Our view on assets

                                                               

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A little difference between self sufficient and being rich can be bridged with the help of a financial planner. Real estate and Gold has been the known stable asset to many in India. I can say even the urban people still believe in getting a flat as a life time goal. There are more things to do than getting a flat. If you see, all the rich people have grown by investing in booming Indian economy either thru business or by investing, whereas the middle class had further divided into lower, middle and upper middle class because of the job they are in currently. The only common thing among all are buying gold as asset or owning a home.

How did we look at assets?

According to the latest estimates India has more than 20000 tonne’s of gold in the household of normal families. We normally use gold only for hedging and it lies in the bank lockers or personal home lockers. The stable view on Gold can never be turned away but once urbanization started, everybody started moving to cities and along with that came the categorization of cities as Tier 1, Tier II etc. Slowly the view on gold has shifted to owning a new home in these cities. In many houses they had hedged gold for buying home and the reason being it is lying idle in lockers.

Who is to blame for our view shift from gold to owning a home? None of us would have thought of this asset view shift among people. All the earnings of life time have been poured in to buying a home in our last generation and the current trend is to own a flat in order to save tax.  Saving tax is ok, but losing your happiness of being debt free, monthly credit card dues, stressed financial life are the extra bouquet of benefits which you will be getting along with this of buying a home if not planned meticulously.

Asset diversification is very essential for becoming self sufficient, rich and hedging against any unknown situation.

There are other assets which give you revenues and appreciate over time like mutual funds, stock market investments, secondary market bonds, alternate investments etc.

Let us look at the other available asset up for purchase apart from Gold and Real estate,

Stocks or shares

Owning a stock or shares can make you rich only if you have hold to it for a longer period of time. Infosys shares were issued for Rs95 and currently it is trading around 2000. It has issued dividends year on year, issued bonus at times, split the shares. If you have invested 9500 in Infosys for 100 shares, now you will own more than 12800 shares and the total worth is more than 3 crores. Can you believe it?

It is not Ripley’s Believe it or not show, this is the power of equity, but only a handful understands all this and stays invested to reap the benefits.

  Mutual Funds

Mutual funds are for the one who fear stock markets but wants to get on par returns, at times this investment avenue have beaten all the returns if you have picked the right fund. Invest monthly thru Systematic Investment Plan for long term say for your retirement, for your child education and for any goals which is more than 3-5 years.

Bonds

Bonds typically gives you fixed returns and with zero risk that too if the bond is issued by Government. Public sector companies, banks, and private companies also raise money thru bond with a fixed maturity and interest will be typically on par with the central bank interest rates. It can be bought in primary market and also in secondary market for long term investments as some are taxes free which will be useful for the people who fall in higher tax bracket.

Corporate deposits

As per the regulations of SEBI, private companies also accept fixed deposits with fixed returns. It can be for fixed tenure say 1, 3 or 5 years and interest rates will be typically higher than bank deposits. Anybody can invest knowing the rating for the company provided by external rating agency as earlier companies use to get deposits and wind the company.

Arts, precious objects

Arts can also be fetch you higher return but this market is at very nascent stage and exists only among the high net worth individual who knows the worth of certain Arts. Precious object includes diamonds, gems and certain stones attract higher returns if you hold on for a higher period.

Asset Diversification

Why should we go for asset diversification when gold is considered as hedge during trouble times and home to live in which everyone needs. This looks perfect, but considering inflation and then the real returns of all available assets it is very much essential. Real returns will show you the actual difference among all the asset classes. All the assets or financial products would have given you negative returns at times, but the growth after that slump should be higher than the loss to make you richer. Diversification will definitely minimize the loss and make you to overcome inflation and sustain any loss of one of the products. A perfect financial advice is to have a right mix of equity, debt and cash at any point of time in life. Product mix moves towards debt if you are moving toward your retirement age.

Financial planning helps in prudent mix of these assets over a period of time.