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Steps to financial freedom- Knowing your asset class.
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Before starting your Investments and allocation of fund read this complete guide ‘Steps to get financial freedom‘ . I have given you an idea of what is financial freedom, what is the difference between investments and savings. In this blog post I would be discussing about the various asset class which you can consider to make an investment that will make you financially secured. Before that I want you take out a pen and paper and list down the following.
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List down your needs.
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What are your financial goals? Long term and short term.
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What asset class do you hold?
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Have you allocated emergency funds?
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After you have made the list refer the below asset classes which would help you to attain your financial goals which you have listed.
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Fixed deposits.
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Fixed deposits can be a good option for investment. The depositor can expect around 8 – 10% rate of interest per annum. Money should be deposited in fixed deposit only when the depositor has to meet a relatively less financial commitment after 12-18 months. The main benefit of depositing in fixed deposit is that the amount is known and certain which the depositor will be getting after 12-18 months so he can plan well.
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Gold
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In every Indian families gold has a special importance and it can be a great investment too. Investment in gold can help you meet a major financial commitment after 4-8 years. Gold has a very successful track record in giving good returns (12-20% P.a.) to the people who have invested in it. Also gold can be useful for 1. Gathering gold jewels and ornaments 2. Emergency gold loans 3.To meet marriage goals.
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Gold is subject to market risk, But this can be used to diversify your portfolio
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Real estate
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Real estate can be a great investment if you have a major financial commitment after 10+ years. You can invest in land as well as buildings like apartments or offices. Investing in buildings can earn you extra income in form of rent. The only disadvantage is that the value of building depreciates as the time passes. Whereas the value of land appreciates as the time passes. Real estates offers good returns for 10+ years.
Do not buy cheap and undocumented real estate as it can be highly risky and can land you in trouble.
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Government Bonds.
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Government bonds are one of the safe bets after fixed deposits. If you want to meet a relatively smaller financial goal after 3-4 years with specific to a date, then government bond can be considered. Tax exemptions are provided for the people who invest in government bonds Under Sec 80. The rate of return is slightly higher than fixed deposits and are almost risk free. Oil bonds, Infra bonds are some of the example of government bonds which give tax exemptions.
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Share market.
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Before getting into this topic I would like you to clear all your myths regarding to share market. There are two classes of people who have different views regarding share market. First group thinks that investing in share market gives the highest returns and second group thinks that investing in share market carries the maximum risk. Both the classes are right as well as wrong. you cannot invest only in stock market nor ignore investing in stock market. Stock market is not for short term as it is highly volatile, for longer duration stock market can give the best returns.
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Investing in stock market is a marathon rather than sprint. – [fusion_popover title=”One thumb rule for traders” title_bg_color=”” content=”‘Hold the performing stocks exit from under-performing stocks.’” content_bg_color=”” bordercolor=”” textcolor=”” trigger=”hover” placement=”” class=”” id=””]Thumb Rule for Stock Investing[/fusion_popover].
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After reading this list of asset class take out your paper where you wrote down your financial goals. Now assign the best asset class which would help in meeting that financial goal. Also I would like to bring to your attention that insurance cannot be considered as an investment it is just a protection, so considering insurance as an asset class can be wrong.
In the next post I would be helping to frame your financial goals and choosing the right asset class. In case you missed the first part click here to read it!
Comments are appreciated, please feel free to comment so that we can help you better.
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