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By:

Kaustubh Kale

10 September 2024 at 6:07:15 pm

Four Methods to Choose Investment

One of the most common questions investors ask is: “Which investment should I choose?” The real answer is that no investment is good or bad in isolation. A simple way to judge any investment is the RRLT framework - Risk, Return, Liquidity and Time Period. Before investing in any product, all four factors should be seen together. 1. Return Return is the reward you expect from the investment. It may come in the form of interest, dividend, capital appreciation or regular income. Naturally, every...

Four Methods to Choose Investment

One of the most common questions investors ask is: “Which investment should I choose?” The real answer is that no investment is good or bad in isolation. A simple way to judge any investment is the RRLT framework - Risk, Return, Liquidity and Time Period. Before investing in any product, all four factors should be seen together. 1. Return Return is the reward you expect from the investment. It may come in the form of interest, dividend, capital appreciation or regular income. Naturally, every investor wants good returns. However, return should be understood properly. It is important to look at the real intrinsic / internal rate of return (IRR) of every investment, especially when cash flows happen at different points of time. A product may sound attractive on the surface, but the actual return may be very different when calculated correctly. 2. Risk Risk is the possibility of losing money whether partially, fully, temporarily or permanently. In some investments, the risk is very low. In others, the value may fluctuate significantly in the short term. Direct stocks, equity mutual funds, gold and real estate can create wealth over time, but they need patience and the ability to tolerate ups and downs. On the other hand, fixed income products may offer stability, but they may not beat inflation over the long term. 3. Liquidity Liquidity means how easily you can convert your investment back into money when required. A savings account is highly liquid. Fixed deposits, mutual funds and stocks are reasonably liquid. Real estate may take time to sell. Liquidity matters because emergencies do not come with advance notice. Before chasing returns, every investor must ensure that enough money is available in liquid instruments for short-term needs and emergencies. 4. Time Period Time Period is the most important filter. The investment product should be selected based on when you need the money. If the money is needed within a few months or one to two years, safety and liquidity matter more than high returns. If the goal is ten, fifteen or twenty years away, growth-oriented assets like equity mutual funds, direct stocks and gold-related instruments can play a larger role. The longer the time horizon, the better your ability to handle short-term volatility. Goal-Based Planning This is where proper financial planning becomes useful. Make a table of your financial goals - home purchase, car, vacation, child education, child’s marriage and retirement. Write the amount required, adjust it for inflation and mention the time left for each goal. Once this is clear, choosing the right investment becomes easier. Investment Avenues Broadly, investment avenues can be divided into two categories - those that help beat inflation and those that mainly provide stability. Equities, equity mutual funds, gold and real estate help in long-term wealth creation by beating inflation. Your long-term financial goals should ideally be invested in this bucket - the one that helps your money grow faster than inflation. For your short-term goals, rely more on bank fixed deposits, recurring deposits, and debt mutual funds. Here, safety and availability of money are more important than high returns. A good investment is not the one that sounds exciting. A good investment is the one that fits your goal. So before investing anywhere, remember RRLT - Risk, Return, Liquidity and Time Period. When these four are aligned with your financial goal, investment decisions become much clearer. (The writer is Chartered Accountant and CFA (USA). Financial advisor. Views personal. He could be reached on 9833133605)

A Ticking Time Bomb

Updated: Jan 30, 2025

As the embattled city of Goma in the Congo descends further into chaos, the world teeters on the brink of an Ebola catastrophe.

Congo

In the war-torn landscape of Goma in the Democratic Republic of Congo (DRC), where rebel factions are clashing with government forces, lies a ticking time bomb that has set-off alarm bells. In the confines of a biomedical laboratory in the heart of this chaotic city, deadly pathogens, including the highly contagious Ebola virus, are stored under precarious conditions. With power cuts threatening to compromise the integrity of the facility, the International Committee of the Red Cross (ICRC) has warned if the virus escapes, it could lead to an unimaginable outbreak.


The National Institute for Biomedical Research, which houses the dangerous viral samples, is located close to the ICRC’s office, underscoring the proximity of the risk. The ongoing conflict between the Tutsi-led M23 rebels and Rwandan forces has exacerbated an already dire scenario. As soldiers and insurgents wage war, the civilians of Goma find themselves trapped in a nightmarish battle for survival, facing the dual threats of violence and disease.


The history of the DRC has long been one marked by instability. The Eastern Congo region, rich in minerals but plagued by a cycle of conflict, has seen tensions flare since the aftermath of the 1994 Rwandan genocide, which left deep scars in the region. The battle for control of mineral resources, exacerbated by ethnic divisions and the involvement of foreign powers, has created a perpetual state of unrest. The M23, a rebel group with roots in Rwanda, has capitalized on this instability, forcing hundreds of thousands of people from their homes. The UNHCR reported over half a million displaced individuals in the region just this year, adding to the nearly 700,000 displaced people already in Goma, struggling to find shelter in a city increasingly consumed by chaos.


At the heart of this crisis is the fragile healthcare infrastructure, now under siege. The Red Cross has voiced grave concerns about the safety of the biomedical laboratory, where Ebola virus samples are stored. The threat of power outages, exacerbated by the ongoing conflict, could cause the samples to deteriorate or escape, leading to an uncontrolled outbreak. This is a virus that has already claimed thousands of lives in past outbreaks. The 2014-2015 epidemic, which ravaged West Africa, killed over 11,000 people, and in its most lethal form, the mortality rate can soar to 90 percent without immediate treatment. The possibility of such an outbreak in volatile Goma already a city on the edge of collapse could lead to a disaster of biblical proportions.


The 1995 film ‘Outbreak’ starring Dustin Hoffman portrayed a race against time to contain a fictional virus in a similarly volatile African country that threatened to devastate humanity. Currently, the very real possibility of a biological catastrophe in Goma mirrors such films.


The Red Cross has not only warned about the Ebola virus but has also raised the alarm about the dire conditions facing the civilian population. In the midst of the fighting, hospitals are overwhelmed with casualties. The ICRC’s medical staff, who have treated more than 600 wounded civilians this month alone, report harrowing accounts of women and children caught in the crossfire.


Hospitals like Goma’s CBCA Ndosho are understaffed and struggling to cope with the influx of patients, many of whom are seriously wounded by gunshots or shrapnel. The healthcare system, already fragile, is now on the brink of collapse. One spark, whether it be a rebel attack, a power cut, or a lapse in safety protocols, could trigger a biological disaster of unprecedented scale.


The ICRC’s call for the protection of the biomedical laboratory is not just a plea for the safety of medical samples, but a warning of the potentially catastrophic consequences of inaction. As the world watches, Goma’s situation has become a stark reminder of the precariousness of global health security.

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