FINANCE TIP OF THE DAY
Can you afford your loan?!
Know the quantity of loan you can afford. The banks may sanction loan based on your income but you should look at your monthly expenditure and see if you can afford the maximum that banks offer. As a thumb rule, remember not to let your credit exceed 40% of your income!
Don’t Fall In the Trap of New Fund Offerings
As an investor, in order to derive maximum benefits from the market, swear by the golden principle of diversification. Make investments in a range of funds offered by an array of mutual fund houses, that aren’t just limited to your area or region. Although this idea may seem a little wild, do not think twice. Investors who made this smart move as long as 5 years ago are now reaping its unending benefits. As investors you must learn 3 small lessons before making investments in the money market. They are:
Do not over-diversify your portfolio by getting hold of every different scheme offered by a fund house. Stick to the basic elements of diversity that offer stability, security and diversity to your portfolio.
Make investments in funds that have a good track record. Do not fall into the trap of an untested NFO or New Fund Offering as it may just hamper your chances of profitability in the market.
When a fund has failed to make profits, waste no time to walk out of it. The more you hold on to such a fund, the chances of you making higher losses will increase.
You may often ponder on how to choose the best and most profitable fund from the millions of schemes up for offer in the market. While this requires a knack of decision-making, the good news is that it does not involve any form of rocket science in it. The answer is quite simple. Opt for a scheme that has a good consistent performance. And that’s it! You will be in possession of a prized investment that is most likely to be the star of your portfolio. Also, chances of such a fund under-performing are relatively low. Refrain from placing your investments in NFOs as their performance is highly volatile and unpredictable. Although some consistent funds may go through a rough patch due to the fluctuations of the market, they are the safest bet you can make as an investor. Keep your portfolio simple and boring to draw on the highest percentage of profitability. While it is advisable to walk out of under-performing funds, give them some time to recover, preferably within 20 quarters. If it has not managed to emerge still, then walk out of the fund without looking back.
But remember, Mutual Funds are subjected to market risks. It is mandatory that you read the offer documents carefully before making any major financial decisions. It is your hard earned money that is being invested and it is important that you take utmost care in deciding the assets into which you want your funds invested. Try getting first hand information on all the sources you wish to opt. First hand information refers to the information that you get from primary sources like your financial advisors, banks financial services etc. Utilizing this info can prove to be quite beneficial as they will be in a position to help you out and understand what your financial requirements and how you can link your investments towards achieving those financial requirements. Seeking information from your investor peer group is not prohibited; however, it is not advisable to fully depend on their suggestions and choices. The main reason being; your financial goals and requirements are different from theirs. Also their risk appetite may vary a lot from yours. If you are a new investor you may be seeking to invest in short term funds where you might yield mighty returns but are secured from any major market disturbances. But if your friend has been a strong player in the market then he may have a good risk appetite. In such cases, you may lose out on your savings and land up borrowing personal loans or a car loan in order to finance your requirements.
To protect yourself from any such avoidable circumstances, make sure that you research from primary sources thoroughly.