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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)

Of Ashes and Alliances

Decades of mistrust, proxy wars and ideological rivalry have brought Iran, Israel and the United States to a perilous crossroads.

Once friends, Iran and Israel are now locked in a confrontation that has grown ever more combustible. The 1979 Islamic Revolution transformed Iran from a regional partner of Israel into its most implacable foe, rejecting the Jewish state’s very legitimacy. Since then, Iran has embraced the mantle of proxy warfare, backing groups from Hamas in Gaza to Hezbollah in Lebanon, as well as the Houthis in Yemen. For its part, Israel sees Iran’s nuclear ambitions and missile programs as existential threats, prompting a cycle of covert operations, cyberattacks, and, increasingly, direct strikes. The conflict, which simmered for decades, has now erupted into full-scale war, whose genesis can be traced to the October 2023 Hamas offensive.


History of Clashes

Several factors illuminate why Iran and Israel have clashed so persistently. Ideology has played a central role: the revolutionary leadership in Tehran has long framed Israel as the “little Satan,” while championing Palestinian resistance to enhance its influence across the Middle East. Proxy wars have extended that hostility geographically, from Gaza to Lebanon, with Iran’s support ensuring a constant, low-intensity threat to Israel. Meanwhile, Israel’s own doctrine of preemption has led to targeted assassinations of Iranian scientists, airstrikes in Syria to prevent weapon transfers to Hezbollah, and cyber operations aimed at crippling Iran’s nuclear infrastructure. Regional rivalry compounds the tension: both nations are vying for influence over the same theatres, notably in Syria, where Iranian entrenchment directly challenges Israel’s security calculus.


Yet the hostility is not immutable. Some analysts believe Iran could recalibrate its stance under certain conditions. The Abraham Accords of 2020, which have normalized relations between Israel and several Arab states, may slowly shift regional dynamics, leaving Iran isolated unless it explores dialogue with Israel. Even China’s recent facilitation of restored ties between Iran and Saudi Arabia hints at a new broker capable of encouraging rapprochement. But the calculus is delicate: missteps, whether in the form of aggressive Israeli operations or heavy-handed U.S. pressure, could reinforce defiance rather than diplomacy.


Across the Gulf, tensions with the United States have long shadowed Iran’s trajectory. The seeds of mistrust stretch back seven decades to Operation Ajax, the 1953 CIA- and MI6-backed coup that toppled Iran’s democratically elected prime minister, Mohammad Mossadegh, and restored the pro-Western Shah. That intervention set a precedent of suspicion that the 1979 revolution amplified, particularly after Iranian students seized the U.S. embassy in Tehran, holding 52 Americans hostage for 444 days. The ensuing decades reinforced animosity: the Iran-Iraq war of the 1980s, during which the United States supported Saddam Hussein, cemented the sense of betrayal, while more recent events - the 2020 assassination of General Qasem Soleimani and sanctions targeting Iran’s nuclear and missile programs - have kept relations at a fever pitch.


Nuclear Dreams

Nuclear ambitions, in particular, have been a persistent irritant. Washington views Iran’s program as a potential path to a bomb, despite repeated Iranian assurances of peaceful intent. The collapse of the 2015 Joint Comprehensive Plan of Action (JCPOA) only widened the gulf, reinforcing Iran’s narrative of U.S. duplicity and leaving regional rivals, especially Israel, to adopt their own aggressive countermeasures. Proxy conflicts further strain ties: Iran’s support for Hamas, Hezbollah, and the Houthis is seen as destabilising not only Israel but U.S. allies across the Middle East.


The current inflection point, however, offers a rare window for diplomacy. Analysts note that regional trends like Arab normalization with Israel, China’s mediation in Gulf politics, and potential Western engagement with Tehran could align to create conditions for de-escalation. But achieving that would demand finesse as Washington and Jerusalem must temper aggressive postures, avoid unrealistic negotiation demands, and recognise Iran’s need for regional legitimacy and security assurances. Misreading the moment could entrench conflict, with severe consequences for global energy markets, regional stability, and international trade.


Domestic and geopolitical calculations converge in this delicate moment. Iran, constrained by economic pressures and wary of isolation as more Arab states engage with Israel, may be compelled to consider dialogue. The United States, wary of overextension but determined to counter Iranian influence, faces its own trade-offs between coercion and engagement. Israel, vigilant against existential threats, must weigh immediate security against the strategic advantages of regional peace. The outcome will shape not just the Middle East but the broader international order, where energy flows, alliances, and the balance of power hinge on the choices made in the next few months.


History has demonstrated that the Middle East rarely offers clean solutions. But the convergence of regional and global factors suggests that, even amid the wreckage of decades-long enmity, there exists a narrow path toward stability. Iran, Israel and the United States face a simple yet profound question: whether to escalate for short-term gains or seize the moment to rewrite the rules of engagement for the 21st century. Failure to act judiciously risks completely threatens to destabilize global markets, imperil international trade and set back decades of cautious diplomacy.


The Middle East today teeters on a knife-edge. The flames of war burn brightly, but embers of opportunity remain. Strategic patience could transform enmity into coexistence, creating a rare instance where history’s mistakes might be set aside and peace, however fragile, could take root. The grim alternative, which is a continuation of proxy wars, direct confrontations and nuclear brinkmanship promises perpetual instability and human suffering on a scale the region has rarely known.


(The author is a retired naval aviation officer and a defence and geopolitical analyst. Views personal.) 

 


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