Wednesday, 23 September, 2009

Personal Finance Ideas


It is a good thing if you can distribute your investments among the various asset classes. Liquid Cash, Equity, Land and Property, Gold, Debt and so on. In your 20s and 30s, you can put aside up to 50% of your money to invest in property, as it appreciates over the long term. Up to 30% in equities and mutual funds, to reap the high returns they promise over the long term. 10% in long-term bonds and debentures will yield a fixed return over a period of time. Liquidity is as important, so about 5% in gold, fixed deposits and 5% in cash. And as you grow older, the ratio of long term investments should come down and liquid instruments and channels should go up.

It is necessary to plan your life and safeguard against risks too. So therefore you have to take care of pure risks through insurance as well as use insurance to generate wealth.

Now-a-days, the top Mutual Funds list out their portfolio - stocks that the funds themselves have invested in. It could be a great indicator of what top fund managers prefer to put all our money into, including a peek at the total holding, percentage across sectors, returns from each sector and so on.

And if we compare 3-4 consistently performing 5 star rated funds with their overall returns (45% - 50%) over five years, it is easy to see which Equity stocks have commonly contributed to the returns.

Though this is no way saying that you should replace your Mutual Fund investments with Equity, as we are not professionals, the list of stocks that the MFs hold is a great answer to the eternal question: "What should I buy, without taking a big risk." Here apart from the Nifty 50s and the BSE Sensex stocks, you are sure to find a few surprises.

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