Why do we need to see "Risk Management" as the Most Powerful "Growth Driver"?

 "Risk Management" as the Most Powerful "Growth Driver"?

Why do we need to see "Risk Management" as the Most Powerful "Growth Driver"?

 

1) We have brakes in cars because we have a desire to drive fast

2) If the desire was to drive slow then we need not have designed good brakes. Even ordinary ones would have sufficed

3) When you have shock absorbers in cars, it is because you want to drive in Volatile terrain. If the idea was to drive in the city, then what was the need to design outstanding and powerful shock absorbers. If there's no shock then what to absorb

4) When you have debt in your Portfolio, they act as cushions in a volatile market

5) They ensure that you continue to stay healthy and stay fit to continue the journey

6) They ensure that you venture straight into volatility without a semblance of fear

7) They ensure you pick the small caps and the micro caps without feeling insecure

8) A Great Risk Management Framework, is exactly like modern braking system and modern shock absorbing systems

9) The Dynamic Asset Allocation Category (BAF and Asset Allocator FOFs) has provided a new dimension of Risk Management framework in Portfolio Management

10) This Dynamic Rebalancing works best in the first 3 to 5 years for a new investor

11) The simple balanced fund starts giving comfort after 3 years or after 5 years

12) Equity Funds provide the comfort only after 7 to 8 years of investing

13) What is most important is to ensure the investor stays till 7 years

14) Hence making him stay first 3 years is the critical path

15) And it is here that Dynamic Asset Allocation Category does an amazing job

16) They provide nearly the security of having money in a Current Account (rarely net loss)

17) But on the flip side they can provide the returns of equity fund .

https://www.investmentjunctions.com/

**Disclaimer: This Article is only for information Purposes and should not be treated as Financial Advice.**

7 Facts About Mutual Funds That Will Impress Your Friends

"Mutual Fund Sahi Hain"

Almost everyone in the country has heard the above line in advertisements.

Mutual funds are professionally managed funds that diversify the portfolio and aim to provide reasonable returns per the scheme's objectives. Mutual funds are available in various types per the investor's risk appetite and time horizon.

Here we will be looking into some facts about mutual funds.

Fact 1. All you need is Rs. 500

Mutual funds are affordable, accessible financial products. Anyone can start investing with Rs.500 per month through a Systematic Investment Plan (SIP). The low minimum amount has made it easier for people to start investing a fixed amount every month.

Fact 2. Let the magic of compounding happen

Compounding is when interests or gains are reinvested to generate additional interest or gains over time. Compounding does its magic with consistent investment over the long-term period.

SIP is an excellent tool for beginners and young investors to start their investment journey. The magic of compounding occurs when the investments are kept untouched for a long time.

Fact 3. Your money is in the expert's hand

Mutual funds are the pool of funds deposited by investors that experts manage in the matter. Experts analyse the various investment opportunities and invest funds to create a portfolio to generate reasonable returns per the scheme's objectives.

Fact 4. Diversification and liquidity

Mutual funds are a great way to diversify your portfolio. Mutual Funds offer the incredible benefit of diversification by investing in different asset classes and sectors of a particular asset class. This helps to minimise risk.

Moreover, one can quickly redeem their money from their mutual fund folio and get it credited to the bank account.

Fact 5. Get a loan against mutual fund units

Did you know that you can pledge your mutual fund units to get a loan from a bank?

Getting a loan against the units of mutual funds you hold is easy, and a few banks offer it to process digitally. The feature enables you to pledge assets for Mutual Funds online and get an overdraft limit in minutes!

By pledging your mutual fund units as security, you can avail loan against mutual funds, whether debt, hybrid or equity mutual funds, at any bank or non-banking financial company (NBFC). The benefit of a loan against Mutual Funds is that your units do not need to be redeemed prematurely. You can keep your systematic investment plan (SIP) unchanged.

Fact 6. The investment horizon depends on the goal

The investment must be goal-driven, and by using the goal factor, you can decide the investment period. The same is the case with mutual fund investment.

So, if you have a short-term goal, you can invest in a debt fund per your time horizon. And, in the case of a long-term goal, you can invest in equity funds that have the potential to give good returns over the longer-term horizon.

Fact 7: You don’t need a Demat account to invest in mutual funds

Unlike investing in the stock market, you don’t need a Demat account to invest in mutual funds. When you complete the investment formalities, and the fund house opens a mutual fund folio where investment units and the investment amount are credited. When you redeem from mutual funds, the units and the investment amount gets reduced from your investment account.

Conclusion

Over the last decade, mutual funds have gained immense popularity in India among all people and investors. Mutual funds are the most favoured investment option for beginner and retail investors.

Mutual funds are a simple, accessible yet powerful tool to create wealth and reach financial milestones. Mutual funds allow investment in various asset classes per your risk tolerance and time horizon. Start your investment journey with a small step like mutual fund investing through SIP.

This blog is purely for educational purposes and not to be treated as personal advice. Mutual funds are subject to market risks, read all scheme-related documents carefully.

Raja Bhattacharjee

Email:  investment.junctions@gmail.com

Phone: 09830146206

 Office : 09681518774   /  7449858289

 

website: https://www.investmentjunctions.com

 

Why is investment significant for millennials?

If you are born between 1981 and 1996, you are a millennial. Millennials are highly ambitious and passionate about money and growth. At the same time, having bad spending habits and 'living in the moment' may not be good for your financial health.

Dreaming big is an inherent part of life, but it requires strategy and time for completion. Millennials have enough time to get things on the path and understand such an approach.

If you are a millennial and haven't yet invested, in this article, we will give you some points on why it is essential to start investing as a millennial.

Changing the life of Millennials

Businesses are taking advantage of new advertising techniques like memes and short videos because they see how social media trends have changed in the last few years. These marketing trends are affecting millennials to buy products that are depreciating in nature.

Social media is not the only reason to start investing. There are many other obvious reasons why it is essential to start now.

Importance of building a Habit of Investing

1. Expensive Lifestyle

A few years back, it was an unnecessary luxury for the middle class to own a car or a house in the city of choice. Fast forward to the present, a car and a place in the town of choice is a need for most people belonging to the millennial generation. It is expensive to live a comfortable, safe, and secure life in today's world.

That's where investment plays a role to help in living a life of choice without stressing about inflation and expenses.

1. Lack of income source security

By analysing today's economy, job security is a question mark for many organisations. It is necessary to secure your near future along with long-term financial objectives. You need to make strategic investments for a retirement plan, build an emergency fund, and have health insurance.

 

1. Achieve ambitious long-term objectives

Millennials are ambitious towards achieving their long-term objectives. Achieving such ambitious goals requires investing regularly in investment options that can generate high returns.

Starting with easy and hassle-free investment schemes with reasonable returns such as equity mutual funds. Manually increasing the SIP amount to reach goals faster can be better.

Before jumping to investment, analyse your risk tolerance and know your investment horizon. Also, you can start in an index fund that tracks the broader market and gives returns in line with the market.

It is always advisable to take the help of financial advisors.

1. Keep a health check

One can easily see the relationship between bad eating habits and their effects on finances and health. Junk food has become an inseparable part of our lives. Also, it is eating our hard money savings and potential investments too.

During covid, we all realised the importance of health insurance, especially for those who had lost their only family member. After analysing your body type, eating habits, and family health history, getting health insurance is essential to keep your finances healthy. Insurance companies also offer consumers financial benefits and discounts on regular health care.

We can get prepared for what we cannot avoid, genetic disease or disease due to unavoidable pollution. Health insurance has a waiting period for various claims under different situations. Millennials must buy a health insurance policy before hospital bills eat their finances.

How to start investing?

By following a standard series of steps, a millennial can start their investing journey in any category of investment scheme.

1. Plan: Plan your finances by starting by analyzing your current situation, and framing where you want to be must be the first step of investing.
2. Financial goal: Financial goals can be either long-term, medium-term, or short-term. You can decide where you need to invest according to your time horizon.
3. Expected rate of returns: Your financial goals will decide the required rate of returns and how much time you have to achieve such objectives.

Conclusion:

The habit of investing takes care of funds, emergencies, and loved ones. In this real world, where everything is growing with unmatchable speed, investment is the only way to grow money.

Habits, dreams, and macro-economic changes are the significant reasons millennials need to start investing.

Millennials still have the luxury of time to use the power of compounding. Starting with a small investment can be significant in no time. So let's get started with the first investment.

This blog is purely for educational purposes and not to be treated as personal advice. Mutual fund investments are subject to market risks, read all scheme-related documents carefully.

Raja Bhattacharjee

https://www.investmentjunctions.com/

 

story of two girls

Story of two girl's

Understanding Risk-Adjusted Returns, the Simply Simple Way, let's say your girl child is returning from school alone using the main road. It takes her 30 minutes to reach. Your neighbor's child does not take the main road, she uses some inside connecting desolate roads and bylanes to get home, she prefers the bylanes because of less traffic along her route, however, the lanes are desolate and prone to attacks by robbers, kidnappers, and accidents because cars drive extremely fast through these lanes. She too takes more or less the same 30 minutes to reach home, thus if the 'time taken to reach home' is the yardstick to measure returns, both girls earn the same returns as they both take about 30 minutes to return home, but is the risk they take is the same???? Clearly your friend's child takes more risk by walking alone in the desolate lanes and bylanes, hence your daughter's Risk-Adjusted Returns are better because she earns better Returns with respect to the Risk taken because she uses the main road which is manned by police personnel all the time and hence pretty safe even though it's a little crowded at times. The crowd actually enhances the safety of the main road, this story depicts Risk-Adjusted Returns -Your child by taking the same time using the safe main road is earning better returns than your friend's child who uses the risk-prone route, even if your neighbor's child takes 5 minutes less because of the by lanes that she uses, still your daughter's risk-adjusted returns are much better because the kind of risk of kidnapping and molestation that exists in her route is far too much of a price to pay for saving just 5 minutes. This example will help you to understand the concept of risk-adjusted returns in investing too.  When 2 people earn similar returns, however, one of them earns by investing in Hybrid Fund like BAF (main road) while the other earns by investing in Pure Equity Fund (bylanes), always employ the services of an expert while investing, the money expert is like having a security guard accompany your neighbor's daughter when she uses the lanes and bylanes route, this nearly eliminates the risk of kidnapping.

This blog is purely for educational purposes and not to be treated as personal advice. Mutual funds are subject to market risks, read all scheme-related documents carefully.

Raja Bhattacharjee

https://www.investmentjunctions.com/

 

 

 What is inflation?

Inflation refers to the hike in the prices of goods and services in an economy over time. The hike in prices signifies that purchasing power of the currency reduces or fewer goods and services can be purchased with the same amount of money.

Consumer demand and money supply affect inflation in the long run. Consumer demand may arise due to factors like an increase in population, an increase in money supply, etc. A rise in consumer demand means a rise in inflation.

Money supply can affect inflation too. Increased money supply means people in an economy have increased spending power leading to more demand than supply. To meet the increasing demand, prices rise, and inflation occurs. Other factors affecting inflation are cheap monetary policy, deficit financing, and a rise in black money.

How to Stop Inflation from Eating your Money?

Rising inflation is a painful reality. It hurts whenever the shopkeeper asks to pay a few extra bucks for the same thing. Surprisingly, the annual Inflation rate in India has surged to 7.79% in April 2022. Food inflation raised to 8.38%, a new record since November 2020. Retail inflation has been rising since September 2021 and reached 6.07% in February 2022.

But what exactly is inflation? Is inflation bad for an economy? How can inflation eat up your money? Most importantly, what can you do about it when it is not in your hands? Is it possible to generate wealth in times of rising inflation?

Let’s seek answers to all these questions in the blog.

How can inflation eat up your money?

Rs 1,00,000 saved in your locker today won’t be equal to Rs 1,00,000 at the end of the year because inflation eats a part of your money.

If you keep your money in bank FDs or savings accounts, you get returns that'll cover some effect of inflation, but your money won’t grow to the level that it outgrows inflation.

Investments with fixed annual interest rates, such as bonds, get affected by inflation adversely. Since you earn fixed returns every year, rising inflation will erode the value of returns each passing year. Investments with market-linked returns, such as equities, can outgrow inflation when markets are rising. But inflation rises as the market grows, and company's profits decline as they have to pay more wages. Hence, it depends on the company's performance.

How do you plan for inflation?

You can not control inflation because it's not in your hands. But you can plan your finances so that your money doesn't lose its value as inflation rises.

Due to the negative impact of inflation, experts advise not to keep all your money in bank FDs or saving accounts. When the inflation is higher than the returns, the returns that you get on Rs 100 investment will not be equal to Rs 100 tomorrow. This is because the 3-4% returns won't cancel the effect of 6% inflation.

Instead, plan to invest in investments that generate good returns over time, like equity mutual funds through SIP. These funds help beat inflation due to the compounding effect if you keep investing monthly, quarterly or yearly for several years. Moreover, these funds lead to wealth accumulation over time.

Investors who can't take the high risks that come with equity investment can invest in debt mutual funds. If one stays invested in a debt fund for more than three years, the capital gains from the debt funds are taxed after indexation.

Indexation is a method of adjusting an investment's purchase price to account for inflation. A greater purchase price implies lower profits, resulting in a lower tax rate.

Indexation allows you to reduce your long-term capital gains, lowering your taxable income. Compared to traditional fixed deposits, debt funds are an excellent fixed-income investing alternative because of indexation.

The solution lies in the diversification of assets. Investing in a mix of different assets such as equities (domestic and international), debt, and gold to match the investor's risk profile can help decrease the risk and optimize returns, thus beating inflation.

Conclusion:

Inflation isn't a curse for a country. However, investors should reconsider their investment portfolio and invest in various assets across different types, industries, and countries when inflation rises beyond expectations. Hence, diversification is the only solution.

This blog is purely for educational purposes and not to be treated as personal advice. Mutual fund investments are subject to market risks, read all scheme-related documents carefully.

Raja Bhattacharjee

For More details click

https://u4873.app.goo.gl/eVZxVkfs6NJoZMrEA.

Money Management is Risky

                                       

The Real Risk of Money Management

 

1) While we may continue to think that the challenge of Money Management is "How to Generate More Returns", the real pain point is quite different

 

2) Money Pain is more to do with our Beliefs and Insecurities

 

3) Things like Buying a House because it feels safe can put one in a real soup (moving from liquid to illiquid asset)

 

4) Mindless investing for the long term is another issue ( Unavailability of money)

 

5) Thinking too much about taxation and missing the larger objective of investing is like buying a BMW and getting overly concerned about the price of petrol

 

6) Postponing purchases long into the future 

 

8) Not understanding the role of Passive Income 

 

9) Making Cost of Living a function of Active Income and not total income (ignoring the massive power of the passive income)

 

10) Falling in love with jobs and fixed salary 

 

11) Not understanding the difference between cash flow and owning an asset 

 

12) Wanting to get into partnerships instead of hiring a team of professionals 

 

13) Having no idea about the power of Valuation Wealth and not knowing how to build the most power source of Wealth 

 

14) Unable to position your business to attract the next generation to invest 

 

15) Not understanding that money is a medium and life is a function of the kind of  opportunities that we select and those that we we sacrifice for the same investment (cost)

 

16) Not understanding that the Cost Curve is Concave and the Revenue Curve is Convex which makes all the difference in understanding Wealth Creation

 

17) Not understanding that Time is the real Wealth of Life 

 

18) Not understanding that spending the right amount of money at the right point of time can generate the best returns 

 

19) Not understanding the power of Goodwill Wealth 

 

20) Not understanding the power of creating Compliant wealth by always following the rules 

 

21) By spending less on Insurance

 

22) By not understanding when we should raise equity money and when debt money 

 

23) By not understanding the power of Geographical Independence

 

24) By spending 2 crores on foreign education and returning to do a job of 15 lac per annum

 

25) By being obsessed with Returns and underestimating the power of cash flow

 

26) Unable to calibrate consumption with respect to current and future income - 

Either we over-design our lives by underspending or vice versa 

 

28) Not trying to understand the dynamics of the stock market and basing decisions based on perceptions

 

29) By following trends and others' financial journey

 

30) By underestimating the power of liquidity and compliance

Raja Bhattacharjee

 

For More details click

https://u4873.app.goo.gl/eVZxVkfs6NJoZMrEA.

**Disclaimer: This Article is only for information purposes and should not be treated as Financial Advice.**

How Millennials can save ?

How can millennials start saving?

Investing seems like rocket science for a millennial, but it's not. So let's understand who millennials are? Millennials belong to that age group who were born between 1981 and 1996.

There were times when savings were the priority, and taking debt was like a sin. Nowadays, easy access to loans makes a millennial spend over their means. Spending influenced by social media, looking rich rather than being rich, or insecurity regarding jobs could be the reasons behind spending without a budget. Savings and investments must be a part of their lives, as taking excessive risks may not be an option after a few years.

There are a few tips on how a millennial can start investing their hard-earned money;

Live within your resources

Irrespective of your monthly paycheck, you need to limit your expenses within your resources. You may use credit cards during emergencies, not for fulfilling your wants.

However, buying things on EMI is common these days. Using excessive EMIs options may affect your credit score adversely as the future is fully unpredictable. If you cannot pay your EMIs, it will become debt stress for you and your family.

For example, if your salary is around Rs.20,000 per month, you want to buy a mobile phone for Rs.50,000. Taking the plunge might not be wise if you haven't saved for it. It may satisfy your social status cause, but debt stress may destroy your peace.

Apply 50:30:20 rule

It is a wonderful budget rule for managing personal finance and might help imbibe the habit of budgeting and savings. You may take the help of such a rule to make your finances stable and alter the ratios according to your needs and financial objectives.

According to this budget rule:

You can spend 50% of your income on the basic necessities, i.e., unavoidable expenses, like-

• Rent
• Grocery and Utility Bills
• Children's education fee

You may spend 30% of your income on your wants. Recreation is part of a happy life. You can spend 30% of your income on these expenses, like;

• dining out with family,
• trips with your friends and family, and
• buying gadgets under your budget.

Basically, it includes those expenses that are beyond necessities.

You can invest 20% of your income. It will help you get returns to hedge the prevailing inflation in the country.

The most essential and valuable feature of such a rule is individuals can use it irrespective of their gross income. Moreover, you can personalise the ratio as per your needs and financial objectives.

As per your risk tolerance and financial goals, you can start investing in mutual funds through a systematic investment plan (SIPs).

Buy a health insurance policy

Changing eating habits, increasing pollution, adapting comfortable lifestyles, and passing genetic diseases are enough reasons to be financially aware and buy health insurance. An early health insurance plan is necessary for millennials as health insurance plans cover pre-existing conditions after a lock-in period of 2 to 4 years.

Creating emergency fund

Data represents that most of us are not prepared for emergencies like the Covid-19 pandemic. According to a report on Business Line, 21% of Indians claim to have taken on more debt to cover expenses during a pandemic. An emergency fund of 3 months of expenses is essential to tide over unpleasant surprises of life such as job loss or healthcare crisis.

However, the ideal amount in the emergency fund may vary with liabilities, financial responsibilities and the risk of losing the job. You may increase your emergency fund amount by analysing your current financial situation.

Start a Systematic Investment Plan (SIP)

One of the many ways to start your investments is with SIPs. SIP is a method of investing in mutual funds in which you invest a particular amount in a mutual fund scheme to generate a reasonable return. You need to shortlist the type of fund such as equity-oriented, debt-oriented, or hybrid schemes that you want to invest in. You must decide your risk tolerance capacity and financial objective of investing such money.

Conclusion

You can start investing by following the points mentioned above. Living within your means, investing in a disciplinary manner, creating emergency funds as per your requirements but for at least three months of expenses, and following budget rules is no rocket science.

This blog is purely for educational purposes and not to be treated as personal advice. Mutual funds are subject to market risks, read all scheme-related documents carefully.

Raja Bhattacharjee

 Email:  investment.junctions@gmail.com

 Phone: 09830146206

 Office : 09681518774   /  7449858289

 

website: https://www.investmentjunctions.com

 

GDP

 

What is GDP ( Gross Domestic Product )

Gross Domestic Product (GDP) is used to measure the economy of any country. Gross Domestic Product hereinafter termed as GDP. GDP is the market value of all final Goods and Services produced within a country in a given period of time. In simpler terms, any economic activity which we produce and that contributes to the GDP of the country.

Goods and Services: GDP includes both tangible goods (food, clothing, properties, automobiles, etc.) and intangible services (spa, house help, health check-up). When you buy a favorite car, you are buying a good, and the purchase price is part of GDP. When you hire it and pay rent for a day or multiple days to go on a vacation, you are buying a service, and the car rent is also part of GDP.

Produced: GDP includes goods and services currently produced. It does not include the past/previous year transactions. For example, if you are manufacturing the laptops and selling them to the customers, the value of the laptops is included in GDP. When the user sells a used laptop to another person, the value of the used laptop is not included in GDP. 

World GDP -- US tops on the table with 20.89 trillion followed by China, Japan, Germany,UK and India. India is now 3.10 trillion is hoping to cross the 5 trillion economy in the coming 3 to 4 years by producing more goods and services.

The three major classifications of GDP are: 

● Agriculture, 

● Industrial 

 ● Services.

Since the beginning, agriculture is contributing a major portion to our national income. Agriculture is an important part of India's economy. Agriculture is the only means of living for almost two-thirds of the employed class in India. The agriculture sector of India has occupied almost 40 percent of India's geographical area.

Although the share of agriculture has been declining gradually with the growth of other sectors, the share still remained very high as compared to that of the developed countries of the world.

Agriculture contributes to the economy where almost 40% of the total population is dependent on this sector , out of the 3.1 trillion-dollar Indian economy, only 20% comes from agriculture. 26% comes from the industry sector and the rest 54% comes from the service sector. Though most of the people in the country depend on the Agri-sector, we are not called an agricultural economy, we are a service oriented economy.

The Services Sector constitutes a large part of the Indian economy both in terms of employment potential and its contribution to national income and it is contributing around 58% to the economy as a whole. This sector covers a wide range of activities from the most sophisticated in the field of Information and Communication Technology to simple services pursued by the informal sector workers, for example, vegetable sellers, dealers, manual workers, etc. 

The following are the constituents of the Services Sector..

● Trade,

 ● Hotel, 

● Transport, 

● Financial, 

● Public Administration, 

● Defence 

● Real Estate and 

● Other Professional Services. 

During the last few decades, it has been observed, in both developed and developing countries, that the service sector has emerged as the main driver of economic growth as compared to the primary and secondary sectors.

The dramatic growth of the services sector in India reflects rapid paces made by the educated professionals. The largest contributor to this change is the information technology enabled services and the business processing and outsourcing services. They have already hit the shores of India with a boom. 

The service sector would be the main driving factor for INDIA to become   a 5 trillion economy.

This blog is purely for educational purposes and not to be treated as personal advice. Mutual funds are subject to market risks, read all scheme-related documents carefully.

Raja Bhattacharjee

https://www.investmentjunctions.com/