Equity investment is risky

If you tell any  one about investing in equity . that too your parents , they will say what happened during Harshad mehta time (Young readers please google read about Harshad mehta scam), Every parent tell the children to invest in Fixed deposit or Post office schemes,

All the investments are risky, But you should have clear goal in mind  before making any type of investment

Let us discuss about the common goals

You are saving the money for making down  payment for buying flat after 2 years.

If you need the money in another 2 years, Equities are the riskiest investment, It is better you  make a recurring deposit monthly from your salary for making down payment for your dream house.

Your saving money for your kids education and your retirement after 20  years.

For long term Equities  are the best investment ,Sensex has given average returns of 15% for last 30 years, If you are good in picking stocks  and also you have lots of time to do research and analysis go ahead with direct stock investment otherwise it is better to invest in mutual funds.

Most of the good funds in India given more than 15% returns in last 15 years.

Applying for Home loan -Improve CIBIL Score

If you are applying for home loan

Please take care of  CIBIL  Score.

what is CIBIL(Credit Information Bureau India Limited)?

If you are taking credit card , Personal loan , Student loan, If you are a defaulter or if you are frequently missing the EMI, You are being watched by CIBIL

How CIBIL works?

Suppose you are taking personal loan from Bank , if you are missing EMI’s or your a defaulter  , The information will be shared with CIBIL, Not only the bad credit History  ,If you are paying EMIs regularly bank sends that information also to CIBIL.If you are regularly paying EMI your rating will be good

Suppose you make a  loan  enquiry  that information also is shared with CIBIL

How it affects your Home loan?

Suppose  when you are  starting  the career  if you miss  credit card or personal loan  EMI , Bank will give this information to CIBIL,After 5 years if you apply for Home loan  in any of the bank, They will reject your Home loan application , because your credit  rating  will be bad .

How to improve CIBIL rating?

You can improve your credit rating  by clearing all unpaid loans and regularly paying your EMI. After that you can ask for one more rating from CIBIL.

For more details on CIBIL visit

http://www.cibil.com/

Investment risks-How to Avoid..?

Any investment  we  do will have risk , But it  is essential  for us to understand the  risks before making investment decision, The various types of  risks are

Market risk

If you are investing in equity market you  will have market risk, Equity market  is always volatile, The fluctuation is due to govt policies,company earnings , economy etc, Some times a statement from a minister can create fluctuation in equity market

Inflation risk

Now you don’t want to take risk in equity market, So you have invested in Fixed deposit, Again you have inflation risk.Inflation reduces the purchasing power of money.

In India Fixed deposits will give post tax return  of 7% , But inflation in India is in the rage of 8% to 10%, The only way to beat the inflation is to invest in equity and real estate.

Liquidity risk

Now you came to conclusion that real estate is safest  investment, In real estate investment you  have liquidity  risk.Coming to equity market small company stock will have the liquidity risk

In the simplest terms, liquidity risk refers to the risk that an investment won’t have an active buyer  when you are ready to  sell it. This means you will be stuck holding the investment at a time when you need cash.

How to Avoid risks?

Markets risk:

Market risk due to fluctuations can be  avoided by investing small amount of money in equity mutual fund by SIP.

Inflation Risk:

This can by avoided by investing in equity and real estate for long term.Keep only emergency fund in Fixed deposit.

Liquidity risk.

Invest only large cap stocks and mutual funds to avoid  liquidity risk. Mutual funds can be withdrawn within 2 to 3days.

If you are planning to sell  your real estate start  as early as possible to avoid distress sale