Investment & Risk Appetite

Investment in general terms relates to putting in money in some variety of financial tools with an aim to appreciate the valuation of the capital invested. However a lot of factors are involved in the scenario. Every financial product has its own variety of risk attached with it, market risk being an inherent one. Talking about financial products under major parts it includes equity, bonds, mutual funds, debentures, government securities, municipal bonds, fixed deposits, insurances and lot more. Degree and nature of risk varies from product to product and it also shows the risk appetite and individual’s perception towards the product. 

Let us talk over some major investment products. While Equity is company issued shares and carries maximum risk, the risk return ratio of equities is also high. Capital loss risk being viable out here, it requires a lot of understanding and research. Difficult yet most important sought after component being understanding when to buy in and when to come out. However given the choice of convenience, liquidity, cost of investment and total opportunity of creating a tailor made equity portfolio, cash market witness maximum churning of money and forms the back bone of any country’s financial health. Equity market performance thus reflects the out come of equity investments both at micro and macro level. The most regularly quoted market indices are broad-base indices comprised of the stocks of large companies listed on a nation's largest stock exchanges, such as the British FTSE 100, the French CAC 40, the German DAX, the Japanese Nikkei 225, the American Dow Jones Industrial Average and S&P 500 Index, the Indian Sensex, the Australian All Ordinaries and the Hong Kong Hang Seng Index.

Here we can say that given time frame of a long horizon [> 1 year] equity returns are positive but obvious proposition lies beneath is the investment value of time associated with it: opportunity cost of investment.

Bonds are one of the safer bet among various instruments of investments being issued by financial institutions, government sector, corporate bonds, high yield bonds, mortgage bonds, public sector companies. Bond market closely relates to market movement quite similar to cash market, bonds carries a certain amount of promised return, however it carries it own variant of risk. Issuer default risk, bond market risk, interest rate risk (IRR). Even though less liquidity, longer time frame and more cost of investment, on risk return analysis bond is less risky, low income generating than equity investment. Mentionable US bonds can be Lehman U.S Aggregate, Saloman Big, Merrill lynch Domestic Master, CPMKTB- The capital market Markets Bond Index.. A few government bonds index like- Saloman Smith Barney World Government Bond Index, J.P Morgan Government Bond Index and lot more.

With lesser fluctuations compared to cash market or equity market, investment in bonds can be a well measured step.

Mutual Funds investment may be observed as good option with risk lover and averter simultaneously given the nature of fund to strike the investment. Carrying the variant of equity funds, debt funds, liquid funds, gilt funds and sub categorizing them even further gives a handsome amount of choice to deal with. While equity funds carries maximum risk compared to other category, income generation is also maximum. However other variants, market risk when taken into consideration, most variety of choices can be made in mutual funds, depending on the time horizon..

However when talking about risk, it actually refers to monetary loss, capital depreciation, opportunity cost of investment on a definite time frame. All said it remains a personal call to choose from, to invest in, time, risk appetite and an obvious introspection and analysis.



Investment and Financial Management - All about investment financial Management - How To invest & financial analysis techniques.

Misselling of financial goods and services

Marketing of financial products actually determines the sole objective of any company ----PROFIT.

Sales and Marketing have narrow difference but in reality there is a vast one. Successful marketing is always followed by successful sales and not the other way round. Marketing actually promotes the product and proper sales hit actually fulfills -

The desired result- Profit.

My point revolves around this approach of every financial company we come across fortunately or unfortunately. We all are experienced with the telesales executives calling up always at the wrong time, wrong place. But what about the products we have gulped up actually of no use or not at all required. The useless plastic money you own and burdened under the debt of it which otherwise couldn’t have tempted you on the spending spree. Have given a thought about the premium you pay which initially looked lucrative but now that you realize it as a blunderous thing to do and that it does not match your requirement at all. All this actually happened to you or any body among us because of the sales pitch of the financial agents we generally succumb to. Instead of proper guidance they end up selling products of their revenue generation and also due to the sales pressure they face but we actually face the heat. Classic example in this regard can be loans which get approved which actually costs us a lot of invisible interest charges and hidden costs adhered to it. The proper lack of communication on the part of the sellers or the lack of interest to do so actually costs us quite dear. After a lot of hazard even if we end up with a counselor who may actually help us, a lot has been over never mind your quite a handsome amount of hard earned money has indirectly been robbed already.

With due respect to all it needs mention that we need to assess our need by ourselves at first hand before moving to a counselor which can always be better than to succumb to lucrative offer to grab on without actually examining the real purpose of the product or service. Hence we all should atleast look into the offer document of any financial product before doing anything—

It’s always better to look before you leap………………..!!

Thanks

Pamela

Manage Your Money



Hello every one, here goes my best wishes for the New Year. We all hope the year fulfills all the dreams and wishes.We all love to make resolutions every year and this year too shall be no exception.
Well, coming to the statement of trying to achieve the dreams we should plan our aims needs and requirements according to our budget. This is simple to listen but really needs care.
Let’s revisit the basics again. We all thrive to establish ourselves in a good financial position and “Every penny saved is every penny earned” as goes a famous saying should be well remembered. We all have a limited source of income and this includes accrued income from all viable sources. Next prudent approach requires jotting down expenses:--
Under two heads—Planned (regular) expenses and Unplanned(irregular) expenses. However before approaching this method we all should keep aside 25% of entire earnings initially into any mode of secured savings then to approach Expense budgeting as mentioned earlier.
Coming back with planned expenses, it should entire house hold expenditure (Taxes, Rent, Bills, Fooding and Lodging, Emi, Premiums).Apart from this money should be kept for other possible expenditures like entertainments,Eating out).
This entire process should take into around 80% while remaining 20% should be dedicated towards irregular or forced expenses. It includes accidental requirements, sudden needs and lot more which are unforeseen requirements. Let us see a hypothetical illustration for better understanding.

Mr. Y earns 10000/- US dollar every month and has no other source of income apart from the salary he draws every month and he follows this method of money management every month to meet his needs.

Steps................................................ Amount

i) Money kept aside................................ $ 2500 [25 % of earnings]
ii) Money Left...........................................$ 7500 [75 % of earning]
iii) Regular/ planned expenses.............. $ 6000 [80 % of money left]
iv) Irregular/ Unplanned expenses.......$ 1500 [20 % of the remaining amount]

However this is solely personal approach towards managing money, I am waiting for further views and inputs from my fellow bloggers.
Cheers enjoy the new year bash to the fullest and my heartiest wishes to all once again.



Thanks
Pamela

New Year2009

"Happy New Year"
Lets greet the year with warm regards & best of hopes to create a new world of happiness and prosperity.




Thanks
Pamela

First Step Into Blogging

Hello All,

Today we witness great turmoil in the world of finance, big shots tumbling down, huge borrowings,mismatch in profit- loss visible in balance sheets, job cuts, job freeze and what not....
Cash Markets are worst hit with huge losses!! What's next??

Lets think in a bit different way!!A layman.... what will he do in this situation with sole income source being service sector?????

Little to save and bigger to spend meeting the needs of the festive season.Appropriate shall be to move into government bonds?? Mutual funds?? Well, Investing at this situation shall appear risky with doubts hovering all around for capital depreciation, Systematic Investments or Regular investments into units of Mutual Funds can be a good option in those funds which have proven past of being fundamentally strong can be good to buy in with a vision for long term capital appreciation which also starts a habit of forced savings.

Again it shall be time consuming to see the results thanks to present turmoil.However Gilt funds and Debt category funds can be good option to bet your money than to leave it idle in savings account with near invisible returns. Though all this sayings are being self perception towards the current financial scenario, it matters a lot regarding Risk appetite for any individual.

Thanks
Pamela