Investment n Growth

 

Basics of Invest n Growth

 

Welcome guys! This time it’s going to be a different subject. Related to the most important factor of our life. People say that “paisa hi sab kuchh nai hota!” Or “money cannot buy happiness.” Well I’m the most anti on these statements. This has a probability of 0.1% or less than that and usually very wealthy or poor people with no hope of growth says such things. Cause here the law of marginal utility applies. In simple words, the more stock you have of thing the less you want it. I am hoping that you also want to grow money and buy happiness in form of cars, home, ornaments, all luxury items you wish. So I am going to suggest you where you can protect and grow your money with calculated risks.

 

Before that some basic one side conversation with you-

 

If you are the person who do not believe in stock markets and you are young…what are you doing friend! You don’t believe because you believe…in what? the stereotype, parent’s opinions that market is gambling, satta, jugaar and what not! SEE, you are young, you have access of world of knowledge and still you are stuck on that shit opinions. I am not saying the market is easy, no it’s not. But we can make it less difficult to understand. And for this some below mentioned you should have or try to possess. – 1. Patience 2. Belief 3. Knowledge. This is not any order, as all these are equally important.  So coming to the point-

long term investor vs Day trader

Recently I started exploring the finance sector. Like there are various financial instruments in which we can invest. But we know very few of it and mostly gold, Real estate and F.D.s ( F.D.s according to me are not an investment. It’s just storage and if the interest rate is less than inflation rate then it’s depreciation of your money.) Real estate and gold are no matter good instruments. Gold always performs better in financial distress, it’s not me saying this, it’s data. It hedge money against inflation. Real estate is also a good option for long term. But since we cannot forecast the future, legal, political, social changes, one should not invest large chunk of his corpus in just one asset class. It Is known as Diversification of Portfolio. There should be minimum 4-5 asset classes in your portfolio. We’ll discuss few of them below –

( This is my perspective for investment. I am not any registered or certified financial advisor. It’s for educational purpose only.)

Diversification of portfolio

 

1.      Gold/ SGBs – We Indians have the tradition of passing the gold to the next generation. Referring the earlier market data the gold is continuously gaining. You might have heard from your parents that in year 2000 gold was just Rs.4000-4500(per 10gm). Still in India so many communities do invest large portion of their income in gold. It is one of the safe option to invest some percentage of your income.

 SGBs stand for Sovereign Gold Bond. RBI issues this debt instrument on behalf of govt. which is  in dematerialize format. No hazard of storing and protecting physical gold. You get a 2.5% of interest and the capital appreciation as same as physical gold. And addition to that it’s government security, so no need to worry. What else you want?

 

2.      Real estate/ REITs – I am sure you have heard about some people telling I bought this n that plot for few thousands and now it’s value is in many lakhs. Yes! Indian real estate market has outperformed few years back. There are two types of real estate- commercial and residential. Commercial real estate is more beneficial as you get rent in equal intervals and there is capital appreciation too.

   REIT is one of the option to replace direct investment in real estate. REIT stands for Real estate Investment Trust. These trusts pool money form investors and invest in the real estate projects which generates revenue. REIT has to distribute 90% of profit with the investors.

 

 

3.      Equity market/ MFs – Think about this when you have the patience. It’s not a short-term thing. If you have expertise or able to do due diligence then equity market is good option and give decent returns of approximately 14%.

 If you don’t know much about market or have no time then Mutual fund is the option with you. It’s their fund manager’s job to maximize your returns by wise stock picking. For this there are some nominal fees.

 

 

4.      Fund of funds (FOF) – To know this, one should know what is hedge fund? In very simple terms, hedge fund is the mutual fund of rich people. To invest in hedge fund, the minimum ticket size is 1 cr in India. And many hedge fund has their own minimum ticket size of 5cr – 10 cr. These hedge funds try to generate higher returns than the market by investing in different asset classes. They do not entertain the people with less money. FOF is the way by which we can indirectly invest in hedge funds. FOFs pool money from retail investors and park in 4-5 hedge funds to mitigate the risk and diversification. For retails investors it’s viable since they get higher returns than the market.

 

 I am damn sure that above list won’t be limited to this in coming months. As much I learn about Markets, the list will update.

 The factor which fascinate me about market is“Calculated Risk"