fund units.

Best Strategy: “Stay fearful at the time most others are greedy, Become greedy when most others are fearful.”

Keep Watch on investment on daily basis.

Stay diversify, and do not take extraordinary risk (My Greed is for 10 to 20% ROI only, realistic long term returns) 

For me it is SIP (Systematic Investment Plan) as you cannot do timing in the market.

SIP make it average irrespective of uptrend or downtrend.

Index Fund are just name, It cannot be kept with same proportion of holding in it as it is define in Index. 

Plan should be both Long term as well as short term. (If short term plan is complimenting to long term will be good)

But follow your plans, review them time and again, do small correction if needed. Take help of professional, paying small fee as against bigger saving is worth spending.

Invest more into MF giving higher return in same period instead of remove (Pull out Profit) investment.

Reduce (Redemption) investment if it is giving negative returns in same period of time and invest into 1st.

Once you achieve your financial goal come out completely from MF investment.

The time horizon for MF investment should be long term (5 to 7 years).

To do above approach, you need to study your MF investment regularly. For my case I do every Monday, without fail before start of my work.

Discipline in investment is key to success follow your own simple rules.

Average Return is equal to (=) some of total returns generated through various investment divided (/) by number of investment.

Maximize average is possible by increasing numerator (i.e. Total Return or ROI) or decreasing the denominator (i.e. No. of Investment).

Investments are art and science.

Study well, learn more, read a lot, join training, understand risk, find out risk mitigation techniques, write notes, write answers, learn by own experience by actual investing experience.

The important questions to learn in future are:

Out of say 6000 companies listed in Stock exchange, what stock I should invest and when?

When to come out from such investments.

If you are more interested to increase your practical knowledge, you should also learn about Technical analysis now.

The reason is fundamental analysis is good but even most CA to do that analysis with great difficulty as you need a team to work on large amount of data, and reach to that sort of data.

But Technical analysis can give you answer of both question mentioned above.

The reason is very simple, Market discount everything in price of shares of a company.

For example what is effect of GST (Goods and Service tax) it will be reflected in trends and charts of different companies. You should choose the field, for example I am an accountant so I know more about Finance companies and how they work, so I study charts of such companies and invest into that.

Suppose you are a chemical engineer so chose Chemical companies and start studying technical charts of those companies, predict something without any actual investment and then find out the outcome after some time, slowly with more study and readings you can be predicting move of share price by 70 to 80% efficiency and then investment decision will be good for you.

I happen to be in Mumbai (Bombay at that time) and got to know that there is training by BSE on share trading.

I joined that and paid fee of Rs17000/- a big money for me at that time.

Fist time entry in BSE Dalal Street building was itself very fearful experience. I took a friend to support me to reach inside.

After training, I came to know the difference between Gambling and Share Investment.

The NSE and BSE (Welcome to BSE institute Ltd.) are doing good job in increasing awareness about stock investment.

But still if you check, most IPO are applied from few western states, and very less awareness in eastern state and even some in north India.

Most people as they do not know much about share market, they depends on Brokers, and most of time lose money, so they ask other people not to even attempt share trading. Many scam, Harshad Mehta, Ketan Parikh, NSEL, and the suicide happen because of the scam, scare more people then attracting.

Most others do not able to put (invest) their time due to different profession, if you ask a doctor, he do not have time from his medical profession, they depend on others to do this job.

One of My good friend very intellectual Mechanical Engineering (design) was having excellent knowledge about share investments, we use to discuss lot as he came to know my interest and gave me real good tips (with Stop loss and exit point). I got benefited hugely because of this, but for himself as he cannot able to leave our office he has kept an accountant (part time) to do outside clerical jobs like submitting a transaction slip or cheque in Bank. (Those days online trading was not permitted from our office computers)

Keep motivating others about investment, if initial hitch you can suggest even Mutual Fund, it is easy way to invest in Equity then direct going into share market. 

The above information is not saying that the investments in mutual funds are risk free, it is having same risk or some time even higher risk then your own investments in the market. Read all the offer documents carefully before any investment. 

The other importance of mutual funds in meeting your financial plan and money required for some long term goal. The SIP (Systematic Investment plan) is also having importance for mutual fund investment as one cannot find right time of investment accurately and get average valuation irrespective of market up or down during the investment period.

A mutual fund manager or any individual like you, when decide to invest in a Stock (Listed Company on Stock Exchange), He consider following aspect before investing.

Stock (a company’s share on offer)

Price (Current Market Price- CMP)

Stop Loss

Target (up to what market price, he will hold)

Time Frame (How long will this investment continue)

All or some of consideration may differ because you as an individual and He as Fund manager are two different persons.

It may be good decision for a fund manager but may not be good for you as you cannot find all above just by looking to that MF.

It is suggested that you take some input from them (thinking that fund manager are expert in their field) but need to work on your own strategy for each of such investment and cannot invest blindfold.

If you came to know about any such stock, where you want to invest and take a risk, please do top down approach about.

Economy (In general in world or in your country)

Industry (To which this company belong such as Telecom or Automobile etc. etc.)

Company (past performances) you also need to study its Technical chart and do technical analysis.

To learn all above you can do stock investment courses from NSE or BSE.

There are two important methods to do this.

Technical Analysis: The study of charts and how price is moving can give very good prediction about future stock price.

2. Fundamental Analysis: The future earning potential is calculated based on how company is doing current business and based on its future earning capabilities the future price of stock is calculated. To know about your portfolio of fund (having invested in many Mutual Fund schemes), you can create one such on any of online services to track on free.

Now after creation of your portfolio of MF, you need to study it on regular interval, for example I decided it to give 15 min time on every Monday first task to study it.

The return should exceed (1) Inflation (2) average share market return, To gain maximum as compare to investment in share market.

Based on such study, please make your future decision such as redeem some of your Loosing MFs and invest in gaining MFs.

The investment can be made at any point of time in MF on its current NAV.

If you actively manage your portfolio, you will learn how good your mutual fund portfolio is. Or How to know my MF portfolio is good enough?

If you gain little more than you were already known about MF.

I really recommend anyone to take advice of professional financial adviser or Qualified Financial Planner to do this job properly. One should not save some consultancy fee, if any as it is hard earned money and saved because of some where you have not spent to save for future.

Financial Planar will ask certain basic questions about your future requirements and your goals about financial security. After knowing about your future needs, age, income and saving profile then only he can suggest the plans, which will work best to achieve your financial goal. One can become qualified or experience financial planner himself, by updating his knowledge reading on this subject or undergoing some financial planning coerces.

I suggest you should firstly insure yourself sufficiently as Life and Health Insurance to transfer your Life and Health risk to others. Keep in mind the tax saving every year while investing, it is increasing your returns. Government give benefits up to 1.5 lacs to invest every year and benefits are depending on which tax brackets you are, highest if you are in 30% slab. After that still you have money left you start with low risk if you are not yourself having experience to take high investment risk.

The risk profile is from low to high Post Office; Bank FD; Bonds; Mutual Funds; Share Market. Further to reduce timing risk prefer SIP - Systematic Investment Plan. Never put all you’re saving in one basket, different asset class grow differently due to market situation. Once your small savings from PO, MF, Shares, grow then do disinvestment and invest in properties. Investment in residential property at right location by EMI Loan is best option as you can leverage the investment because of possibility of future earnings. Last but not least before doing all above please start saving by adding a new coin every day in your piggy-bank.