Zebu blog

Tag: portfolio management

  • Building a Strong Portfolio: Key Factors to Consider

    One of the most important steps in safeguarding your financial future is creating a long-term portfolio. You may reach your investing objectives, such as retirement savings, house ownership, or funding a child’s education, with the aid of a well-constructed portfolio. But creating a prosperous long-term portfolio necessitates carefully taking into account a number of essential criteria.

    Investment Objectives: Choosing your investment objectives is the first stage in creating a long-term portfolio. What do you hope to accomplish with your investments? Do you wish to make money, accumulate riches, or protect your money? You’ll be better able to choose the assets for your portfolio if you have defined financial goals.

    Before constructing a long-term portfolio, it’s critical to be aware of your risk tolerance. How much danger are you prepared to accept in order to meet your financial objectives? A portfolio with a larger percentage of bonds may be preferred by a risk-averse investor, whilst a portfolio with a higher percentage of stocks may be preferred by an aggressive investor.

    Time Horizon: When creating a long-term portfolio, it’s crucial to take into account how long you want to retain your investments. While a shorter time horizon could need a more cautious investment approach, a longer time horizon allows you to take on more risk and achieve larger returns.

    Asset Allocation: The practise of distributing your portfolio among several asset classes, such as equities, bonds, real estate, and commodities, is known as asset allocation. Your investing objectives, level of risk tolerance, and time horizon will all affect the optimal asset allocation. Your asset allocation should be routinely reviewed and modified as your objectives and risk tolerance evolve.

    Diversification: Spreading your investments over several asset classes, industries, and geographical areas is the practise of diversification. You may lower your chance of suffering big losses from market volatility by diversifying your portfolio. Even in the face of market volatility, a well-diversified portfolio will assist to guarantee that you reach your investing goals.

    Cost Control: Over the long run, charges related to investing, such as brokerage fees, management fees, and taxes, can chip away at your profits. It is crucial to take into account investment costs and look for ways to reduce them, such as purchasing inexpensive index funds or negotiating cheaper brokerage fees.

    Tax Planning: When creating a long-term portfolio, tax planning should be taken into account. You may reduce your tax liability and increase profits by being aware of the tax ramifications of your investments. Choosing tax-advantaged assets, such as Roth IRAs or individual retirement accounts (IRAs), or making investments in tax-efficient funds may be necessary to achieve this.

    Investing goals, risk tolerance, time horizon, asset allocation, diversification, cost management, and tax planning are just a few of the important elements that need to be carefully taken into account when creating a long-term portfolio. You may create a solid and effective long-term portfolio that will assist you in reaching your financial objectives by taking the time to comprehend these elements and making educated judgements.

  • HNI vs Retail Traders: A Comparison of Benefits and Advantages

    One of the most important steps in safeguarding your financial future is creating a long-term portfolio. You may reach your investing objectives, such as retirement savings, house ownership, or funding a child’s education, with the aid of a well-constructed portfolio. But creating a prosperous long-term portfolio necessitates carefully taking into account a number of essential criteria.

    Investment Objectives: Choosing your investment objectives is the first stage in creating a long-term portfolio. What do you hope to accomplish with your investments? Do you wish to make money, accumulate riches, or protect your money? You’ll be better able to choose the assets for your portfolio if you have defined financial goals.

    Before constructing a long-term portfolio, it’s critical to be aware of your risk tolerance. How much danger are you prepared to accept in order to meet your financial objectives? A portfolio with a larger percentage of bonds may be preferred by a risk-averse investor, whilst a portfolio with a higher percentage of stocks may be preferred by an aggressive investor.

    Time Horizon: When creating a long-term portfolio, it’s crucial to take into account how long you want to retain your investments. While a shorter time horizon could need a more cautious investment approach, a longer time horizon allows you to take on more risk and achieve larger returns.

    Asset Allocation: The practise of distributing your portfolio among several asset classes, such as equities, bonds, real estate, and commodities, is known as asset allocation. Your investing objectives, level of risk tolerance, and time horizon will all affect the optimal asset allocation. Your asset allocation should be routinely reviewed and modified as your objectives and risk tolerance evolve.

    Diversification: Spreading your investments over several asset classes, industries, and geographical areas is the practise of diversification. You may lower your chance of suffering big losses from market volatility by diversifying your portfolio. Even in the face of market volatility, a well-diversified portfolio will assist to guarantee that you reach your investing goals.

    Cost Control: Over the long run, charges related to investing, such as brokerage fees, management fees, and taxes, can chip away at your profits. It is crucial to take into account investment costs and look for ways to reduce them, such as purchasing inexpensive index funds or negotiating cheaper brokerage fees.

    Tax Planning: When creating a long-term portfolio, tax planning should be taken into account. You may reduce your tax liability and increase profits by being aware of the tax ramifications of your investments. Choosing tax-advantaged assets, such as Roth IRAs or individual retirement accounts (IRAs), or making investments in tax-efficient funds may be necessary to achieve this.

    Investing goals, risk tolerance, time horizon, asset allocation, diversification, cost management, and tax planning are just a few of the important elements that need to be carefully taken into account when creating a long-term portfolio. You may create a solid and effective long-term portfolio that will assist you in reaching your financial objectives by taking the time to comprehend these elements and making educated judgements.

  • Time-Frame Based Investment Plan: The Best Ways to Generate Passive Income

    Passive income is an important aspect of financial planning, as it provides a steady stream of income without the need for active involvement. With the right investment plan, it is possible to generate passive income and secure your financial future. In this blog post, we will explore the best ways to invest to generate passive income, taking into account different time horizons and financial goals.

    3-6 Months Time Horizon: Fixed Deposits (FDs)
    For those looking for a short-term investment option, fixed deposits are a good choice. Fixed deposits are a low-risk investment option, where you can invest your money for a fixed period of time and earn a guaranteed rate of return. The tenure of fixed deposits ranges from 7 days to 10 years, making it a flexible investment option. FDs are a good option for those looking to park their money for a short period of time, as they provide a guaranteed return on investment.

    1-Year Time Horizon: Ultra Short-Term Bonds
    If you are looking for an investment option with a slightly longer time horizon, ultra-short-term bonds may be a good choice. Ultra-short-term bonds are debt securities that have a maturity period of less than a year. They are a good option for those looking to generate passive income over a short period of time, as they offer a higher return on investment compared to fixed deposits. Ultra-short-term bonds are generally considered to be low-risk investments, as the risk of default is low.

    More Than a Year Time Horizon: Balance Advantage Fund
    For those with a longer-term investment horizon, balance advantage funds are a good choice. Balance advantage funds are mutual funds that invest in a mix of equities and debt securities, providing a balanced exposure to both asset classes. This type of investment is a good option for those looking to generate passive income over a longer period of time, as it provides a combination of stability and growth. Balance advantage funds are generally considered to be low to medium-risk investments.

    Retirement Planning and Long-Term: Equity Mutual Funds
    For those looking to invest for the long-term, equity mutual funds are a good option. Equity mutual funds invest in stocks and shares of companies, providing exposure to the stock market. Equity mutual funds are a good option for those looking to generate passive income in retirement, as they provide the potential for long-term growth. Equity mutual funds are considered to be higher-risk investments, as the value of your investment may fluctuate based on the performance of the stock market.

    In conclusion, the best way to generate passive income depends on your financial goals and investment horizon. Fixed deposits are a good option for those looking to park their money for a short period of time, ultra-short-term bonds are a good option for those with a slightly longer time horizon, balance advantage funds are a good option for those with a longer-term investment horizon, and equity mutual funds are a good option for those looking to invest for the long-term. It is important to consult with a financial advisor before making any investment decisions, to ensure that your investments align with your financial goals and risk tolerance.

  • The Importance of Long-Term Mutual Fund Investing

    Particularly when it comes to long-term savings and retirement planning, investing in mutual funds may be a great instrument for reaching financial objectives. A form of investment instrument known as a mutual fund pools the funds of several participants to buy a diverse portfolio of stocks, bonds, and other assets. The expert management given by mutual fund managers may assist guarantee that the portfolio of the fund is well-diversified and managed in a way that is in line with the fund’s investment objectives. This diversity can help reduce risk.

    The potential for long-term development is one of the biggest advantages of investing in mutual funds, though. The importance of long-term mutual fund investing can be seen in the following ways:

    Compounding Interest: By making long-term investments, you may benefit from the strength of compound interest. The interest earned on the initial investment as well as the interest earned on prior interest is known as compound interest. The more time compounding has to work, the longer the investment is kept, leading to bigger returns over time.

    Volatility: Short-term trading can be dangerous and the stock market can be unpredictable. Long-term investors may withstand market swings and resist the urge to sell when the market is down by sticking with their investments. By doing this, the investor can benefit from market recoveries and prevent investments from being sold at a loss.

    Diversification: As was already noted, mutual funds offer asset diversification, which reduces risk. Mutual funds can lessen the effect of any one investment on the whole portfolio by investing in a number of other securities. By diversifying, an investor may guarantee that their portfolio is well-balanced and isn’t unduly exposed to any one industry or market.

    Professional Management: Professional fund managers who have the knowledge and skills to make investment choices on behalf of the fund’s investors oversee the management of mutual funds. This might make sure that the portfolio is well-diversified and managed in a way that is consistent with the investment goals of the fund.

    Tax Benefits: Some mutual funds offer tax benefits that may aid investors with their tax obligations. For instance, some mutual fund categories, such those that invest in municipal bonds, can be qualified for tax-free dividends.

    Mutual funds can entail some risk, like with any form of investment, so it’s vital to do your homework and fully understand the fund before you invest. When selecting a mutual fund, it’s also crucial to take into account your individual risk tolerance and investing objectives.

    Finally, investing in long-term mutual funds can be a useful strategy for reaching financial objectives, especially when it comes to long-term savings and retirement planning. Compound interest’s potency, the capacity to withstand market volatility, diversification, expert management, and tax advantages may all help an investment expand over time. When selecting mutual funds, it is crucial to conduct research, take into account your personal risk tolerance, and have clear investing objectives in mind so that you can make an educated choice that is consistent with your investment plan.

  • Things To Keep In Mind During A Market Correction

    Some investors are wary of the stock market and investing in stocks in general because these markets tend to be unstable. Investors say they’d rather be safe than sorry, so they put their hard-earned money into relatively safe investments like government-issued bonds and fixed deposits. People who say the stock market is extremely volatile aren’t completely wrong, because it can be. But it’s important to remember that investors and traders who know what they’re doing can get a good idea of how volatile the market is and limit any possible loss.

    While you analyse how the market is going to act, it is important you have the best tools in hand. At Zebu, we aim to offer our users the best trading accounts and the lowest brokerage for intraday trading to make their online stock trading journey easy.

    Correction in the stock market

    If you are a big investor and most of your money is in stocks or if you want to start trading and investing in the stock market, you need to know about stock market corrections. A “correction” in the stock market is when prices fall by at least 10% from their previous highs. Just the fact that prices are falling gives it a bad reputation. Even though this might make you feel nervous, it doesn’t always mean something bad. Most investors think that this is a normal part of trading on the stock market. In light of this, there are a few things you should know about corrections in the stock market.

    1. Types of corrections

    The markets can only go up or down. But when the market goes down, it can go down in different ways. For example, a “pullback” is a change of about 5% in market prices. A correction, on the other hand, is a little bit bigger, with a drop of 10–20% from previous highs. Then you have what is called a “bear market,” which means that prices have dropped more than 20% from their previous highs. This could go on for a longer time than a pullback or a correction. When you buy shares online, the good news is that bear markets don’t last as long as bull markets.

    2. Inevitable Corrections

    Corrections are the only way to reach a balance that makes sense for markets to stay in a healthy state. If markets go through the roof, it means that other parts of a country’s finances, like inflation, are in trouble. Because of corrections, investors can buy stocks at fair prices.

    3. Greater uncertainty

    During a correction, volatility, as measured by the VIX (volatility index), is thought to reach greater heights. This is because investors’ feelings change all the time, and a wide range of feelings affects market prices.

    4. Expectations

    Corrections in the stock market can’t be predicted, but they happen as often as the sun rises and sets. Also, a crash in the stock market doesn’t have a clear cause. Some stock market investors make predictions based on what happened in the past, but this isn’t a sure thing.

    5. A chance to make a long-term investment

    Long-term investors like it when the stock market drops because they can buy stocks at lower prices (called “discounts”) and they don’t mind keeping them for a long time. When the stock market as a whole falls, the prices of individual shares tend to fall as well. This is great for people who invest for the long term.

    6. Temporary

    Corrections are temporary. Most people agree that they may only last a little more than a year at the most. This is important to investors because months of hard work can go to waste in a single day, but if you look at the big picture, the highs of the stock market are higher than the lows of corrections.

    7. Dividends

    When you buy shares online, you should know that in the past, growth stocks have helped the stock market as a whole reach new heights. But stocks that pay out income or dividends can be a safer investment. These come from stable companies and give you dividends you can count on. They start making money after a few years. If you buy “dividend stocks,” you might still get returns that won’t change if the market goes down.

    No Reason to Worry

    A few changes here and there don’t matter much in the long run. In general, the market is always going up.

    Stock Market Trading and Investment
    You shouldn’t worry about a correction when you open a Demat account. Many investors do this, and it keeps them from having a healthy view of investing and diversifying their portfolios. You can learn and make money at Zebu, and we can help you make smart investments.

    At Zebu, we aim to offer our users the best trading accounts and the lowest brokerage for intraday trading to make their online stock trading journey easy. Check our website for more info

  • The Ideal Asset Allocation Formula For Your Capital

    For the same amount of capital, different investors will divide it and invest in different asset classes like mutual funds, real estate, bonds, FDs and so on.

    But how can we decide which portfolio is the best? Well, that depends on the investor’s age and what they want to do with their money. The right asset allocation for each investor is based on these things. But what does it mean to divide up assets? Let’s find out.

    As an online share broker company, we understand the importance of efficient digital technology and offer a seamless online trading platform for our users and an added advantage of the lowest brokerage options.

    How do you divide up your assets?

    Asset allocation is the process of putting your money into different kinds of investments, such as stocks, bonds, gold, real estate, cash, and so on. It is the process of choosing what assets to buy with the money you have to invest.

    Asset allocation is important because it makes sure that your portfolio is in line with your financial goals. It also makes sure that you don’t buy assets whose level of risk doesn’t match your risk tolerance.

    So, what’s the best way to divide your wealth among different assets?

    There is no one best way for investors, in general, to divide up their assets in their portfolios. Even for the same investor, the best way to invest their money will change as they get older. So, if you are just starting out with investing, here is how you can figure out the best way to divide up your assets.

    When you’re in your 20s, you’re still young and many years away from retirement. This means that you can take more risks with your money and invest in the stock market today. So, you may put more of your money into stocks and mutual funds that invest in stocks.

    This is fine as long as you don’t have too many debts in your name. Also, you should balance your equity investments with a few safe investments to make your portfolio more diverse and reduce the overall risk.

    When you’re in your 30s, you may be able to earn a lot more than when you were younger. But you may also have other debts under your name, such as a mortgage or car loan. Still, you can still take some risks at this age because retirement is still a long way off.

    So, your portfolio could have a lot of stocks and a few fixed-income investments to balance out the risk. You could buy shares in mutual funds, or you could put together your own portfolio of stocks and bonds.

    When you are in your 40s, you are getting closer to retirement age. You need to make sure that you pay off your high-interest debts. As for how you divide up your assets, it may be time to gradually put less money into high-risk investments and more into stable ones.

    You could keep investing in mutual funds on the stock market as long as you choose “blue chip” stocks from strong companies or stocks that pay regular dividends. Aside from that, it might be a good time to put more of your money into debt instruments and deposits.

    Asset allocation in your 50s: When you’re in your 50s, you should put more emphasis on keeping your money than on making it grow. With retirement coming up in just a few years, you need to make sure you have enough money to take care of your life goals after retirement. Since you won’t be working after you retire, it’s also important to set up another way to make money.

    At this point, you can almost completely get out of the stock market and change your portfolio so that it has more debt and fixed-income investments. Also, try to choose investments that can give you a steady stream of income.

    When you are in your 60s, it is likely that you have already retired. You should have been able to pay off all your debts if you had planned your money better. Your asset allocation should be made up of only safe, risk-free, or low-risk investments like gold, real estate, deposits, and debt instruments. This way, you can make sure that the money you’ve saved up over the years is safe and not affected by changes in the market.

    How to make sure the best use of assets?

    In addition to the above rules of thumb, you can also make sure your asset allocation is good by making sure your portfolio is in line with your financial goals.

    Know where your money is going:
    Your goals must match up with how you divide up your assets. You need to know why you’re investing, whether it’s to buy a new house, pay for your kids’ college, or save for your retirement.

    Think about the time frame of the investment. You should choose investments with a time frame that matches the time frame of your goals. In other words, choose long-term investments for long-term goals and short-term assets for short-term goals.

    Think about the money you’ll make from your investments. Find out how much money you’ll need to reach a certain financial goal, and invest in something whose returns will help you build up the money you’ll need. For instance, you can’t use an FD to get the money you need to build your house. Instead, if you want to make a lot of money, you should invest in the stock market or stock funds.

    Conclusion
    If investing in the stock market is part of your ideal mix of assets, you need to open a demat account before you can start. Zebu has an online platform that makes it easy to do this. Make sure you look at your portfolio every six months or once a year to make sure it fits your age and goals.

    As an online share broker company, we understand the importance of efficient digital technology and offer a seamless online trading platform for our users and the lowest brokerage options. Visit us to know more.

  • Rules Investing Rules That Every New Investor Should Know

    If you are a new investor, you can give yourself a pat on the back for getting started. Rest assured that if you invest wisely, you can provide your family with the ideal lifestyle. At first, getting started on this path might seem hard, but millions of people have made money from the markets by following a few simple but important tips.

    Along with the 5 golden rules of investing, another important aspect of investing is the technology we use. Hence, Zebu, one of the biggest share broker company offer the lowest brokerage for intraday trading and the best trading accounts for our customer.


    These five golden rules will be your guide when it comes to investing:

    Compound your returns

    Learn about the power of compounding. The key to your future wealth lies in the power that you haven’t used yet: the power of your investment growing over time. The earlier you start investing, the longer your money will make money for you. At the end of the day, it can be better to invest a small amount regularly over a long period of time than to invest a large amount for a short time. To get the most out of your equity investment, you need to stay invested through the market’s boom and bust cycles.

    Financial goals

    Know what you want to achieve with your investments. Always keep in mind that your portfolio must help you reach your life goals. If you make a plan with your financial advisor, your investments can help you reach your life goals, like saving for your kids’ college, buying a house or car, or saving for retirement. Many people make the mistake of investing on their own, which they later regret when their investments don’t meet their goals.

    Know your risk limits

    Accept the risk you’re willing to take. The risk of investing in the markets varies from one instrument to the next. For example, investing in fixed deposits is less risky than investing in mutual funds. Over time, though, many mutual funds do give better returns than fixed deposits.
    Before you buy a market instrument, you should think about what you want, what you need, and how much risk you can handle. Consider investing in a mutual fund or the shares of a company only if a trustworthy stock market expert tells you to do so.

    Keep your emotions in check

    Learn not to let your emotions get in the way. People often get too emotionally attached to their portfolios and give up on good sense and objectivity. Most likely, your portfolio will go up and down in the short term. During a bull market, it will make you happy when the price goes up, but it shouldn’t make you lose your nerve when the price goes down. As an investor, you need to develop the discipline to stick with your investments over the long term and not sell them off when things get hard. When investing in the markets, it’s always a good idea to be smart about your investments and listen to stock market experts you can trust.

    Appoint a Financial Advisor

    In the last few decades, the study of behavioural economics has shown that people often invest in a sloppy way. People they know often have an effect on what they decide to invest in. On the other hand, people fall for irrational cognitive biases. When it comes to the stock market, good advice from a reputable stock market advisor can be your best guide. You won’t sell your investments out of fear if you have well-researched market reports and good investment advice.

    Conclusion

    Overall, a disciplined approach to investing and a calm, patient attitude during market lows can help you not only survive the worst of the market lows but also profit from them. In the same way that you take your car to a mechanic to get it fixed, you can go to a financial advisor to help you get your portfolio in order. Getting help from a good financial advisor can make a big difference in how much money you and your family have.

    Zebu, one of the biggest share broker company offer the lowest brokerage for intraday trading and the best trading accounts for our customer. Get in touch with us to know more.

  • Four Things To Consider Before Investing

    Starting your investment journey can be intimidating but is a necessity considering inflation and economic uncertainty. That is why you need a sound investment strategy to help you meet your financial objectives. At Zebu, it is our mission to help every Indian become financially independent and that is why we have platforms that will help you invest wisely. Please get in touch with us to know more.

    At Zebu, an online share broker company it is our mission to help everyone in India become financially independent, we offer the best online stock market trading platform with the best trading accounts.

    Here are four things to think about before choosing an investment strategy.

    Financial Objectives

    Your long-term and short-term financial goals should be the main thing you think about before you choose an investing strategy. Keeping track of such financial goals will help you make smart choices. Some examples of such goals are getting married, going back to school, travelling abroad, and buying a new smartphone.

    For instance, if you want to save up for a trip to your favourite foreign country, a post office deposit or a recurring deposit could be some of the best ways for you to invest. You can put money in either of these accounts at a post office near you.

    Budgeted, near-term cost

    When looking for a way to invest in India, one of the most important things to do first is to figure out how much you expect to spend in the future. These can be things like your child’s wedding, college, or buying a home.

    If you do this, you’ll have a better idea of how much money you need to invest now in order to get enough money back in the future to pay for any upcoming bills.

    Present Expenses

    When looking for the best way to invest, it’s important to start by looking at what you’re already spending. For example, if you don’t have any big expenses like rent, you will have more money to save or invest for the long term.

    But if you have financial obligations that make it hard for you to save much money, it would be better for you to invest in a financial plan that gives you a good return on your money.

    Financial Dependents

    Most people in India don’t think about how their dependents’ finances affect them when they buy an investment plan. Still, you have to do this because you need to have enough investments or savings to meet the financial needs of your dependents as well as your own.

    For example, if you only have two children who depend on you, you probably won’t need to invest as much as someone who also has to take care of their parents, siblings, and children.

    Investment options for short-term goals

    Plan for investment for one year

    If you like to invest for the short term, even three years can seem like a long time. But there are many 12-month investment plans that can also help you avoid market risks. Here are some good short-term investments you might want to think about:

    • Recurring Deposits
    • Fixed Maturity Plan
    • Post Office Deposits
    • Arbitrage Funds
    • Debt Fund
    • Fixed Deposits

    Plan for an Investment for 3 Years

    3-year investment plans are a common type of short-term investment plan. These plans are best for people who want to make a lot of money in a short amount of time. Here are some choices you might want to think about:

    • Liquid Funds
    • Fixed Maturity Plan
    • Recurring Deposits
    • Savings Account
    • Arbitrage Funds

    Plan for 5 Years of Investing

    Even though five years is a long time, in India a five-year investment plan is usually seen as a short-term investment with low market risk. But compared to other short-term investments, the returns on a 5-year investment plan are much higher. So, here are some choices for you to think about:

    • Savings Account
    • Liquid Funds
    • Post Office Time Deposit
    • Large Cap Mutual Fund

    As an online share broker company, it is our mission to help everyone in India become financially independent, we offer the best online stock market trading platform with the best trading accounts.

  • What is the Risk-Reward Matrix?

    If you have seen the recent miniseries about one of India’s famous scammers, you would have come across this phrase: Risk hai to Ishq hai (Where there is a risk, there is love)

    Think about the times that you enjoy going on a long drive. When you started learning how to drive, it must have seemed risky and scary. But now that you are an experienced and good driver, you can enjoy the road to a great extent. All that risk you took seems to be worth it, right?
    The same is true for investment. Every investment has some level of risk. While you cannot prevent risk, you can reduce it by being financially savvy and recognising your risk tolerance.

    The same is true for investment. Every investment has some level of risk. While you cannot prevent risk, you can reduce it by being financially savvy and recognising your risk tolerance.

    So, if you want to achieve your goals, you must invest. But, if no investment is genuinely risk-free, how will you achieve your objectives? That’s a problem! But there is a workaround. You can increase your return potential by diversifying into the correct investments to help limit market volatility and keep your financial goals on track.

    Investment risk-reward matrix

    Every investor seeks an investment opportunity that will provide them with the highest possible profits as quickly as possible. But remember that it’s better to proceed slowly in the correct way than quickly in the wrong direction.

    And, as the saying goes, “all good things take time.” Similarly, investments take time to mature. In terms of investments, the risk-to-reward ratio is an important issue to consider.

    Consider you and your friend deciding to participate in the ‘dice throwing’ Instagram trend. In this game, your friend suggests that each of you contribute Rs. 500, for a total contribution of Rs. 1000. You will win the complete money if the dice is tossed and lands on an even number. Your friend stands to win if it is an odd number. The risk to reward ratio, in this case, is 1:1, as both of you have a 50% chance of winning the money you put in.

    It doesn’t sound like an attractive investment, does it? Assume you opted not to play.

    Your friend decides to up the stakes after hearing this. He modifies the game and recommends that if you contribute 500, he would place three times that amount, or 1500, for the same bargain.

    This sounds amazing, doesn’t it? You still have a half-chance of winning. If you win, he will receive Rs. 1500, which is three times your initial investment. As a result, the risk to reward ratio is 1:3.

    In technical terms, the risk to reward ratio is a valuable measure that helps gauge an investment’s profit (reward) relative to its potential loss (risk).

    We have already learned that each investment carries a certain level of risk. According to the industry, the greater the risk, the greater the reward.

    We’ll look at common assets and their risk-reward ratios to see what you may expect if you invest in them.

    Equity

    Shares and equities are the most volatile of all investments, making them the riskiest. However, it has the greatest potential for long-term profitability.

    Debt/bonds

    Debt securities are issued with the promise of interest payment. Because the risk is lower, the rewards achieved over time may not be as great as in the case of equities.

    Property investment

    The real estate market is volatile by nature. Key risks are determined by a variety of factors such as geography, demand, structural challenges, and a lack of liquidity. Based on all of these criteria, the risks associated with real estate investing are likely to be comparable to those associated with equities and bonds.

    Gold

    When it comes to gold investment risks, the expense of keeping and insuring the precious metal may be included. However, you can now invest in gold through Sovereign Gold Bonds (SGB), digital gold, gold ETFs, and gold mutual funds. Investing in gold provides diversification and a distinct blend of reward benefits. However, the risks associated with commodities such as gold are determined by market demand and supply.

    Varied assets will provide you with different growth rates. After reading about the various degrees of risk associated with each investment, you may be wondering, what if you just keep the money at home? Wouldn’t that imply no risk?

    Keeping cash at home, for example, may be dangerous. Alternatively, simply having money in a savings account exposes it to inflation. This means that the money will continue to lose value over time. And that’s an extra risk you’d be incurring. So, it is always better to invest.

  • You Need An Imaginary “Third Child” To Prepare For Retirement

    Knowing how much it costs to raise a child and how much joy it brings isn’t always easy to compare, but it’s smart to know and plan for these costs. In general, it costs a lot to raise a child, from the time it is born to when it goes off on its own. It costs between 1.5 and 2 crores. When you think about how much it costs to raise a child now, having two kids makes sense.

    At different points in a child’s life, there are some costs that need to be paid. These are some of them. In light of the current trends, these costs are based on averages.

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    Expenses at different stages of life

    There is a lot of money spent on medicines and vaccines in the first year after the birth of a child in urban and semi-urban areas. A playgroup or creche costs a lot of money when a child turns two. This could cost anywhere from 50,000 to 1 lakh, depending on how many amenities the creche has to offer. In the early years of a child’s life, the cost of toys and clothes is big because they tend to grow out of them.

    School expenses: Based on recent trends, it looks like more than half the population of parents spend more than half their annual income to pay for their children’s education and hobbies. There are times when parents have trouble making ends meet because the cost of school has gone up. A good school charges a fee of 50,000 to 2 lakh for the whole year. Expenses for the 12 years from classes I to XII would be between 11 lakh and 43 lakh if annual education costs rose by 10% each year. In addition to any tuition or extra-curricular activities that the child will be paying for, this fee will be added on as well.

    Higher studies: Suppose that the average cost of going to school for engineering is about 10 lakh today. In about 15 years, the same thing would cost 40 lakh to 50 lakh, too. The same thing goes for medical degrees. If they cost 25 lakh now, it’s a safe bet that they will cost more than 1 crore in the next 15 years. Even though parents can take out loans to pay for their kids to go to school, the interest rate is still high, even after tax breaks.

    Besides paying for their kids’ education, a family might have to spend money to make their home more private for their grown-up kids. Entertainment costs have also gone up a lot, especially in cities. There are birthday parties to plan, birthday gifts to buy, school cultural events, gadgets, hobbies to keep track of, and so much more to think about.

    In light of the above outflows, it is important for parents to plan their finances so that they don’t spend more than they need to and aren’t able to save for their own retirement. There are also safety nets that need to be put in place, like getting enough insurance and setting up an emergency fund.

    To make sure that you have a retirement fund, you can assume that you have a third child and every time you spend on your first two children, you can invest the same amount for the imaginary third child and invest it in a mutual fund. With a return of around 12-15% per annum, you will be left with a substantial corpus. You can use this as your retirement fund and can enjoy your golden years with enough funds.