Personal finance is a term that covers managing your money as well as saving and investing several aspects income, spending, savings, investing and protection. Income and spending are different for every individual. So will not talk about it
Let’s discuss savings, investing and protection:
What all you can save from income?
Most importantly do not cut down your necessity expenses such as Groceries, Household expenses, Monthly bills etc.
Remember you must keep emergency fund for any uncertain times like Covid or war or whatever unpredictable event occur Protection is insurance. Most importantly I feel everyone should have medical insurance and term insurance. Rest endowment plans and other things are secondary and not mandatory
An investment is basically an asset that’s created with the aim of allowing money to grow. The wealth created can be used for a variety of objectives such as meeting dearth’s in income, saving up for retirement, or fulfilling certain specific scores such as reimbursement of loans, payment of education fees, or purchase of other assets.
There are many types of Investments such as:
- Mutual fund
- For girl child Sukanya Samridhi is must
- Equities after certain times
Conclusion: emergency fund + insurance + mutual fund
We have seen lot of people ignore insurance part in their life but we must have the insurance as this is the most important thing for us.
Let’s take an example if you see things are turning expensive. So if any health issue comes in later age you must feel pain in pocket at that time. As a safe guard of yourself you must be insured by the Insurance companies like Life Insurance of India, Max Life Insurance etc.
Ayushman Bharat is well and good for the people who live in tier 2 cities and Villages or Remote Areas to insured themselves.
Else you can also have Mediclaim policies. After Covid we have seen lot of jump in term insurance so better cover yourself if you are responsible Earning Member in your household.
Emergency fund + insurances + mutual fund or direct stocks must to keep in your kitty
What are ETFs?
An exchange-traded fund (ETF) is a type of pooled investment security that operates much like a mutual fund. Typically, ETFs will track a particular index, sector, commodity, or other asset, but unlike mutual funds, ETFs can be purchased or sold on a stock exchange the same way that a regular stock can.
A genius with huge portfolio and idiot with index fund can beat a genius
Some famous ETFs are
- Nasdaq100 mos
These ETFs are benchmark
Nifty50 benchmark and its ETFs are niftybees, sbietf, icicipruniftyetf, Kotak niftyetf, etc
Whatever return nifty50 will give same return we will get in ETFs and benefit is We buy nifty50 in future which is lot size of 50 and daily Mark to Market (MTM) and rollover cost. In ETF you can buy and sell whenever you want to whatever quantity you want to
“Nifty aur manushye ko ghum phir ke upar hi jana hai”
What are mutual funds?
A mutual fund is a company that pools money from many investors and invests the money in securities such as stocks, bonds, and short-term debt
In equity categories are as follows
- Large cap
- Mid cap
- Small cap
- Multi cap
- Pure value
- Thematic (like pharma pse it etc)
How to choose funds?
It always depends on your Goal and Horizon
Let’s Assume you are a 27 years old. So must be more aggressive in investment as your goal should be for long term like your Retirement Plan. So we recommend you to Invest in small caps and midcaps. As it implies High Risk/ High Return
If somebody is in their 40’s and need money in 50’s I prefer him/her to invest in large caps or multi-caps to diversify risk.
If you are investing for ultra short term goal so we prefer you to go for debt funds or liquid funds because safety is more important than growth always.
Do remember every individual has different profile Risk and Horizon. So plan things accordingly time in the market beats timing the market.
So invest less or more that’s up to you but invest for longer time you can build up good Wealth and always remember nothing comes easy Keep learning and growing your Personal Finance
Note: We are AMFI registered member.