Insurance: Insurance is a necessity, any person shouldn’t consider it optional or an investment or tax saving tool. There are many types of Insurance each with different categories to meet different needs, i.e. Medical & life insurance for people, Home insurance for your home, Veichle insurance for your veichles, Travel insurance for your journey, Transit insurance for your products, Electronic goods insurance for your Electronic products.
Life Insurance: Every individual should atleast have life insurance irrespective of their income. Life Insurance protects you and your family from unforeseen circumstances, it helps your family financially. Purchasing Life insurance doesn’t make you rich, but it protects your family from becoming poor, Your family gets the Sum assured of your Insurance Policy, its funds your family, food, clothing, education and shelter after you. some insurance companies have Disability rider and serious illness rider with their insurance policy, Depending on the circumstances you don’t have to pay future premiums or policies which pays you the entire insurance amount you secured for in case you have met with an accident and you have been disabled or incase you are contractidicated serious illness like chronic lung disease, apallic syndrome, heart valve surgery, major head trauma etc. there are mainly five types of life insurance policies, term insurance,endowment plan insurance, whole life insurance, unit link plan insurance and money back insurance policy.
Term Insurance: Term insurance is the cheapest of all insurance as it gives returns if the insured person is no more. In term insurance the premium is very less compared to other insurance plans as it gives no maturity benefits. Some insurance companies offer add-ons with term insurance like critical illness rider and disability rider. The benefit of these add-ons is that in case you have met with an accident and get disabled, you get the sum insured and the same goes with the critical illness rider, All these benefits varies as per insurance companies policy, so you should review and compare the policies before buying.
Endowment Plan Insurance: Endowment plan is a life insurance policy designed to pay an assured sum amount at the maturity period, an endowment policy has a maturity period of 10 to 25 years depending on your age. Endowment policy benefits with the term of the policy, the longer the year of premiums you the more the benefits you get. In Endowment policy, you can opt for additional add-ons like disability rider and critical illness rider.
Whole life Insurance: Whole life insurance policy is a wealth accumulation policy the premium of the policy remains same as it was at the time of taking the policy. It provides the insurer life time insurance or up to the age of 80 years. At the time of maturity the insured person gets the sum assured plus interest and additional bonus. The Whole life insurance policy also comes with optional disability and critical
Unit Link Insurance Plan: Unit Link Insurance Plan is an insurance with an investment in equity plan, in this insurance your money is invested in the stock market, Your investment is in units in this insurance plan and subject to the movement of stock market, you may make huge profit or make some loss as per the stock market movement. Many people who prefer investment avoid these plans.
Money Back Insurance Policy: In money back insurance policy you get life insurance as well as a fixed amount of sum assured at a particular time frame from the start of your policy.
Stock Market: Buying and Selling of Shares/Stocks are called investing/trading in the stock market, by purchasing shares or a company you become a share holder of that company. You can either trade in the stock market through a stock broker or you can trade all by yourself by having a online trading and a demat account, you a need a computer/laptop/smart phone with trading software. Investment in the stock market requires proper knowledge and patience.
The stock market is divided in many sectors like Automotive, Banking & Financial services, food & beverages, Chemicals, Conglomerates, Consumer Durables, Consumer Non durables, Engineering and Capital goods, Food & Beverages, Information Technology, Manufacturing, Media & Entertainment, Metal & Mining, Miscellaneous, Oil & Gas, Pharmaceuticals, Retail & Real Estate, Services, Telecommunication, Tobacco and Utilities.
The stock market is further classified in three groups, i.e. Large cap stocks, Mid cap stocks and Small cap stocks. Large cap stocks are mostly blue chip companies with good value. Many of the new investors enter the stock market at the wrong time and purchase those stocks which are at the peak or overpriced, they just invest through their friend’s advice, Rumors through the internet or tips from experts on TV news channel. Investing in the stock market without proper knowledge is like appearing for exams without studying, we are sure many of you understand the consequences.
Some people think of buying penny stocks or stocks of lower value will make them rich instantly, These people get wrong/misleading news that price of these shares will increase 20 to 30 times in a few months. Many of these penny stocks or stocks of lower value prices are hiked by some miscreants in the stock market to fool people, they miscreants buy these stocks at lower price and make a hype that the price of these stocks are going to increase more and some new investors fall in the trap of these people and after a few months they come to know that these stocks are worthless and they even find difficult to get back their investments.
People who enter the stock market without any or very little knowledge and who make loss and loose a large amount of money in the stock market are called “Donors” These people enter the stock market with big dreams of getting rich overnight and instead apart with their hard earned money, on the other hand there are small investors who have made big profits from stock investment, no its necessarily people who have purchased some stocks and they were lucky enough that prices of those stocks shot up overnight.
We are talking about smart investors who took the time and pain to do research and analyze stocks and purchased those stocks which had a proper and an attractive valuation, they invested for a long time and held on to their position, they had long term goals and steadily their investments and profit grew.
Understanding the basics and fundamentals of stock market is necessary before investing; a smart investor does research and diversifies his investment in different shares of different sectors, this reduces the risk as well as increases the profit.
Mutual Funds : After Fixed Deposit and Gold Bonds, Mutual Funds are considered as an investment with more returns and less risk due to diversification and managed by professional research. Investing in Mutual funds is like investing in stock market indirectly as your money is diversified in different companies and stock depending on the choice of funds you choose. In Mutual funds you can start investment with a low amount and gradually increase your investment, Many Mutual fund companies promote the idea of Systematic Investment Planning (SIP) where you can start investing from a low amount every month. These amount are invested in your choice of Mutual funds. Mutual funds investment is beneficial for those people who don’t have the time and the expertise to invest in Equities. You have many choices of Investing in Mutual funds. There a lot of Mutual funds you can choose from, but they mainly consist of three types of categories.
Mutual funds which invest in Equities have different goals and objectives, These types of mutual funds can be classified in three groups depending on their Returns, feautres and risk. Growth Funds, Balanced Funds(growth and income) and Income funds
- Equities(Stock Market) These Mutual fund group invests your money in the stock market
- Fixed Income These Mutual fund groups invest your money where you get a fixed return in the form of Interest or dividend.
- Money Market Funds These Mutual fund groups invest your money in short term funds with high liquidity, less risk and low returns.
Growth Funds : In Growth funds mutual funds your money will be invested in stocks(Equities), which have chances of a dramatic rise in the prices . In these types of Mutual funds returns can be very high and chances of loss are more. Often these Funds Manager chooses a combination of large cap and small cap stocks which have the potential to do well within a short span of time. These types of investment is recommended for people who have the ability to hold their investment for a long period of time as the risk is high and stock may loose value faster during the market downfall and may take time to recover your investment.
Balanced Funds : In these type of Mutual funds the fund manager diversifies your money in equities as well as fixed income funds. he tries to keep a balance so that you investment grows as well as give you some returns you need to keep in mind that these types of mutual funds have some risk
Income Funds : These funds gives you less return compared to other two funds mentioned above. In these types of Mutual funds your money is invested in Debentures or company fixed deposit etc. Your principal amount is safe and where you get a fixed return on your investment. The risk is very negligible in these type of investment and risk is releated to fluctuation of the interest rate as it come down a little bit. There is no risk on your principal amount
Fixed Deposits: These types of investment are considered to be the safest investment. In a Fixed Deposit investment, Bank or financial institution pays you a fixed percentage or interest on the money you keep with them. Depending on the bank or financial institution they pay you either Yearly, half yearly or quarterly. The Bank’s pay additional percentage of interest to senior citizen to attract them so that they deposit their retirement money they have got through provident fund or some other means. Some Banks or financial institution pays simple interest, other compound your interest as written in their terms at the time of accepting your deposits. Banks and financial institution take your deposits either for a freehold period or lock in period, banks and financial institution give more interest on lock in period deposits as compared to free hold deposits. In the free hold period you are allowed to remove your deposits anytime you want without any penalty, but in lock in period if you need your money before the time frame you kept your money, they will deduct a small amount of the penalty or processing charges on your deposit.
Gold bond : The Government has approved gold bonds and gold monetisation to lower the physical demand of gold and to bring out gold held by individuals and other entities. Investing money in gold bond and gold monetisation is very profitable, safe and provides stability. In gold monetization scheme an individual or an entity can deposit the gold they have with the government approved authorized agency. He will get the benefit of the increase in the price of gold as well as he will earn good returns on the gold through interest.
Gold Etf : Gold Etf are different compared to gold monetization. Gold Etf is like mutual funds. You can invest in Gold Etf through financial institution’s, Gold Etf require low investment, so all segments of people can invest in Gold Etf, Cost of Holding is also low in Gold Etf.
Gold Etf is like investing in Physical Gold without taking the delivery of the gold, when you purchase gold from a jeweler you have to pay high making charges and you can’t be sure about the quality of the gold. In gold Eft the amount you invested is converted into 0.995 pure gold and you have to pay minimum service charges. Liquidity is very high Gold Etf at any point of time you call sell the Gold Etf in your account and the money is transferred to your Bank account.
If you purchase physical gold you have to pay wealth tax, but gold Etf are exempted from wealth tax. Compared to physical gold chances of theft are almost nil as no one can steal or transfer your gold etf from your account as your account is secured with a username and password, even if someone gains access to your Gold Etf account and sells your gold etf the amount is transferred to your bank account, so it is nearly impossible to steal from your account.
Pacific Investment provides free advice for investment in various types of assets. We provide your information and research to invest your money in the stock market, Derivatives, Commodity, Gold ETFs and gold bonds, Mutual funds, Debentures, Fixed Deposits, Insurance, Mediclaim, IPO, Real Estate and other Investment opportunity.
Important things you must know and understand before you start investing. Know and calculate your expenses, Debt and most importantly, how much amount you can set aside from your income for investing. Do a proper calculation of your monthly expenses, Always set aside a good amount of money as an unwanted expense can strike any time. Never use your Credit Card or Personal loan to invest as it can create additional trouble for you.
Keep yourself and your family protected by paying the basic insurance and medical insurance premium on time. Do check on the renewal date of all your and your family member insurance policy as it can make a huge difference if you have made a loss in investment or if you want to hold your position if you have invested in some stocks. If your and your family’s insurance is up to date and someone is sick or some accident occurs, your insurance will take care of the hospital bill and avoid a panic situation.
As you have taken care of your expenses and your family now decide how much money you have and what percentage of that, are you willing to invest at once and where, you should first do a market research on the types of investment oppurtunities available. If you don’t want to take the risk of losing all of your money or suffering huge losses, then Short term trading and swing trading is not your cup of tea. The safest are fixed deposits where you get a fixed percentage of amount as interest either yearly,half yearly or quarterly. Other options which are less risky are gold bonds, gold etf and mutual funds.
If you are able to take more risk then you can invest in the stock market, forex market and commodities, you should always follow the golden rule never invest all your money in one place. Do a market research and look on the internet for more information if you want to invest in a particular stock or a company, avoid investing on rumors and on friends advice. Diversify your investment it would lessen your risk and increase the chance of making profit. You should not invest more than 35% of your investment in the stock market, forex and commodity. You should invest 65% of your money in mutual funds and bonds as the risk is low in these investments.
If you have a good amount of money to invest and you can afford to take the help of a financial expert, you should do so as they have more experience and knowledge in doing so. They will diversify your money into different investment opportunity and lessen your losses and increase your profit as they are well versed with the market.
Even if you have less money you can still invest many companies and mutual fund offers Systematic investment planning and the amount you can start investing is very low and affordable to any person. By investing a small amount monthly you will have a good amount in your hand in the future.