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Earlier we discussed the cookie jar investment method. In this article, we will discuss more investing options. Every investor wants to put their money into the best investment alternatives to get the best returns. Some people invest for financial security, while others meet their investment objectives.   Your investing alternatives are dependent on your risk tolerance, investment horizon, financial goals, and liquidity requirements.  In reality, risks and returns are precisely proportionate. That means the greater the risk, the greater the likelihood of returns will be. There are primarily two kinds of investment opportunities in the country.   That is financial and non-financial assets. We can further split financial assets into market-linked assets such as mutual funds, stocks, and ETFs. Some fixed-income products are bank FDs, PPFs, and Bank RDs.   Gold investments, real estate, Treasury bills, and other non-financial assets are also examples.   Let us now see which of these different investment options are suitable for India's various categories of investors.   Source: pexels Investment options for housewives   Housewives are often left behind in the race to make investments. However, there are many options in which a housewife can put her savings to grow her money.   Some of the best options are investments in direct equity (if they have a relative level of experience) and mutual funds. By investing in mutual funds, they can reap the benefits of professional management of their money and diversification of investment.   Investment in ETFs, bonds, and even PPF are viable options to grow their savings over time steadily.  Investment options for salaried people  Salaried people often struggle with managing their expenses. As a salaried employee in India, you will have various investment opportunities to invest and increase your hard-earned money wisely.  Different instruments are available for investing and ranging from traditional investment options like fixed deposits, recurring deposits, national pension schemes, and ULIPs to modern investment options such as investing in shares, cryptocurrencies, etc.   Investments in stocks and cryptocurrencies can provide returns as high as 10 to 15% per annum. At the same time, safer investment options include mutual investment in mutual funds like equity mutual funds and debt mutual funds.   Most risk-free investment options are bank fixed deposits, government bonds, etc. Salaried people have great potential to create wealth if they budget their expenses and investments.   Investment options for senior citizens  In old age, the thirst for returns is not as high as in youth. So, senior citizens usually need investment alternatives that mainly protect their money rather than growing it.   So, the need is for safe investment options. For elderly people over the age of 60, the Senior Citizens' Savings Scheme. It is one of the risk-free tax-saving investing choices available in the country.   It is one of the most significant investment ideas for seniors because they get a steady income in the form of a competitive interest rate of 8.6% per annum, making it a highly profitable investment option.  Another viable option is the Pradhan Mantri Vaya Vandana Yojana. It is for elderly adults of age 60 and up and provides them with a guaranteed return of 7.4% p.a.; pension income is payable monthly, quarterly, semiannually, or yearly depending upon the option selected.   Some other instruments include the Post Office Monthly Income Scheme and National Pension Scheme.   Low-risk investment options  Investments with low risk are always popular because they do not exhibit unnecessary volatility, so investors have less worry about the undertaking.   Low-risk investment options include Fixed Deposits, National Savings Certificates, Public Provident Fund, National Pension Schemes, and Gold. All these investment options are primarily fixed-income type investments – guaranteeing a particular level of return.   And gold has historically risen in value through tough times and often proves to be a hedge against inflationary pressure in the economy.   Investment options for students   As a student, you usually do not have too much money, but the biggest thing you have is time – which you can use to your advantage. Also, as a young investor, you have the option to take a significantly higher risk in terms of your investment options.   Students can invest even fundamental amounts through Systematic Investment Plans (SIPs) every month in mutual funds, index funds, and ETFs. Acquiring knowledge about bond investment will also be beneficial.   Since students have a higher risk appetite, they can also mobilize a small part of their investment amounts into cryptocurrencies after thorough research. Since there is less expendable money, choosing free brokers or low-cost brokers is essential.   Using simple rules of spending, students can save and invest small amounts over a long period and thus, grow their wealth. Investing Options - Summarised Equity Shares Direct equity investment, out of all the investment options covered here, delivers the best combination of stock appreciation and dividends.   When a long-time horizon (10 years or more) is taken into account, equity markets can be somewhat unpredictable in the short run, but they provide greater inflation-adjusted returns.   You can diversify your portfolio by purchasing stocks from companies in different industries, allowing you to account for economic growth in other sectors.   Equity is the riskiest asset class due to the unpredictability of global markets and the probability of sectoral instability. When markets crash during difficult economic circumstances, there is always the risk of significant capital wipe-out.   Equity Mutual Funds Mutual funds that invest in equities are known as equity mutual funds. Instead of buying individual stocks in a specific industry, you can buy a mutual fund that encompasses that industry's growth. These are less hazardous due to their diversified nature.   An equities mutual fund invests more than 65 percent of its assets in the stock market (according to SEBI rules). An equity mutual fund can be active or passive.   Fund management's expertise also influences these mutual funds' performance.   Debt Mutual Funds Debt mutual funds, as the name implies, invest most of their assets in debt instruments. These funds are appropriate for investors with a moderate risk appetite and desire for consistent returns.   Government bonds, corporate bonds, treasury bills, and other money market instruments are also in the portfolio of debt mutual funds. Low risk does not imply that there is no risk.   Credit risk and interest rate risk are two risks that you should be aware of before investing in debt mutual funds.   Fixed Deposits (FD) A bank FD is safer than practically every other investment choice. With a high level of safety comes a poor rate of return.   FDs are a method to maintain your money where it is (returns are often so low that they don't even keep up with inflation), not a strategy to increase it.   Depositors have protected up to a maximum of Rs 5 lakh apiece in the event of a bank failure (under the Deposit Insurance and Credit guarantee corporation).   Bonds: Bonds are fixed-income securities representing a loan a borrower advanced to the investor. When governments or even listed companies want to raise money in the form of debt, they issue bonds to the public.   You can purchase these bonds in the bond market. Bonds offer fixed interest payments to the bondholders (a variable interest payment system is also there).   Bond prices and interest rates move in the opposite direction. At the time of maturity, the total principal has to is to be returned. There are different types of bonds, like government, corporate, and municipality bonds.    The risk of investment in bonds also arises from the possibility of potential inflation outstripping the rate of interest on the bonds.   Furthermore, when you buy bonds that are not well rated, there remains a chance of default, wherein you might lose out on what you lent out.   National Pension Scheme (NPS) This investment vehicle is for people over 60. PMVVY offers a 7.4% annual guarantee.   Pension income, payable monthly, quarterly, bi-annually, or annually, with pension sums ranging from Rs 1000 to Rs 9250, is available. With a 10-year duration, the maximum investment amount is Rs 15 lakh.   The senior citizen, or their nominee in the event of the senior citizen's death, receives the maturity amount.   Public Provident Fund (PPF) PPF is a tax-free (interest) investment that lasts for 15 years. The government reviews the interest on PPF accounts every quarter.   A PPF account can also be opened with a monthly contribution of Rs 500. PPF is a remarkably safe investment because the interest received is covered by a national guarantee.   Gold Gold is often known to be a safe haven for investors. In your portfolio, gold will operate as a hedge.   In the past, gold has proven to be a winner when the economy has been in the doldrums. Gold is an attractive investment in the long run because of its rising price.   Digital gold, sovereign gold bonds, gold ETFs, and physical gold are options for purchasing gold. It's also a highly liquid asset to own. Consult an expert advisor to get the right plan for you TALK TO AN EXPERT

Before going to the types of asset classes, let's understand what is an asset class. A resource with economic value that an individual, business, or country holds or controls with the hope of future gain is an asset. An asset can produce cash flow, cut expenses, or increase sales in the future. Asset classes are groups of investments with comparable characteristics governed by the same laws and regulations.   As a result, asset classes consist of instruments that often act similarly in the marketplace. The significant types of asset classes are as follows  Types of an asset class 1. Equity Talking in brevity, equity also called a stock, is fractional ownership of a company. The ownership interest in a corporation represented by securities or stock is equity.   Common and preferred stock are two types of equity shares that an investor can possess in a company. The original business owner shares ownership with others, known as shareholders, in the form of equity ownership in the company.   The monetary value might represent the equity of each share that they could receive if they sold it. This value fluctuates as a result of market dynamics during the trading day.   By multiplying the equity value of a single share by the total number of shares an investor owns, they can calculate their entire equity interest in a company.  A person invests in equity to get ownership in a firm and get the rights to vote on critical decisions. However, the core reason for investing in equities is that the investor will make money by selling away the equities at a premium compared to the buying price.  2. Fixed Income Fixed-income assets and securities offer investors a steady flow of cash, usually in the form of fixed interest or dividends.  Investors in many fixed income instruments obtain the initial amount they invested and the interest earned at maturity. Fixed income is an investment type that emphasizes capital and income safeguarding.   Government bonds, corporate bonds, CDs, and money market funds are specific investments. Fixed income can provide a consistent stream of income with less risk.  Fixed-income investing is less volatile than equity investing because when an investor lends a loan to a firm, the corporation pledges to repay the entire debt at the end of the term (plus interest).   There is no such guarantee with stock investment, as it could lose all of its value. Fixed income is popular among investors because of its stability, capital preservation, and consistent income stream.  Source: Pexels 3. Commodities Raw resources or agricultural goods that can be bought and traded are commodities. They are one of the most important investing asset classes.   A futures market is where commodity trading is done. The people who make the goods and those who buy them haggle for payment in this market. These contracts also include a future delivery date for the products. Commodity pools are also available to individual investors.   It is a method of diversifying your holdings. These pools are much like mutual funds or exchange-traded products (ETPs). Traditional mutual funds and exchange-traded funds are not the same as these.   The assets themselves do not belong to the investor. Instead, the investor purchases the right to buy or sell an asset in the future for a certain period. This asset class can be precarious.   Commodities are appreciated as an asset class because of their low connection to stock and fixed-income markets, in other words, for their diversification benefits.  4. Alternatives  Alternative assets are investments that are not part of the standard asset classes that most investors are familiar with, such as stocks, bonds, or cash.   These investments may be less liquid than their traditional counterparts because of their alternative nature, and they may require a longer investment time before any substantial benefit is received.  Alternative investments are difficult to understand and are not well regulated. As a result, institutional investors and high-net-worth individuals hold the majority of alternative asset assets.   In comparison to public markets, private markets are famously opaque due to their lack of oversight. Private corporations, for example, are not required to disclose earnings or financial information or to report to shareholders; therefore, information on these types of assets might be difficult to come by.  Some alternative asset classes are Private equities, venture capital, hedge funds, private debt, real estate, infrastructure and natural resources.   5. Currency  A wager on the direction of a currency is known as currency investing. Investors can now make directional bets on currencies like the euro, Australian dollar, yen, US dollar, and even currencies from emerging markets like the Indian rupee or Chinese yuan in ETF format.   Currency investing is a rare recommendation as a long-term investment. On the other hand, professionals and short-term traders frequently use currency funds to hedge current currency risk.  A proper mix of the above asset classes based on investor goals and risk profile can generate handsome returns for the investor.  Consult an expert advisor to get the right plan for you TALK TO AN EXPERT

The financial uncertainty and health crisis caused by the pandemic over the two years have had every household reassessing its financial goals and needs. Higher education is an unavoidable expense and one question that probably bothers every parent is how to finance a child’s foreign education post-pandemic.   With high inflation, the cost of studying and living is rising every day, every hour. Studying abroad is not just about paying the tuition fees every quarter; it requires paying for the student visa, college clubs, utilities, rent, books, and miscellaneous expenses that are bound to come up. Today, the average total cost of studying abroad in the top countries is 40 to 50 lakhs.  If your child is still in school, this cost will grow to new heights. The cost of education has multiplied over the years; in India and globally, the rise in educational costs during the pandemic meant parents pulling out their children from private schools to cut back the high cost. This price tag is carried forward to university education; every year top universities like MIT, the University of California, New York University, and the University of Toronto raise their overall tuition fees by 1-2% in response to inflation.  Indian universities are no strangers to this event. IITs and IIMs raise their tuition fees every year due to inflation and competition.   To ensure your child does not suffer, you need to take the right steps to save for the future. There are plenty of ways to finance your child’s foreign education. The most commonly used are education loans, scholarships, and savings generated through different avenues of investments.   1. Education loans  Most Indians prefer to take education loans when it comes to paying for foreign education. A majority of Indian students apply for secure and unsecured loans to help fund their education overseas. Education loans are the fastest and a reliable way to pay for your child’s education. However, it has its own demerits. The pressure of paying back the loan, high-interest rate, attached collateral, and other liabilities can put undue pressure on your child and finances.  Source: Pexels 2. Scholarships Most countries offer scholarships to international students. These can be full or partial scholarships that can help offered by universities or third-party organizations. The competition for certain scholarships is extremely fierce which makes this source of funding unreliable to a degree especially when you are planning your child’s education in advance. In fact, there are very limited scholarships that provide full academic coverage such as Rhodes Scholarship, Cambridge Scholarship, Bill Gates Scholarship, etc.   https://www.youtube.com/shorts/wtjFfQMLnW8 3. Savings   The most reliable and efficient source of funding is your own savings generated through investments. Savings via investment is the ideal source to fall back on because you get to finance your child’s dream through your years of savings and without the pressure of paying back a loan. Savings can help your child secure a future without financial stress or heavy liabilities. The sooner you start saving, the greater your fund. If your children are still in school, then starting a SIP till they graduate from school can cover a major chunk of their tuition fees or cost of attendance.   There are unlimited investment opportunities that you can avail such as Mutual Funds, ETFs, and Digital Gold based on your goals. Another benefit of saving via investment is that you can invest in US dollars. This will protect your savings from inflation and help you finance your child’s foreign education far more efficiently.  If your child is planning to pursue his/her education abroad then saving via investment is the best way to finance their dreams. Post-pandemic, the need to save and develop a healthy habit of saving for long-term and short-term goals is a must. Consult an expert advisor to get the right plan for you TALK TO AN EXPERT

In the previous article, we discussed Mutual funds vs FD to find out which is a better asset for your child's future. In this article, we will talk about Saving vs Investing. Savings and investing involve different goals and functions in your financial strategy.   Saving money entails depositing money in secure, liquid accounts, whereas investing entails purchasing assets, such as stocks, to make a profit.   Before you start your journey to riches and financial independence, you must understand this fundamental difference.   Difference between Saving vs Investing   Saving money implies putting away money by depositing it in highly secure securities or accounts. The money is also liquid, which means it can be turned into cash quickly.   Above all, your cash reserves must be there when you need them. They must be ready for use to meet all your immediate needs and wants. Some examples are: keeping money in cash form, in a savings account etc.  Investing money refers to utilizing your cash or capital to purchase an item you believe has a fair chance of creating an acceptable return over time.   Investing is to increase your wealth, even if it means going through significant volatility for months or even years. Actual investments have the backing of a margin of safety, usually in of assets or earnings from the owner.  Stocks, bonds, and real estate are some of the best investment instruments.     Basis of Distinction Investing  Saving Definition The exercise involves investing the money saved so as to generate profits and capital appreciation The income or money left at hand after meeting all expenses Purpose The purpose of investing is capital appreciation and wealth creation. Investing in your alpha tool, which fights increasing inflation and helps you create wealth. The purpose of saving is to meet short-term and long-term requirements. And also, to tackle unforeseen events. Saving is the foundation of your investment portfolio. Returns The biggest advantage of investing in high returns is that it provides some exposure to market volatility as well. If you are a risk-averse investor or have a little risk appetite, you can choose to invest in debt funds. Saving is not done with the view to generating returns. Since there is negligible or little risk involved with the money, there is very little return - generally, a percentage or two on the instruments where you save your money. Risk Investing has its fair share of risks involved because of the market volatility, the risk and return depend on the mood of the market in general. Saving money has no volatility risk. The thing that can possibly happen with your money is that it can diminish in value owing to rising inflation. Liquidity Investments vary in liquidity depending upon the instruments.  Liquidity is the primary purpose of saving.  An important difference   The most significant distinction between saving and investing is the Risk Factor. When you place your money into a savings account, such as a money market account or a certificate of deposit, you are saving.  It has a very low danger of losing money but has very little chance of making money. When you save money, you have access to it as and when you need it.   When you invest money, you have the chance to make higher long-term profits or rewards. But you also have an opportunity to lose money. You can take on more risk for a higher return, but your potential loss is also more significant.   It is critical to assess your objectives to determine which alternative is ideal.    Making the wrong decision can cost you a lot of money in fees or even result in a loss of future investment revenue. Another distinction is interest or profit.   The primary purpose of investing is to make money, whereas the motive of saving is to keep money secure while earning relatively little.  Source: pexels Saving vs Invest: Which comes first?   Almost often, saving money comes before investing money. Saving is the foundation upon which your financial dreams are based.  The logic is simple - unless you possess a certain sum of money, you will need to rely on your savings to fund your investments.   In rough times when you need money, you'll probably have to sell your investments at bad possible times, and that is not a prescription for financial success.  As a rule of thumb, your saving should be able to cover at least three to six months of your expenses - usually known as an emergency fund.   You can start investing until you have things in places, such as an emergency fund, health insurance, and life insurance.   You will benefit from significant tax cuts with the help of these instruments like insurance. You will also have a safety net to bear volatility even in your investments.   Which one is for you?   There is no particular answer to this question because saving is a means to your investment journey. If you have good savings and if you can generate a safety net around your wealth, you can start investing that day itself.   It all depends on your planning, your needs, and your future goals. Make your decision wisely and choose the instruments carefully. Consult an expert advisor to get the right plan for you TALK TO AN EXPERT

In the previous article, we read about how to save your child from the student debt trap? In this article, we will read what is inflation and how does it affect us? According to International Monetary Fund (IMF), "Inflation is the rate of increase in prices over a given period.   What is inflation? Inflation is typically a broad measure, such as the overall increase in prices or the increase in the cost of living in a country. But it can also be more narrowly calculated for certain goods, such as food, or services, such as a haircut or travel cost.   Whatever the context, inflation represents how prices of the relevant set of goods and services have increased over a certain period.   Inflationary pressure suggests that you will have to pay more for the same goods and services this year compared to last year. If you possess the assets before the price rise, such as homes and stocks, this can help you.   But if your income does not keep up with Inflation, your purchasing power diminishes. Inflation raises your cost of living over time, and it can be harmful to the economy if it is high enough.  High Inflation has far-reaching consequences for a country's economy. Let us see some ways how inflation affects us Erodes purchasing power Inflation causes a decrease in purchasing power of your currency due to a rise in prices across the economy. With the increase in the general price level (without an equivalent rise in your income), your ability to purchase goods with the given money decreases.  Causes more inflation When Inflation is stepping in, people tend to buy more stuff in the anticipation that the prices will rise further in the future. So, this desire to spend produces a potentially disastrous loop in the face of this desire to spend.   People and businesses are spending faster and more to limit the amount of time they hold their deteriorating money, resulting in an abundance of cash that no one wants.   In other words, the supply of money exceeds the demand, causing the price of money and the purchasing power of currency to fall at an increasing rate.   People grow frantic to get rid of their money, so every payday becomes a frenzy of spending on anything that isn't becoming increasingly worthless.  Lowers the cost of borrowing When a business borrows money, it may pay back the cash it received with the cash it earns later. The basic rule of Inflation says that the value of a currency tends to decline over time.   So, in other words, the cash now is worth more than the cash in the future. Thus, Inflation lets debtors pay lenders back with money worth less than when they originally borrowed it.   Inflation and the cost of living The cost of living rises when prices rise. People have less money to meet their responsibilities if they spend more money to live (assuming their incomes haven't increased).   People's purchasing power falls due to rising costs and stagnant income. As a result, consumers may require more time to repay earlier loans, allowing lenders to collect interest for a longer time.   Also, it is worth noting that some inflation is good for the economy. In its mild form, inflation has a positive effect as well. People who anticipate inflation are more likely to spend now rather than later since they know prices will rise in the future. Consumer spending is the engine that propels economic growth forward.  As general consumers in the economy, to beat the brunt of inflation, we need to keep our money in safe assets and as little as possible in terms of cash. If we keep our money in assets that provide higher returns than the inflation rate, our money will grow over time. Consult an expert advisor to know the right plan for you  TALK TO AN EXPERT

Leaving the child with the stress of debt is the last thing any parent would wish for. Yet there are various examples where the burden of financial stress is carried down through generations. Have you ever wondered why this happens?  This is because taking out a loan is simpler and a faster solution to a financial problem. But, what is often forgotten is the mental stress and task of paying back the loan that may fall on your child’s shoulders. While education loans can be effective and instrumental in securing a bright future, there are some ways to rise above and save your child from a student debt trap. Save your child from a student debt trap: 9 tips! Save your money Obvious though it may sound, saving still is a habit many fail to inculcate. It is quite difficult to resist the desire of spending money when we have so many options available. Now here is the catch, spending your money can get you temporary pleasures, but it contributes nothing to your long-term goal.  Sticking to a budget, evaluating your needs and saving your money in a high-interest offering saving account are some small steps you can take to harness this habit.  Invest your money In a country of 138 crore people, only 1.2 crore people are active investors according to a report by National Stock Exchange. By not investing, you are missing out on an opportunity to grow your money and give your child a debt-free life.  Stick to your budget Usually, there is a 50/30/20 rule whenever the question of planning a budget comes into the picture. It says that 50% of your earnings should go towards your needs, 30% to your wants, and 20% you save. By following this scale, you can keep a check on your money and control the uses you put it to. Very easy and rewarding technique, if implemented diligently! Monitor your Credit Card Usage Your monthly earnings should always exceed the monthly bill that you pay for your credit cards, as simple as that! Having the option to spend, should not necessarily provoke you to spend. Always be in check of your credit limits and do not let the perks control you.  Source: Freepik Create a College Fund The cost of higher education is skyrocketing and it is an unavoidable expense. The purpose is not just to protect your child from debt, but also to have enough to support them until they are independent. Make sure you have a sound investment plan in place today, to provide for your child’s higher education tomorrow! Practice Self-Discipline Discipline is crucial to ensure the consistency of your efforts. For instance, a newly launched luxurious car may tempt you, but knowing your needs and checking your priorities is important. Especially when you have kids to afford reckless spending.  Portfolio Diversification  Investments are subjected to risk. The ROI from equity or mutual funds is highly dependent on the market conditions. Portfolio diversification, however, is one way to adjust the risk associated with your investments. You invest into multiple securities varying in terms of risk and return involved in such a way that the overall risk is adjusted.  Health Insurance Cover Have a proper insurance plan for your health in place. You can not anticipate medical emergencies, but you can plan for them wisely. Medical bills can hugely impact your financial planning and spending. Besides, insurance cover concerning fire, vehicle, etc. can be helpful as well.   Mindful about procuring finances For individuals, bank loans continue to be the popular source of procuring finance. It is mostly a ready source to pay off big amounts. However, one should not neglect the cost associated with it. Loans from banks are secured against collaterals. Moreover, you are obliged to pay the interest at which the loan is offered along with the principle. Therefore, this source of financial procurement would call for consistent allocation of your earnings towards the repayment.  The catch is to be mindful of the quantum to ensure a debt-free future.  Financial planning, investing, saving and budgeting can help make your life and your child’s life easy. By following the above-mentioned methods you will save your child from a student debt trap and give them the confidence to build a unique future.  Consult an expert advisor to get the right plan for you TALK TO AN EXPERT

In the previous article, we read about why choose SIP to save for your child’s higher education. In this article, we will read the best time to start investing in your child’s education.  As an Indian parent, you aim to prioritize your child’s needs before yourself and strive to provide them with all the comfort and luxury in the world. Eventually, all the comfort you bring to your child’s life exemplifies how protective you are of them. And, out of all the beautiful things that you do for them, education is the greatest gift you give.   Yet quality education comes at a high cost, especially in an economic climate that is affected by the global economic crisis and political turmoil. These events affect your purchasing power, devalue your savings and affect your lifestyle and future needs. The only way to escape this vicious cycle is through smart planning and saving on time.   Why is it important to save and invest early in your child’s education?   The simple answer is inflation. Inflation in the education sector is escalating at a scary rate. It is painful to see that your hard earned money will likely lose its value over time and may not suffice to protect your child’s future. Thus, the earlier you start planning your child’s education journey, the better it will be for their bright future.  In other words, it's time to not only save but grow your money to meet the needs of the future. Investing enables you to increase your money and retain your purchasing power. However, you must invest smartly.  There are several aspects associated with investing. The two main factors that affect your investment strategy are Risk and Return. The general rule of investing is higher risk and higher return. Based on your risk appetite, and short-term and long-term needs, you can accumulate your desired corpus over time. Another powerful rule of investing lies in longevity; the longer you stay invested, the greater your reward.  Here is how investing early can yield greater returns  Kartik is blessed with a baby girl. After a month of her birth, he chooses to invest a monthly SIP of Rs. 5,000 at 10% for 20 years. This way, he makes a total investment of Rs. 12,00,000 over the said period.   On the other hand, his friend Pratyush waits for his son to attain the age of 10 to start investing. He invests the same amount at the same rate of return but for a smaller period. He makes a total investment of Rs. 6,00,000 over ten years.   When their kids attain the age of 20, Kartik receives an accumulated corpus of Rs. 38,28,485. Whereas, Pratyush receives Rs. 10,32,760 as a return on investment. The growth rate for Kartik has been 3.2 times the investment, whereas Pratyush could receive only 1.72 times. But why is there a vast disparity despite the same amount of investment?   The disparity is a result of time. The longer your money stays invested, the more you get in return. That’s the magic of compounding! So, the best time to invest in your child’s higher education is NOW!  The longer your money stays invested, the more rewards you yield. Let’s find out what are the benefits of early investing.   4 benefits of early investing   1. Time Value of Money  When we talk of money and investing, time is an invaluable asset. The amount and the duration for which your money stays invested contribute significantly to the education corpus. The longer it stays invested, the higher return you get.   2. Acceleration through Compounding  Compounding is the return that you get on your return. It means you don’t just get the return on what you spend out of your pocket but also what you earn from it. Resultantly, your corpus gets richer with time.   3. Manageable Sums  You can start your investment journey early with a manageable sum. A delay would put an unnecessary burden on your pocket. Whether you start early or later, you need to save to meet the growing cost of education. Why put yourself into unnecessary trouble?  4. Higher scope for modification  In the above example, Kartik had assumed Rs. 40,00,000 to be the cost of his daughter’s higher education. However, when her daughter is ten years old, he realizes that the price may rise to Rs. 50,00,000. This situation will not bother him much because he can quickly meet the increased requirements. But things would not go the same way for Pratyush because he will have a considerable gap to fill just because he started late.  The education industry is highly competitive; over the last three decades, the cost of higher education jumped more than 500%.To ensure your child has all the amenities and a bright education, you need to start working on your savings. Our advice is to start easy, start small, but start early! Consult an advisor to get the right plan for you TALK TO AN EXPERT

Rating agencies are companies that evaluate the financial capabilities and strengths of different companies and government entities, especially their ability to meet their principal and interest repayment on their debt obligations.   The ratings given by these companies act as a signal to the public whether the borrower (the company or government entity) will be able to honour its obligations or not.   If a rating agency downgrades your short-term instruments, it isn’t a big worry if the maturity date is close. However, it could be an issue if the downgrading happens for long-term bonds. Keeping track of these ratings is essential because all debt instruments, though less risky, have some degree of risks involved such as default risk, interest rate risk, rate risk, etc.  Credit rating agencies like Standard and Poor’s, CRISIL, and Fitch assign letter grades to indicate ratings. Each rating has a different meaning. For example, Standard and Poor’s credit rating varies from AAA (excellent) and D.   Any instrument with a rating below BBB minus is considered a junk bond. You should invest your money into bonds with high creditworthiness and, thus, less speculative.   The ratings become crucial when choosing between bonds of different entities.  What is the role of rating agencies in capital markets?   Assessment of credit risk is done by rating agencies for specific debt securities and borrowing entities. In the bond market, a rating agency assesses the creditworthiness of government and corporate debt obligations.   Two of the three major rating organizations provide ratings to large bond issuers. Rating agencies also give ratings to sovereign borrowers, the largest in most financial markets.   For example, some sovereign borrowers are national governments, municipalities, state governments, and other sovereign supported institutions.   A rating agency gives the sovereign a rating to show its ability to fulfil its debt obligations.   The poor credit rating shows that the loan has a high-risk premium, and it prompts an increase in the interest charged to the individuals and the entities with a low credit rating.   A good credit rating allows borrowers to quickly borrow money from the public debt market or financial institutions at a lower interest rate. At the national level, investors use these ratings given by the credit rating agencies to make their investment decisions.  Source: Pexels Impact of a downgrade by a rating agency   Rating agencies downgrade companies primarily because of the danger of default, which can emerge from bad financial performance, declining cash and bank balances, increasing debt, lowering the debt service ratio and worsening business circumstances and prospects.   Any news of the downgrading of any asset, particularly bonds, could cause a drop in the price, resulting in a loss for the investors. Unrealized losses are often known as market-to-market losses.   A downgrade with a ‘rating watch’ might sometimes imply that the instrument will be downgraded further or the default on the debt will be initiated soon.   When a hybrid fund is downgraded, the immunity portion of the portfolio may lose value. When the downgrade is just one notch lower, with an outlook for an upgrade shortly, it can result in temporary volatility in the price.  How to make decisions?   As said above, if the downgrade is for a short-term instrument, you need not worry too much if the majority of these instruments are just one or two months away from maturity. However, if the downgrade is for long term bonds, you must check how much of your investment is in these bonds. One can get this information from the monthly factsheets.   An exposure of 10% to 15% could be risky. To conclude, whenever a downgrade happens to a debt or a hybrid fund you have invested in, you must take care of the above aspects and then decide to exit or continue from the scheme.  Consult an expert advisor to get the right plan for you TALK TO AN EXPERT

In the previous article, the discussion was about: how long should you invest in SIP? This article, will try to understand the steps you must take to secure your child's future, that is, how to plan for a child's future?  Your child's birth is one of the most critical events in your life. Other than celebration, it requires maturity and responsibility for the parents to take up this responsibility and secure their future.   A plan for the child should cover different phases of a child's life, including their education, health care and even marriage. https://www.youtube.com/watch?v=r1fA8jz3dIE&t=1132s YouTube: EduFund 8 Tips on How to Plan for a Child's Future 1. Use compounding to your advantage  A lot of money is involved when a child goes for higher education, which means you have to build a robust corpus for your child.   Good education. From the child's birth, there is quite a long time, close to 15-20 years, to when a child reaches the age of higher education.  So, you can invest in instruments like stocks and mutual funds that will compound your money at a better rate and will leave you with a vast corpus in your time of need.    2. Starting early and having insurance  The power of compounding takes time to show its magic, so the most important thing is to start early.   You must maintain a plan for your child as soon as they are born. There must be a comprehensive insurance policy to consider some unforeseen events. Insurance policies will also act as a cushion for your investments. Guard you against unwanted events.   3. Account for inflation An essential thing that most people miss while planning their investments is to account for inflation or education inflation. Since you are investing for a very long period, you must take care of the inflation-adjusted returns that you will make. Since inflation is a huge factor that eats up your money, you must take adequate steps. If you consider this factor, you can protect your child's education fund, marriage fund etc., from being eroded.   It will help you plan your child's future better by incorporating the best plans that offer a cushion from the blow of inflation, preventing your savings from eroding. Source: Pexels 4. Goal setting  Goal setting and prioritizing your goals for the child's future are very important as they will help you channel your investments. For example, you must invest in different plans so that you will be able to withdraw your funds at the time of, say, your child's higher education or at the time of marriage.   So, keeping in mind the goals and being specific helps a lot while planning for your child. You can also have different; for example, you can take other term plans to safeguard essential goals.  5. Invest in a high-yielding scheme Since you have a lot of time to invest from the birth of a child, you can take advantage by investing in high yielding strategies that might come with greater risk and high return potential.   They have the potential to outperform most other asset classes, and they are considered effective in building a corpus faster.   You can take this risk since you are investing from a long-term perspective. Still, it is also essential to do proper hedging by purchasing an adequate amount of investments to cushion this aggressive equity investment.  6. Invest in partial withdrawal plans As we know that you will require the money at different time points, it is wise to invest in plans that allow you to withdraw cash when you need it because these plans are very helpful during emergencies.   The ease of withdrawing funds might act as a boon at a time when fulfilling a need for a child's financial future is more urgent than other things.  7. Plan for yourself as well If you want your child to be happy in the future, you must do your retirement planning properly. Parents won’t want their daughter or son to remain worried even after they have settled in their life.   So, to take care of this factor, you must take adequate steps to secure your retirement.   8. Review your plan periodically To keep your plan relevant over the years, you must constantly review it every year or on some decided timeframe to ensure that you do not miss out on any event that might affect your investments.   Parents who indulge in reviewing and modifying their child's plans, be it for education or their future settlement or their marriage, are more likely to adjust their investments, savings and strategies by the times and thus maintain the sync.  Consult an expert advisor to get the right plan for you TALK TO AN EXPERT

The 30s are very crucial for you as an investor. In this article, we will try to understand the best way to start investing in the 30s.   Steps to take before investing   Create an emergency fund The first and foremost thing you need to do is create an emergency fund that will assist you in times of urgent need. Ideally, the emergency fund should be equivalent to 6- 8 times your monthly expenses.    Become debt-free Tension-free and full-fledged investments are possible when you are not reeling under your loans. In the case of personal loans like credit card bills, try to clear them off on or before the due dates.  What should be your investment strategy?   Align investments with life goals The 30s is that juncture of life where you have a lot to do ahead –in terms of responsibility and achievement. For this reason, you need a detailed time log of what you intend to do in the upcoming decades before you define your investment strategy. In general, some big-ticket expenses are your marriage, your kids’ future studies (maybe 15 years later) and planning your retirement. At this age, your portfolio should have a subtle combination of equity and debt to suit your long-term goals.   Beating inflation In your 30s, you still have time to get rich and enjoy the luxuries of life. So, you should put the investible money into assets that will beat inflation. Inflation is your enemy so treat it like one, and thus, do not invest your money (for growth purposes) into assets that do not even match inflation such as FDs and savings bank accounts. You should aim at investing in stocks and mutual funds or even real estate (if you have the proper knowledge and guidance).   Do not fear risk At this time of life, the risk is synonymous with living in terms of a career or investments. Risks depend on your appetite; if you wish to obtain asymmetric returns, you have to take asymmetric risks. However, you must have the potential to manage the risk (an emergency fund). Managing risk implies diversifying your investment portfolio by placing your money into various asset classes and reviewing your portfolio to check for the risks.   Do not disregard liquidity Liquidity is a vital factor to consider. While investing, you must ensure that your investments are not tied entirely to illiquid assets, which might create problems in times of distress.   Invest continuously Continuity and patience will reap the highest benefits in your investments. The longer you remain invested, the more you can benefit from the power of compounding and through the systematic accumulation of stocks/mutual fund units over a long period.  Consult an expert advisor to get the right plan for you TALK tO AN EXPERt

In the previous article, we learnt about what is financial planning? And the importance of financial planning. In this article, we will dive into the types of financial planning. Investment planning  Investment planning refers to allocating funds towards various investment products to create a wealth corpus and generate continuous income.   It involves the analysis of short-term needs and long-term goals and then deciding how much money to invest in and in which asset class. Knowing how much savings you possess is the first step in investment planning.  Tax planning   Tax planning is a way to optimize your investment returns smartly by minimizing your tax liability by channelling your investments into particular instruments.   With proper tax planning, you can have a higher post-tax income. Some ways to save tax are to hold your stocks for more than one year and prefer tax-savings schemes like ELSS.  Retirement planning  This type of planning’s objective is to ensure that you have adequate resources to live after you stop earning. Achieving a good retirement requires good planning from an early age by investing and saving a proportion of your income for your future self.   The most important factors while considering your retirement plan are the rising inflation and the rising standard of living. Source: Pexels Cash Flow Planning  Cash flow planning is more of a daily process. It involves actively budgeting your income and expenses to maximize your savings by prioritizing necessary expenses over wasteful ones.  Insurance planning  Having insurance is most important, even before having any other investment product. Insurance acts as a safety net for you and your investments.   Insurance planning requires planning the amount of life cover and health cover through various comparisons between individual and family floater plans to ensure protection.  Children’s future planning   Planning your children’s future is an important task – be it education or marriage, these are big-ticket expenses that require proper planning and investments.  Estate planning  This type of planning entails the concoction of property investments; real estate investing is usually tricky because of the high investment amount and various government rules and regulations involved. However, with good consultation, real estate investments can be one of your best bets. Consult an expert advisor to get the right plan for you  TALK TO AN EXPERT

As a parent, it is essential to consider the benefits of providing your child high quality education. Enrolling your child in a distinguished university increases the returns on their schooling and distinguishes their career.   At the same time, choosing an institute that aligns with your child’s profile is a task of utmost importance. Some would even call it the make-or-break decision.   A review by Matthew Mayhew and his co-authors of 1800 research studies reflects on how the selected college could affect your child in various ways economically, socially, psychologically, and intellectually.   In a world of IIMs and IITs, it would be wise to know: If these are suitable options for your child Are these your only options.   To ensure that your child is part of an academic environment that nurtures their unique faculties, take note of the following.  Top ranked colleges are not necessarily the best-fit college  There is a widely-held misconception that top-ranked colleges are the absolute best. While there is merit in these famous universities being labelled as great institutions; the rank may not be the best metric of “fit.”   Popular websites that rank colleges have a set of parameters that they consider while ranking them from top to bottom. The criteria considered can vary from website to website, and these are not specific to the individual preferences of each student and, therefore, can be highly generalized.   Brand value is another main factor that plays a significant role in deciding between different universities for parents and students. The brand value varies from region to region.   It depends on the portrayal of a college to a specific audience. Having alumni from a particular university in a social circle can also influence the decision to pick a university for many parents and students. So, parents and students may choose which is the best university rather than the best-fit university for them. Source: Pexels What is the best-fit college?   The best-fit college for one student is hardly ever the best-fit college for another, even if the course of study is ordinary for them both. Two top colleges that offer the same principal can be completely different choices for these students.   While one college could provide a great deal of work experience while studying, the other can be a traditional college that entirely focuses on academics.   It is significant for every student and parent to understand which environment will work best in the future. Thus, a parent can choose the best-fit college for their child only after they know what their child expects from a college, especially as a contribution to their future career.     What to consider while choosing the best-fit college   Before shortlisting options, parents and students need to discuss what they’re expecting out of a university. If flexibility in courses is a choice for the students in, then the UK may not be the best place.   Most UK colleges demand students choose the course they want to study before admission and continue to learn the subject throughout their period in college. However, many colleges in the US offer students more flexibility when choosing their courses.   Students should also account for the teaching methodology of colleges. Some colleges offer one on one attention to students and demand they work on each chapter after a few lectures and discuss it with their tutors weekly or regularly.   Such colleges may work for students who like to be regularly taken care of. However, if a student prefers to attend large lectures, conduct their research, and prepare for exams on their own, these colleges that offer special attention to each student may not be the best fit for them.   Students should also look beyond academics while zeroing in on a college. Some of the main factors that should be studied are opportunities for internships, extra-curricular activities, the scope for exploring sports and the infrastructure to support it, and community involvement. These days universities also look beyond students academic achievements while screening their applications. They look at their interests, how they perceive the world, why, and more.  A few colleges also expect essays about how students plan to explore different campus facilities.     Most importantly, how your budget accommodates the best fit is a significant factor to consider before sending out applications. Know the total cost of education over the usual academic costs. Consider expenses related to accommodation, food, commute, outside campus activities, internship costs, etc. Parents should assess if their family can afford these fees and if they need a scholarship or loan to lighten the loan on their finances. Looking for more information? Speak to a professional today! TALK TO AN EXPERT

The Dow Jones Industrial Average (DJIA) is possibly the most commonly followed financial market index globally. Yet, very few people know that it represents just 30 businesses.  The DJIA's Beginnings  The Dow Jones Industrial Average was set up on May 26, 1896. Charles H. Dow, one of the founders of Dow Jones & Company, came up with the Dow (formed in 1882).  The first Dow Jones index was constituted in 1884. There were 11 transportation-related stocks in the portfolio. The original index was called the Dow Jones Rail Average.   The Dow Jones Transportation Average was created in the 1970s to include air freight and other modes of transportation.  Dow soon discovered that industrial companies grew in value faster than railroads. He then created a new index by combining the stocks of 12 different companies.   It was dubbed the Dow Jones Industrial Average by Charles. Initially, it was the average of industrial firms in the cotton, sugar, tobacco, and gas industries. What is Dow Jones Industrial Average? The Dow Jones industrial average is a stock market index that tracks the Dow Jones Industrial Average (DJIA).  Dow Jones Industrial Average (DJIA), usually known as "the Dow Jones" or simply "the Dow," is one of the most well-known stock market indicators.   It tracks the daily stock market movements of 30 publicly traded firms in the United States, either on the NASDAQ or the New York Stock Exchange (NYSE). The 30 publicly-held corporations are among the economic leaders in the United States.  Additional read: What is ADTV? The Dow Jones Industrial Average components  There are no set criteria for a business's inclusion in DJIA's 30 company stocks. However, to be included in the DJIA, a corporation must make up a significant portion of its business in the US economy.   The corporation should also be registered on NASDAQ or NYSE and belong to the industrial sector's top players. CompanyStock Ticker SymbolIndustryLatest Addition to Index3MMMMConglomerate1976 / 08 / 09American ExpressAXPFinancial Services1982 / 08/ 30AppleAAPLTech2015 / 03 / 19BoeingBAAerospace1987 / 03 / 12CaterpillerCATConstruction1991 / 05 / 06ChevronCVXOil & Gas2008 / 02 / 19CiscoCSCOTech2009 / 06 / 08Coca-ColaKOFood and Beverages1987 / 03 / 12DisneyDISEntertainment1991 / 05 / 06DowDuPont IncDWDPChemical Industry2017 / 09 / 01Exxon MobilXOMOil & Gas1928 / 10 / 01Goldman SachsGSFinancial Services2013 / 09 / 20Home DepotHDRetail1999 / 11 / 01IBMIBMTech1976 / 06 / 29IntelINTCTech1999 / 11 / 01Johnson & JohnsonJNJPharmaceuticals1997 / 03 / 17JPMorgan ChaseJPMFinancial Services1991 / 05 / 06McDonald'sMCDFood1985 / 10 / 30Merck & CompanyMEKPharmaceuticals1979 / 06 / 29MicrosoftMSFTTech1999 / 11 / 01NikeNKEApparel2013 / 09 / 20PfizerPFEPharmaceuticals2004 / 04 / 08Procter & GamblePGConsumer Goods1932 / 05 / 26Travelers Companies IncTRVInsurance2009 / 06 / 08United TechnologiesUTXConglomerate1939 / 03 / 14UnitedHealthUNHManaged Health Care2012 / 09 / 24VerizonVZTelecom2004 / 04 / 08VisaVFinancial Services2013 / 09 / 20WalMartWMTRetail1997 / 03 / 17Walgreens Boots AllianceWBARetail2018 / 06 / 26 How are stocks weighed?  The DJIA is a price-weighted indicator – it means that businesses with more costly stocks are given more weight in the Dow. Market capitalization, the entire market value of all of a company's shares, is not factored into the DJIA's price weighting.   As a result, corporations with fewer pricey shares have a more significant impact on the Dow's value than companies with a large number of less expensive shares.  The Dow's strategy differs from other prominent indexes that measure the stock market's overall performance, such as the S&P 500 or the NASDAQ. When evaluating how much influence a firm will have in an index, these take its market capitalization into account.  What is the best way to invest in Dow Jones Industrial Average? The DJIA can be used as a proxy for the overall performance of the US economy because its constituents are among the most significant public corporations. Many investors prefer index funds modeled on the Dow Jones Industrial Average.   Finally, If you purchase a new stake in a DJIA index fund, you have exposure to all 30 Dow components in your portfolio giving you simple access to businesses with a demonstrated track record of profitability and sound business practices. FAQs What is meant by Dow Jones Industrial Average? Dow Jones Industrial Average (DJIA), usually known as "the Dow Jones" or simply "the Dow," is one of the most well-known stock market indicators.   It tracks the daily stock market movements of 30 publicly traded firms in the United States, either on the NASDAQ or the New York Stock Exchange (NYSE). Why is it called the Dow Jones Industrial Average? The Dow Jones Industrial Average was set up on May 26, 1896. Charles H. Dow, one of the founders of Dow Jones & Company, came up with the Dow. It is named after its founder. How are stocks weighed in Dow Jones Industrial Average?  The DJIA is a price-weighted indicator – it means that businesses with more costly stocks are given more weight in the Dow. Consult an expert advisor to find the right plan for you TALK TO AN EXPERT