Vijaibabu's Blog - Personal Finance Guide for Financial Freedom

 It becomes doubly important when we realise that one of the major factors that is drawing global attention to our country as a key emerging market is India’s young population: nearly 50% of our population is below the age of 25 (2011 census). Today’s youth are typically interested in leading a fast life, large spending and quick gains.  Few are averse to spending most of their income to follow a trendy lifestyle. To generate quick returns, they often do not realise the risk involved in investments such as equity derivatives, commodities trading, etc. So, it is important they learn early on in life about the importance of saving and spending wisely. Start early The first and foremost rule is to start early. For example, Rs 1,555 saved every month from the age of 25 would return Rs 1 cr at 60 assuming portfolio returns of 12% (See Table 1). However, a delayed start is likely to lead to higher outflows to achieve the same target. A 5-year delay almost doubles the monthly s...

Work out a financial plan according to your needs and goals If you want your dreams to come true, there is no running away from taking small, but steady, steps in the right direction. Different people have different needs, therefore, a financial plan that works for someone may or may not necessarily work for you. The right way to go about building your wealth is to create your own financial plan aligned with your future goals. This discipline needs to be adopted in any investment. When you invest in mutual funds, work out the right amount to be invested in a Systematic Investment Plan (SIP) that fits well with your financial plan than blindly follow someone. SIP is one tool that can help you build investment corpus for the long term by investing in mutual funds. Thanks to the volatility, more often than not, investors find it hard to time the market.In a turbulent market, if you wait for the opportune moment to invest, you might end up not investing at all. This...

Children’s education has always been among one of the top priority goals for everyone. Every parent wants to provide the best of education to their kids and better than what they themselves had got, which makes this a very emotional goal too. Children’s education is a time bound goal. You have specific number of years during which you need to save enough to achieve the desired result. You cannot postpone this goal.  Though you cannot be sure which way the child’s interest will develop and which specific field she’ll get into, still you would want to be prepared to provide for this responsibility as much as you can.  am going to point out some of those mistakes which if avoided can be beneficial to your financial planning at large.  1. Get your basics right :  You should understand that good education is not only about studying in a big reputed college, it is about building character, learning to earn and give respect and all this starts from home. Though good ...

Here is how a first time investor should look at starting investing in mutual funds- 1. Define your horizon - Any investing avenue cannot be selected till you are not aware of your investment horizon. Many a times when you when you make investment without any specific goal behind it you get inclined towards the returns and so you get lured by the best funds of today. Such decisions has higher probability of going wrong. So it’s wiser to define clearly what is the time period you can hold your investments i.e. when you will liquidate this money. This  specification will tell you whether you are looking for a short term, medium term or a long term investment. 2. Assess your risk tolerance-  Each one of us has our comfort ability with volatility of markets. We may divide it into aggressive, moderate or conservative but there are host of factors which decide this. While making your first investment if you have dependents or liabilities then you may not be too aggressive. Simila...

Avoiding  spending several hours researching which funds to invest in from the 1800+ funds in the market Signing up for different fund houses (Takes several days including paper work and to and fro communication) Getting KYC compliant if you are a first time investor in equity markets (Normally takes several days after doing necessary paper work) Making RIGHT investments Tracking your portfolio manually across different funds you have invested in Review of mutual funds every year to ensure you have the best funds Rebalancing to get market-beating returns

All investments are not equally important. You need to fulfil the basic investment needs first before moving on to the others LEVEL 1 Basic contingency funds:  This is the money that you may need to handle a personal emergency. It should be available instantly, partly as physical cash and partly as funds that can be immediately be withdrawn from a bank. Online banking and ATMs make it relatively simple to get this organised. LEVEL 2 Term Insurance:  Calculate a realistic amount which allows your dependents to finance at least short and medium-term life goals if you were to drop dead or be struck with a debilitating injury or disease. You should have an adequate term insurance before you think of any savings. LEVEL 3 Savings for foreseeable short-term goals:  This is the money needed for expenses that you plan to make within the next two to three years. Almost all of this should be in minimal risk, deposit-type savings avenues. LEVEL 4 Savings for long-term fore...

“Compound interest is the eight wonder of the world. He who understands it, earns it ... he who doesn't ... pays it.” ― Albert Einstein As time progresses some things just get better.. Red wine gets an enhanced taste while aged cheese is so much more tastier.Don’t you agree? Now what’s with Money?? It grows.. grows with time… And why?? Because it gets compounded. So what’s compound interest exactly? Its earning interest for interest already earned. In other words, your interest on savings also earns interest . Suppose you deposit some money in your account today, there will be an increase in the value of it after a year. And, that’s because it has earned interest. The journey to wealth can begin with even keeping aside the smallest amount each day. Don’t believe?? The picture below says a thousand words. Rs. 15000/- invested per month for 20 years will turn into more than Rs 1.13 crores. On the contrary, if you left it in a savings account, it would be worth...