How to Romance with your Investment!!

CA Umesh Sharma , Last updated: 12 February 2024  

Arjuna (Fictional Character): Krishna, 14th February is celebrated as Valentine’s Day. However, as we know, for most of the people wealth is their first valentine. What are we going to learn in this part of Arthneeti?

Krishna (Fictional Character): Arjuna, till now we have very well understood how to manage our expenses and save money for emergencies and investments. However, this last step is not as simple because you have to choose wisely among so many available options for your investment. The various categories of investment may not selected in isolation and percentage investment shall be made in a group of options to balance risk and reward.

Arjuna (Fictional Character): Where can the common man invest his money?

How to Romance with your Investment

Krishna (Fictional Character): Arjuna, careful investment of the savings is of utmost importance and proper consideration has to be given to the risk appetite of the individual in deciding where to invest. The popular investment options are:

  1. Gold: Here we are not talking about investment in Physical Gold, but in Gold Bonds. The Application for allotment of these Sovereign Gold Bonds can be made by the investors through the website of the banks and these bonds provide fixed returns to the investors as well as the value of their investment grows in proportion to the value of gold. In the past few years, these bonds have provided averagely 13.7% p.a return to their investors which is among the highest from investment perspective. New series of these gold bonds is set to open on 12th February 2024.
  2. Mutual Fund: Investment in Mutual Funds has been seen as less risky among the options to invest in stock market. The selection of right fund is however equally important. Most of your Investment in Mutual Funds shall go to Large Cap Mutual Funds wherein your money is invested in top companies like Reliance, Infosys etc. In the past five years these Large Cap Funds have provided 15 to 19% p.a returns to the investors. Large Cap Companies are established companies and hence are less volatile than Small and Mid-Cap Companies. In the past two years however Small and Mid-Cap Companies have outperformed the heavyweights in terms of growth. In 5 years Mid-Cap Funds have provided a return of 21 to 33% p.a to the investors whereas Small Cap Funds have provided 25 to 38% p.a returns to the investors. However, this Mid-Cap and Small Cap Funds possess higher degree of volatility and risk as these are budding and growing companies.
  3. Shares: Investment in Shares shall be made similar to that of Mutual Fund. One shall aim to invest more in top companies for long terms. Investment in Small and Mid Cap. Companies shall be made by giving consideration to sector wise boom in the market, such as Banking Sector, Railway Sectors. Public Sector Undertaking(PSUs) stocks are currently under the focus for their rising market prices. Our Hon’ble Prime Minister himself have rooted for these undertakings in the parliament and the stocks have seen significant rise in their prices from there. Last year itself NIFTY Large Cap shares help their investors earn a return of 20%p.a on the other hand for NIFTY Mid Cap 46.57%p.a, for NIFTY PSU Sector 79.87% p.a and 55.62% p.a was the return percentage for  NIFTY Small Caps.
  4.  Fixed Deposits: This is another form of investment wherein fixed returns are provided on your money invested depending on the term of your investment. FDs provide very low return when compared with other options but bears low risk. Averagely 7.39% interest per annum is received on Investment in FDs.

Arjuna (Fictional Character): Krishna, If I have Rs. 1,00,000 as my saving which I want to Invest, how shall I ideally allocate this fund?

Krishna (Fictional Character): Arjuna, Rs. 25,000/- shall be invested in the Gold Bonds and Similarly upto Rs. 40,000/- can be invested in Mutual Funds. These both can provide stability to your total investment and balance amount of Rs. 35,000/- can be invested in various stocks based upon the holding ambitions of the individuals.


Arjuna (Fictional Character): Krishna, what should one learn from this?

Krishna (Fictional Character): Arjuna, wealth has always been at the heart of most of the people. To see their money grow is the dream of every person. However, patience is the most important factor in wealth creation. People should however not compare their investments on daily basis and worry about their money. It has been found that, no person has lost money in share market if he has invested for consecutive 7 years. This investment not necessarily shall be made in lumpsum and Monthly SIPs can be made for your ease to accumulate funds and create wealth. One should always make carefully study of the investment area and its related risk and only then shall invest their money.

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CA Umesh Sharma
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