Investment Plan for 10 years #Gold
#Real Estate
#Mutual Funds
#Fixed deposits
#Real Estate
#Mutual Funds
#Fixed deposits
Gold Investment
There are a plethora of precious metals, but
gold is placed in high regard as an investment. Due to some influencing factors such as high liquidity and inflation-beating capacity, gold is one of the most preferred investments in India. Gold investment can be done in many forms like buying jewelry, coins, bars, gold exchange-traded funds, Gold funds, sovereign gold bond scheme, etc.
gold is placed in high regard as an investment. Due to some influencing factors such as high liquidity and inflation-beating capacity, gold is one of the most preferred investments in India. Gold investment can be done in many forms like buying jewelry, coins, bars, gold exchange-traded funds, Gold funds, sovereign gold bond scheme, etc.
Gold in the form of jewellery is not only used as a wearable but also works as a tool to tide over financial emergencies. So, buying gold has traditionally been a financial support.
There are ways of owning gold - paper and physical. You can buy it physically in the form of jewellery, coins, and gold bars and for paper gold you can use gold exchange traded funds (E.T.Fs) and sovereign gold bonds (S.G.B.s). Then there are gold mutual funds (fund of funds) which further invest in gold E.T.Fs. There are gold MFs (fund of funds) which invest in the shares of international gold mining companies.
PHYSICAL GOLD
Jewellery
Indians certainly cherish possessing gold. But owning it in the form of jewellery has its own concerns about safety, high costs, and outdated designs. Then there are the 'making charges', which could prove to be a costly affair. The making charges on gold jewellery, which typically ranges between 6 percent and 14 percent of the cost of gold (may go as high as 25 percent in case of special designs) are irrecoverable.
Gold Coin Scheme
Gold coins can be bought from jewellers, banks, non-banking finance companies, and now even e-commerce websites. The government has launched ingeniously minted coins which will have the National Emblem of Ashok Chakra engraved on one side and Mahatma Gandhi on the other. The coins are available in denominations of 5 and 10 grams while the bars will be for 20 grams.
Gold savings schemes
Gold or jewellery savings schemes come in two forms. A typical one allows you to deposit a fixed amount every month for the chosen tenure. When the term ends, you can buy gold (from the same jeweller) at a value that is equivalent to the total money deposited, including a bonus amount. This conversion is done at the gold price prevailing on maturity. In most cases, the jeweller adds a month's instalment at the end of the tenure as a cash incentive or may even offer a gift.
PAPER GOLD
Gold exchange traded funds (ETF)
An alternate way of owning paper gold in a more cost-effective manner is through gold exchange traded funds (Gold ETF). Such investments (buying and selling) happens on a stock exchange (NSE or BSE) with gold as the underlying asset. What's more, the high initial buying and even selling charges that go into owning jewellery, bars or coins gives an extra edge to the low-cost gold ETF
Digital gold
you can now purchase gold coins, bars and jewellery online. 'Digital Gold', is offered on the mobile wallet platform of Paytm and 'GoldRush' is offered by the Stock Holding Corporation of India on their website, while Motilal Oswal has launched Me-Gold, a digital gold online investment. All of these are offered in association with MMTC - PAMP, (a joint venture between public sector MMTC and Switzerland's PAMP SA)
How to Invest in Gold: Best Gold Investment Plans
Coming to the most important part which deals with – “How to invest money in gold.” Well, there are some conventional and modern types of gold investments preferred by people. In conventional forms, it was just buying physical gold in the forms of jewelry, coins, billions, or artifacts. The scenario has changed nowadays and investors have more options to invest such as Gold ETF and Gold funds.
REAL ESTATE
This major retirement horizon for investors is called the intermediate term and it’s for those who are going to retire in 10-20 years.
With an intermediate-time horizon, you should choose properties in a mixture of growth and income-based neighborhoods. These neighborhoods have strong local economies, healthy job markets, and continued plans for expansion. By investing in these neighborhoods, your properties should generate enough cash flow to pay for the mortgage, cover expenses, and provide some cash flow for the future. Unlike investors with a shorter time horizon, you have more time and flexibility to tailor your real estate strategy. Investors in this group should choose leverage to maximize their overall buying power. Investors with a 10 to 20-year timeframe should opt for a 15-year fixed mortgage, which means the portfolio of properties will be fully paid for near or before retirement.
At this point in your career, you’ve most likely grown capital by investing in numerous assets like stocks and bonds. While your assets have time to recover from a serious stock market correction, you shouldn’t tolerate too much risk to your portfolio. This also applies to your real estate investments.
The key is to invest in multiple markets to mitigate your overall risk through diversification. The majority of your real estate investments should be in stable neighborhoods with less risk. You could also choose to add a few higher level-of-risk properties to reap potentially higher gains. By diversifying into multiple neighborhoods with varying degrees of risk, you’ll be able to protect your portfolio while simultaneously growing your capital.
Mutual Funds
Many investors who have put money into equities through Systematic Investment Plans (SIP) in the past five years and even beyond have reason to be disappointed. While 10-year SIP returns of various equity schemes have been in single digits, there are some that managed to outperform peers and the benchmark indices. ET takes a look at five funds across categories in which SIP returns have been 13-16 per cent over a 10-year period. open for lump sum investment only since March end, this fund is one of the most sought after in the small-cap space. It follows a bottom-up strategy for stock picking with a strong emphasis on management quality, return on equity and valuations. The portfolio has 45-50 stocks with the top 10 bets accounting for 37 per cent of the portfolio. It has consistently outperformed its benchmark by a decent margin over 1, 3, 5 and 10-year periods. A fund in the large and midcap category, the proportion of the large-cap and mid-cap stocks in the portfolio is 55:45. Knowing for managing its risk well that has helped generate superior returns, the scheme avoids concentrated bets and caps exposure to mid- and small-cap stocks at 3-4 per cent in the portfolio. Some of the companies preferred by the fund are those who gain market share, good ROCE and backed by strong management.
Fixed Deposits
Deposit is a financial instrument available at any bank, where an individual can save a part or all of his savings. You can deposit the amount with a bank/lender for 1 month to 10 years. This can earn you a fixed sum as interest monthly/quarterly/annually. In this article, we will tell you everything you want to know about FD. Fixed deposits is a good choice for people who have some extra lump sum amount, which they don’t need to use at the time. It ensures capital protection as well as a uniform flow of income. However, the returns are not inflation-beating. If you are somewhat risk-averse and do not want equity exposure, FD is for you. Debt mutual funds also serve this purpose and give higher returns. Though they are more tax-efficient than FDs, returns are subject to market risks.
Why you need diversification in Investments.
Diversification is a technique that reduces risk by allocating investments among various financial instruments, industries, and other categories. It aims to maximize returns by investing in different areas that would each react differently to the same event.
Most investment professionals agree that, although it does not guarantee against loss, diversification is the most important component of reaching long-range financial goals while minimising risk. Here, we look at why this is true and how to accomplish diversification in your portfolio.
Different Types of Risk
Investors confront two main types of risk when investing. The first is undiversifiable, which is also known as systematic or market risk. This type of risk is associated with every company. Common causes include inflation rates, exchange rate , political instability, war, and interest rates. This type of risk is not specific to a particular company or industry, and it cannot be eliminated or reduced through diversification—it is just a risk investors must accept.
The second type of risk is diversifiable. This risk is also known as unsystematic risk and is specific to a company, industry, market, economy, or country. It can be reduced through diversification. The most common sources of unsystematic risk are business risk and financial risk . Thus, the aim is to invest in various assets so they will not all be affected the same way by market events.
Why You Should Diversify
Let's say you have a portfolio of only airline stocks. If it is announced that airline pilots are going on an indefinite strike and that all flights are cancelled, share prices of airline stocks will drop. That means your portfolio will experience a noticeable drop in value.
If, however, you counterbalanced the airline industry stocks with a couple of railway stocks, only part of your portfolio would be affected. In fact, there is a good chance the railway stock prices would climb, as passengers turn to trains as an alternative form of transportation.
But, you could diversify even further because there are many risks that affect both rail and air because each is involved in transportation. An event that reduces any form of travel hurts both types of companies. Statisticians, for example, would say that rail and air stocks have a strong correlation.
Therefore, you would want to diversify across the board, not only different types of companies but also different types of industries. The more uncorrelated your stocks are, the better.
It's also important to diversify among different asset classes. Different assets such as bonds and stocks will not react in the same way to adverse events. A combination of asset classes will reduce your portfolio's sensitivity to market swings. Generally, bond and equity markets move in opposite directions, so if your portfolio is diversified across both areas, unpleasant movements in one will be offset by positive results in another.
And finally, don't forget location, location, location. Diversification also means you should look for investment opportunities beyond your own geographical borders. After all, volatility in the United States may not affect stocks and bonds in Europe, so investing in that part of the world may minimize and offset the risks of investing at home.
Problems with Diversification
While there are many benefits to diversification, there may be some downsides as well. It may be somewhat cumbersome to manage a diverse portfolio, especially if you have multiple holdings and investments. Secondly, it can put a dent in your bottom line. Not all investment vehicles cost the same, so buying and selling may be expensive—from transaction fees to brokerage charges. And since higher risk comes with higher rewards, you may end up limiting what you come out with.
There are also additional types of diversification, and many synthetic investment products have been created to accommodate investors' risk tolerance levels. However, these products can be very complicated and are not meant to be created by beginner or small investors. For those who have less investment experience, and do not have the financial backing to enter into hedging activities, bonds are the most popular way to diversify against the stock market.
Unfortunately, even the best analysis of a company and its financial statements cannot guarantee it won't be a losing investment. Diversification won't prevent a loss, but it can reduce the impact of fraud and bad information on your portfolio.
How Many Stocks You Should Have
Obviously, owning five stocks is better than owning one, but there comes a point when adding more stocks to your portfolio ceases to make a difference. There is a debate over how many stocks are needed to reduce risk while maintaining a high return.
The most conventional view argues that an investor can achieve optimal diversification with only 15 to 20 stocks spread across various industries.
The Bottom Line
Diversification can help an investor manage risk and reduce the volatility of an asset's price movements. Remember, however, that no matter how diversified your portfolio is, risk can never be eliminated completely.
You can reduce the risk associated with individual stocks, but general market risks affect nearly every stock and so it is also important to diversify among different asset classes. The key is to find a happy medium between risk and return. This ensures you can achieve your financial goals while still getting a good night's rest.
Kanika Mangal [MBA FA]
Manager Fintech
AirCrews Aviation Pvt. Ltd.
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