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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)

NCP (SP) takes a gamble with young, new faces

Updated: Oct 30, 2024

FRESH FACES AND A LACK OF HEAVYWEIGHTS TO DECIDE FUTURE


NCP

Mumbai: As the election approaches, the NCP (SP) is taking a bold risk by introducing a slate of fresh, youthful candidates driven by a need for new leadership, caste considerations, and an absence of political heavyweights. This strategy signifies a significant departure from traditional candidate selection, illustrating the party’s commitment to evolving alongside its electorate.


One notable newcomer is Fahad Ahmad, actor Swara Bhaskar’s husband and an impassioned politician known for his stirring speeches during the anti-CAA protests. He is set to contest against Nawab Mallik’s daughter in the Muslim-dominated Anushakti Nagar constituency. Until a few days ago, Ahmad was a member of the Samajwadi Party. His induction and nomination has left some party workers perplexed. However, the NCP (SP) views this as a necessary gamble, particularly in a political landscape where many prominent figures have left the party.


A few hundred kilometers away, in Baramati, where most candidates privately concede defeat even before polling, the young Yugendra Pawar will make his political debut against his uncle and senior politician Ajit Pawar. In Mohol, the party has picked the 26-year-old Siddhi Kadam whose MLA father Ramesh Kadam was jailed in a case of financial corruption The selection of these candidates has raised eyebrows among observers and constituents alike, showcasing a blend of both risk and opportunity. “Politics is changing; you don’t need heavyweights to win elections. Our party had declared that we would give tickets to new faces because we want to grow and cultivate new talent. These young faces are a reflection of our society and what people want—these candidates are young, dynamic and agile,” says Anish Gawande, national spokesperson of the NCP(SP).


The NCP (SP) also has its sights set on Tasgaon Kavthe Mahankal, where Rohit Patil, son of the late former home minister R R Patil, stands as a promising candidate, buoyed by his father’s legacy and grassroots involvement.


With 21 per cent of voters under the age of 30, the party’s shift towards youthful representation could prove to be a winning strategy in the coming election.

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