Personal Finance to educate the young employees on investments
The Google office of India’s leading online financial services platform, policybazaar.com, is India’s largest insurance website and comparison portal. Established in 2008, the portal has come to be known as the gateway of online insurance in India. The company’s finest experts, Mr Tanveer Alam, Founder and CEO at Finkart Finance and Mr Ankur Kapoor, Founder at Angkor Kapoor Advisory to advise and educate the young employees on investments and financial planning. Personal finance is one of the most important which we need to check on regular basis.
To begin with, firstly, you should take the stock off your income and expense on monthly basis or on annual basis. And secondly, you need to probably write down each and every component of your investments that you have. Then comes the planning set for what you want to save but these are the first two things to start with so in a way, so do your budgeting that is really important. And to do the planning stage you need to set correct goals for your future. You have to look at the life milestones that you have and there are some easy rules to set up goals but before getting into that planning, just think of planning a holiday, which everyone plan three or four months well in advance. But your biggest holiday is perhaps your retirement and there are not many for sure. What happens behaviourally is that we tend to plan for things which we know we are aware of but anything that you are not completely aware of or you lack knowledge or if you have a limited knowledge on that space, you tend to procrastinate. But in today’s time investment is no longer a choice, it is a necessity.
And given the lifestyle change that is happening, planning is very important. So, the first thing you need to do is educate yourself. If you are not married, your marriage will be a goal. Once you get married your goal changes to children education, your own retirement, buying a house, a vehicle or yearly vacations and many more. If you have these milestones set up for your own self, you can plan your investment accordingly by segregating them into two aspects; one is your poor requirement while the other will be your aspirational requirement. The core requirements would be your basic things like planning for retirement, for a child’s future and so on. Aspirational would be like buying the expensive car or second home likewise. The first aspect of core portfolio you need to fulfil and from that point of view diversification is important. A goal which is three years from now and a goal which is fifteen years from now will have a different allocation of funds. If you are investing for a short period, for instance, less than three years than you should not take an exposure of equity but invest into bonds, the debt side of investment? In case, you are investing for a period beyond 10 years then having an equity exposure is essential so that your money can grow beyond inflation.
You should have at least 25% of your net earnings as being put for longer saving. If you have credit cards, your credit score actually impacted only in case of default. Your limit will allow you to take on more money but if you pay it on time regardless of lesser or higher credit limit won’t impact your CIBIL score. You can invest into debt or equity directly also or else you can give that money to an expert who knows how to make that investment. Obviously, whosoever, investing your money will have a charge but they have a better knowledge in terms of investing that money. As you are aware that large cap is the least risky category within equity because these are big companies where the money is being invested followed by mid cap and small cap. Small cap is the riskiest. If you are a first-time investor, allocate more towards the large-cap say around 75% you can allocate and 25% allocate on the mid-cap. As you gain more investing experience, you can allocate more on small-cap as well.
The last ten-year average inflation has been 8% and if you look at historically the inflation has been around that level, not counting the lifestyle inflation that we get into. So, what is happening that the money you are investing in fixed deposits is earning lower returns than the inflation that you have and that is the much bigger risk than what you will get in while investing? When you invest in an equity market for a period of ten years, your capital has always been protected. The problem arises when we try to become rich overnight by trying to trade the market, out beat the market which is really fatal. So, if you have a discipline investing or long-term period, you will create a significant wealth. Today, Investment is necessary to beat inflation and for that investing in any mutual fund is the best way of investigating in the market through equity or debt, whichever, way it is possible.