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Investment GuidesMaking investments is an art. This is something that we all know and have heard and read about, at all the seminars and books that guide us to good investments. It is a topic that bothers each one of us and all of us will surely have something positive or negative to talk about it.
Money gives us a sense of importance and power. While we display power most in how we spend and what we possess, we also tend to let this pride seep into our investment guides decisions. We like to behave as if we are in control and we like to make what we think we have made smart decisions. And we speak of our investment choices proudly as we would speak of our childrens achievements as if they were our own. In todays world we have a dearth of options available ranging from mutual funds, insurance plans, stocks, real estate.that as an investor one is really lost in this money world.
A better way to keep your money secure - and productive - is to invest it. An investment is anything you spend money on with the intention of making more money. Investments can be almost anything, from land, to precious metals, to stocks and savings bonds. To help decide what investment is best for you, you should determine your investment guides objectives. Do you want your investments to grow slowly but steadily over several decades Or would you rather earn money right away How much risk are you willing to take to get these results
Money works for you by making more money. When you invest your money in a company or in a bank account someone is paying you to use that money. That payment is the return on the investment or the interest rate on the account. When you put money in a bank account you know what they will pay you, when you invest in the stock market, you get paid depending on how well the company uses your money to make itself better.
Stay out of crowd - The social pressures that often dictate investments give rise to a peril called herding. Herding seems to be the most prudent choice and popular as well. The large subscriptions to the new fund offers, even though we know that there will be enough opportunities to invest them in the future is a classic example of herding. It is not an affliction of an individual investor alone, but professional fund managers and the savviest also tend to herd, mostly from performance compulsions. Surely someone has done the homework and collected all the detailing that needed and the rest can just have a ride. Although herding may be a very nice way to optimize the effort of taking decisions, believing that we are doing the right thing by following the majority may not be as rewarding. But how can we protect ourselves from herding
Look before you leap - Its a good quality to develop some basic understanding and answer some questions to ourselves before jumping to eat a cake that has been baked by someone else. After all we dont board a train towards which the crowd is running but the one that takes us to our destination. To protect ourselves from the instinct of herding we can sometimes choose a rather boring investing routine than associate power play with it. We must follow the basic principle A teacher will appear whenever the student is ready . Similarly, we must understand that there will be enough opportunities to invest as there will always be houses to buy, jobs to seek and food to eat. Hence, instead of jumping into un-thoughtful decisions, it is wiser to wait for the right time and.
For example, as you navigate the choppy waters of equity investing, you tend to rely on you broker as a safety line to keep you afloat. You tend to rely on him for buying and selling for you and even more important you tend to go with his advice to make a killing in the market. You assume that hes your eyes and ears at the market. Which is why, when one day he decides to play fast and loose, you are hit really hard. But before investing your hard earned money, did you really do your part of work It may be a wise idea to answer a few questions as if its such a great idea to buy into an IPO then why are the investment guides company and its merchant bankers selling it so cheap If the market is too high, why does it continue to move up Who is doing the buying and why
We as investors cannot be led anymore by passing fads. Just the way we dont buy lottery tickets even if they are touted as an easy way of acquiring riches. Another way in which we can favor ourselves is by looking at what we are investing our money rather than focusing on how and when we buy it. Most of the investors do not even bother to know about the company in which they are investing. We must look into our financial goals; our priorities and what we need from these investments rather than just letting ourselves do the thing.
Nobody got wealthy by pure chance it takes discipline, patience, and some financial awareness. You are never too young to plan for retirement. But how many of us are in a real chance of taking one. Most of us lack the discipline of investing regularly and hence loose out on the benefit of compounding. Our investments grow just that bit faster if you invest Rs 5000 every month rather than investing Rs. 60,000 annually, because of the fact that each monthly investment earns simple interest for the rest of the year. Technology has made our lives easier now for you can instruct your bank to debit a fixed amount on a particular date.
Saving your money in a safe place may seem like an obvious priority. Why would anyone want to put savings somewhere unsafe But the fact remains that a large percentage of popular saving and investing vehicles provide no guarantee of earnings, not even assurance that the original capital will be preserved. Of course, one would love to obtain highest possible returns on our investments but one must also keep in mind that the highest returns comes with higher risks. But what has also to be understood that the higher risks can at times translate into no returns or negative returns. One needs to police his habits before blaming it on someone else for the losses that a bad investment option can bring.
Diversification of risk - Is it a good idea to keep your entire 1,000 page novel on your computer with no back up copies and no printed version Not if you are worried about keeping it. The same idea is true with money; investors put money to work for them in a number of different ways in order to meet different goals and in order to minimize the chance of losing all their money. People put money into savings accounts and savings bonds, they buy houses and other assets, and they invest in different markets to diversify where their risk lies. If the house burns down, or the stock market declines, not all off your money is lost. Apportion your money to a mix of investment guides with different risk-return profiles. It is important to articulate ones goals and set a target on how much once can save every month. Also one must keep provision for the rapidly changing financial universe new products are being constantly added to it. Hence one must not put all his eggs in one basket.
A Financial plan - It is important to be financially independent but at times one looses the opportunity because of the inability to take right decisions at the right time. It takes more than luck to get what you want out of life, you have to know what you want and have a plan to meet your goals, otherwise it is unlikely in the future. A good financial plan is like a road map to help one get to the destination. Yet it is important for one to realize that a road map will help you the best when you consult it in the beginning of your journey. A financial plan works best if one keeps it simple, uses realistic income and expenditure estimates, and periodically reviews and adjusts the plan to reflect changing conditions and goals.
Taxing times - Judicious tax planning improves returns. The rules of the tax planning undergo a sea-change with every new rule that the government levies at the financial universe. One must go for deferred tax payment options, preferably till maturity, to get the maximum effect of compounding. For instance, if you invest Rs 10000 for 10 years at a compounded interest of 10 per cent, and if your income is taxed every year, you end up with Rs 19127 at the end of 10 years. But if you pay tax only on maturity, you get Rs. 20.678. Armed with the right knowledge of investment tools, you can make your money generate enough money for you.
Think think & Save save - Plan, plan and plan is the only one word to chant to ward off all old-age worries. Of course, its about attitude, about self-confidence, about finding happiness where you get it.but like bedrock under it all runs the solidity of financial security. Theres no escaping it. You have to build that financial foundation for yourself stone by stone, laying the first stone today.
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