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Will : legal declaration of how a person wish his/her possession to be disposed after their death
Fund : An amount of money saved or collected for a particular purpose
Return : Profit or loss derived from an investment
Investor : An investor is any party that makes an investment.
The gain or loss in an investment over a specified time, with respect to the amount of initial investment. It is generally given in percentage.
In this type of mutual funds, your funds will be in invested partly in equities and partly in fixed income securities.
It is a type of a security whose value is derived from another underlying asset.
This is a type of mutual fund, where your funds will be invested in fixed income securities like debentures, Treasury bills, etc.,.
Unit Linked Insurance Plans are the type of insurance where part of your money is invested in units that represent Shares and debt instruments and the remaining is used for your premium.
Wealth is accumulation of resources or as on date value of assets a person own. Commonly Net worth is the measure of Wealth of an individual.
It is the raise in the value of Consumer Price Index. That is the rate of increase of the price of a goods or services.
Whenever people have surplus money, they want to invest. When they invest, they just want to act or execute. They don’t want to spend time on understanding the product and various investment strategies. They would like to take investment decisions without doing any homework. There is no plan of action. Their attitude is “I have surplus money; just tell me where to invest”.
Misselling:
These kinds of investment decision making will make you fall prey for misselling. As you are not interested in doing the homework and if someone comes with a long chart and calculations for 20 years, then you may find it interesting and end up buying products like ULIPs. When you realize that you have invested in a mediocre product, you will blame the agent or broker and not yourself and your wrong decision making approach.
Market Moods:
When you just want to act, your investment decisions will swing based on the market moods. If the stock markets are highly volatile and it is comes down day by day then you may think that instead of investing in investing in debt fund are fixed deposits, are safe and wise. If the stock market goes up and everyone is investing in the market including your driver, then you may think it is opt to invest in shares or equity funds. So in this case you will never buy low and sell high. In fact you end up buying at peak and avoiding the market when the share prices are low.
Aggressive Trading:
Blindly, some investors believe that by doing aggressive trades in shares and derivatives are the quick way to make money in the stock market. They enjoy their higher degree of involvement with the stock market. They feel very happy about the few successes in the stock market which give them comfort in accepting many losses. They don’t go back and calculate how much they have made or lost in a trade; what is the total profit or loss they have made in a particular year. These investors will learn very old lessons of investment after losing a huge amount of their hard earned money.
Wealth Creation Secret:
The mistake investors do is they don’t understand the basic investment principles. They simply try to make some investment decisions. How can these investment decisions be right? Very difficult. As an investor, you need to understand the investment principles. Then based on the investment principles, you need to take the investment decisions. These investment decisions will be right for sure. Without right investment principles, right investment decisions become impossible. Without right investment decisions, long term wealth creation is just a day dream.
Sound Investment Principles:
Asset Allocation:
Depending upon your financial goals , you need to arrive at the required rate of return from your investments. You need to decide what kind of allocation needs to be given to different kind of investment avenues (like Fd, Debt funds, balanced fund or a high risk Equity Funds?, Gold ETF..) in order to achieve the required rate of return. Once decided, don’t change this asset allocation ratio depending upon the market movement.
Risk Vs Safety:
Whatever the long term savings you have got you can invest in risky assets like equity funds. You will be adequately rewarded for taking risk in the long run. Whatever the short term savings you have got you can park it in FDs or debt funds.
Investing your long term money in safe avenues will be a destruction to create long term wealth. You will not be able to beat inflation. Similarly investing your short term money in risky investments is also dangerous.
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“The 10 Commandments of Personal Finance”
Fundamental Factors :
The returns an investment generates will be based on its fundamental factors. Analysing fundamental factors only will lead to a long term success. There is a lot of difference between taking one right investment decision by fluke and taking right investment decisions regularly by analyzing the fundamental factors.
These investment principles are very simple and straight forward. At the same time these principles are very authentic and profound. The magic formula for creating long term wealth is “Sound Investment Principles + Right Investment Decisions = Long Term Wealth”.
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