Investment in Life -- by Suman KC

Investment is the choice by the individual to risk his savings with the hope of gain.

Why investment is required:-
1. To make our future secure.
2. To make indirect source of income.
3. To fulfill our dreams.
4. To become financially free and take up some challenging task etc.

If you have the ability to relate these following sentence in you investment then you don’t need investment class… you are already a guru.
1. Energy neither be created nor be destroyed.
2. One form of energy can be converted to other form with little loss of energy.
3. Value of a substance is directly proportional to the demand and inversely proportional to supply.

Investment option available in India
1. PF/VPF
2. PPF
3. NSC
4. Bank FD’s
5. Bonds
6. Shares
7. MF
8. Insurance
9. ULIP’s
10. Gold and other Precious Metals.
11. Real Estate
12. Future & Options
13. Currency

Human beings can work and earn money only for some period in there lifetime; he is not like a machine where just by re-servicing the machine start looking like new and start working in almost same phase as new one.

Thought I have not secured any degree in finance by studying on investment and playing with money was my passion, which made me to learn more on the investment strategy and will my experience I have become a guru now.

In this article I will divide the investments into two types one which will come under Sec 80C tax exemption and which will not come under tax exemption.

Very Very Impt Note about investment with my real life experience: - Don’t trust any one kind of investment as master investment and surrender your life… as per my experience no investment can be a trustable investment in life… it is only situation which makes one better than others… according to me all kind of investment are necessary in life and few investment which ppl forget and finally regret in there life are love, family, friends, society, health and trust.

One of the master key I forget to tell you… until and unless luck wont favors you… even if you are in gold mine you cant pick up 1 milli gram of gold… it doest’t matter how strong, intelligent, brilliant and innovative you are… so in life master way to lead the life is “perform your best and expect the least” which keeps you happy in all situation..

Before I get into the details of the each investment uses and dis-uses I would like to answer a small question

A. Investment in which we get tax exemption under sec 80c maximum amount that will be considered for each individual per year is 1lakhs:-

1. PF/VPF: - Provident fund is an option provide by government which will yield a return of 8.5% pa with a yearly compounding.

2. PPF: - Public Provident fund is option provide for non-employee class of people and other, PPF account can be opened in any SBI bank, which will yield a return of 8% pa, there is a limit of the investment i.e. 75000 per year with a lock in period of 15 years and have partial withdrawal option available after 7 years with some specific condition, a minimum of 500 needs to be invested year or else a fine of 50 rupees will be charged per year.

3. NSC: - this is a similar to Bank FD where rate for interest offered by post office is 8.16% per Annam… according to me you can invest in PPF than this as the returns are taxable.

4. Bank FD’s:- Bank fixed deposits with lock-in period of 5 years will be exempted under sec 80C

5. Bonds: - this is indirect from of fixed deposits in which you are not keeping the money in bank, instead of you are depositing the money in some company or govt.

6. Shares:- I would like to explain this part with an example
Rama was a very good business man he was having a small garment industry, he had lots of ideas and know how to multiply money by investing in Garment export business for which I know he need a capital of 50 lakhs to start garment export business where as he had could arrange 30 lakhs with all this ways, but with this amount he cannot start the export business so he decide to start the business by partner ship with some of his friends, he met some of his friends and explained the same concept to them and they were interested and 2 more friends Krishna was ready to invest 10 lakhs and shaker was ready to invest 10 lakhs. By this way the profit and loss gained by the business are shared among the 3 individuals in the same portion as there investment.
This entire scenario can be spoken in this way; in the garment export company 60% of shares are hold by Rama, 20% by Krishna and remaining 20% by shaker.
The same concept is used in the share market; the only different is there will be too many people who will be holding the shares in that company.

7. MF-ELSS: - Mutual fund is term itself describes the investing with mutual understanding, collections of funds from many source like individual, Institutional investor, NRI etc... This fund is managed by a fund manager and based on the fund criteria he will invest behalf of us. Only mutual funds with ELSS (Equity Linked Saving Schemes) are exempted under sec 80C, once the money is invested in this fund, the investor cannot withdraw the money for 3 years and the capital gain, dividends are tax free in the hands of investor.

8. Insurance: - the concept of insurance evolved to sharing the risk, initially insurance was installed in ships, where during some circumstances to get back the ship into normal during heavy wind in oceans, they have to reduce the weight of ship by throwing some goods in ship into ocean... or else entire ship will sink… the question arises here is… who will be ready to thrown there goods? No one right… so this insurance concept started where what ever goods are thrown into ocean… the amount is shared among all the ppl in ship… so that not one person get affected by this cause. Our society adopted this insurance concept in terms of joint families… in which one of the person is dead also the family will dissolve the problem to some extent and they were not in need of insurance. But when it come to small family it is one of the way by which you can secure you family during some circumstances… like if a young/earning person is dead then who is support the family? So insurance is required for some extent… but I don’t believe that insurance is must and should... if you have good financial planning you can live without insurance happily.

9. ULIP (Unit Linked Insurance Plan):- this is a combination of Insurance and Mutual fund which has both advantage as well as some disadvantage… so before getting into this product, know the working of this product well… some ppl say this is a useless product… etc, bcos then don’t have the logic to utilize this positively… I my self invested in this product and it is usefull in longterm like after 3 years from the date of investment, I would like to give some of the useful option of this investment.
• You have the option like invest in Equity, Debt, Liquid, etc… and fund switching which is really an excellent option which we need to look into this… if market is Too much over valued then you can easily invest in either Debt or liquid based funds…
• In case of ELSS you don’t have the option to come out of the equity and fund manager will have full control on your investment.
• After 3 years you can with draw with little thought partial withdrawal option and deposit the same amount back and get the tax benefit again, in this way if you invest in ULIP for few years you can gain the tax benefit for every year till the end of the policy term.
• As per my knowledge insurance requirement is required for only few people in india …

10. Gold: - in the previous strange I have explained some sort of information of gold demand... Gold is one of the precious metal, which has not lost its value till now in my experience. Why gold? For this question my answer are also simple question to you… how safe is you country? How safe is your govt? how good is you so called leaders?.... why I am relating this questions is simple… if your country become bankrupt and your currency losses it value only way to protect your life time earning is gold… as gold value will not drop even if your country potential… you can invest in gold in many forms such as gold articles, gold Biscuits and Gold ETF… as per me best option is gold biscuits as this will give almost you money back if you go for selling it back. Don’t buy gold biscuits in bank as you will lose around 15% of money while purchasing.

12. Future & Option: - the best way to explain this is it a Betting game… profession way of betting on some company, this works on the principle of win-lose... Where if one person made profit then definitely other person has to lose the money. Many people knowingly or unknowingly jump into this betting game and screw up there life… and this is the easiest way of making money also but be cautious while entering this game… because you wont be know who much you depth you fell into it.

11. Real Estate: - one of the common sentence that I use to hear with from ppl is “investment in Gold and Land will never make you looser” as per me this is not 100% true, there are various factor that involved in this… life population growth in that country, no of ppl migrate to that ppl, people life style and etc are involve in calculating the value. Consider an example if all the ppl of our country bharath start having only one kid the in each generation there will be 50% decrease in population which in turn do not require more houses and there wont be value for land… if ppl of our country start having 2 kids then our population remains the same then not much housing is required and current housing itself is sufficient and one other case is if ppl start having more than 2 kids then each new generation requires new house and land value increases… similarly if there is any we find new gold mine then gold value will drop drastically.

13. Currency:- consider you are in a country life Afghanistan where you cannot guarantee that the country currency will retain its value tomorrow (even our country situation is almost same.. with our knowledge already lost Kashmir, Mizoram, nagaland, megahalaya… and we will be loosing assam, kerala and few other states soon).


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-Suman