Investments

All financial calculator

When we gift a child his first piggy bank, it is not just a toy but infact the first step towards a habit called saving. As he grows up, this toy bank gets replaced by organised investments, even though the intent remains the same.

Investments may certainly take away a part of our current monthly income, but these come back to us multiplied many times over with ‘sweet’ returns. At Grace Solution, we take great care in analysing investment options, not in isolation, but in tandem with our client’s future goals, risk appetite and current savings.

We believe that Overall financial planning a healthy investment portfolio not only helps to fulfil all our future needs, but infact becomes one’s backup in the hour of need; any unforeseen situation can be met and overcome with ease.

For the uninitiated, seek professional guidance on choosing your first investment instrument if you want to put the right foot forward. For the regular investor, if you still rely on gut feel, stop and think! Just because you never saw the bigger picture, you may be drifting away from your financial goals. But as they say, it’s never too late – start investing the smart way and avail of professional advice today!

WHY DO WE EARN AND INVEST MONEY ?

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LIFE STAGES

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Success Formula to Achieve Goals

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FINANCIAL PLANNING – STEPS INVOLVED

  1. Risk Profiling and Asset Allocation
  2. Net-worth Analysis (Asset minus Liabilities)
  3. Cashflow Analysis (Income minus Expenses)
  4. Contingency Planning (Emergency)
  5. Goal Planning (Wealth Planning)
  6. Protection Planning (Life Insurance Requirement)
  7. Retirement Planning (Retirement insurance policy)

Risk Profiling and Asset Allocation

Risk Profiling

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    Risk profiling will analyse your attitude and ability to risk on your investments.

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    It considers your life stages, Finanacial Ability, Investment Knowledge and Investment Experience.

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    Asset allocation is the process of spreading investments among diffrent asset classes to optimise the risk-return based on risk profile.

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Goal Planning

Goal Planning involves
 

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    Children Goals

– Education
– Marriage

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    General Goals

– Buying a Home
– Buying a Vehicle

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    Wealth Creation

– Leaving a heritage for the family

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    Prioritising the Goals

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    Goal Achievement Year

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    Amount Required for the Goal

– Current value of the goal
– Planning would be done to enable you achieve the future value of the goal at the goal achievement year

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    Mapping of existing investments to the goals

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    Arrive at additional investments needed for the goals

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    Based on risk profile and goal horizon, arriving at proportion in which the investments to be done across investment avenues

RATE OF INTEREST

Rate of interest is at the core of the debt market. It is the rental price of money paid for the use of money for a period of time

It decreases:

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    When inflation is low

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    Maturity period is short

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    Default risk is negligible

It increases:

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    When inflation is high

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    Maturity period is long

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    Default risk is high

Money market instruments carry low interest rate because the maturity period is short and default risk is negligble.

INFLATION AND REAL INTEREST RATE

The nominal interest rate on a debut instrument is the rate in nominal terms whereas the real rate is the one corrected for inflation. Formula:

Real rate = Nominal Rate – Inflation Rate
1 + Inflation Rate

Example: if you earn a nomial rate of 8% on your investment, with inflation at 5%, your real rate works out to 2.86%.

With inflation hovering around 5% and interest rates declining, fixed interest avenues are giving negative or marginal real returns. Market related returns are the answer.

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An investor is more concerned with portfolio return than specific security return