Archive for July 9, 2012

The World is your Playground

If you wish to gain from global economic trends, international markets offer lucrative investment options.

In 2007, when the Indian economy and markets were both soaring, I witnessed the CEO of a fund house trying to peddle the idea of international investing at an investor’s forum. The poor gentleman was scoffed at. But investing in international markets enables you to diversify against the risk of being invested solely in your home market. By being diversified across segments, your portfolio benefits irrespective of which segment does well.

Hence, I recommend that high net worth investors dedicate at least 10 – 20 per cent of their equity portfolio to foreign markets. Besides, the central bank too has now liberalized rules and allows individuals to invest up to $200,000 [Rs 1.11 crore] abroad, annually. » Read more..

Money: Costly Moves

Even the financially well-off are not immune to making these money mistakes- Amar Pandit

 

You may have heard of the Pareto principle [also known as the 80-20 rule]: it says that for many phenomena, 80 per cent of the effect arises from 20 per cent of the causes. Even your small investment mistakes too have that impact on your overall finances. My promise to you is that if you take care of the five points discussed below, a good deal of your financial planning related problems will get taken care of.

No written plan or strategy

The first thing you need is to prepare a written financial plan to give concreteness to your plans and ensure that you don’t deviate from the course.

Since most individual investors lack the knowledge for preparing a detailed plan, it is best to approach a trained financial planner to get this work done. The financial planner will ask you to fill up a detailed questionnaire to gauge your risk appetite, your current financial situation and your goals among other things. It is on the basis of this information that the plan is prepared. When your plan is unclear, you end up investing wrong. If your portfolio of wrong investments is big and a lot of time has gone by, undoing these mistakes becomes costly and difficult.

A correlated mistake is to buy the flavour-of-the-day product. When the equity markets are doing well, the launch of NFOs [new fund offers], sector funds, and IPOs [initial public offerings] becomes frequent. The investor is lured into buying these high-risk products that he can well do without. Then the bull run ends, the value of these investments crashes, and the investor regrets his impulsive purchases.

So, get a basic portfolio in place with a select number of correct products and then stay the course. » Read more..