Saturday, February 5, 2011

Chapter 9 - High Risk , Low Risk and Medium Risk

What is your risk bearing capicity ?

Answer to this question decide whether you should invest in MF and share markets or not.

The amount which you can afford to loose . If you are a student with 5000 pocket money per month then you can afford 2000 - 3000 per year to loose . This amount you can invest in a good mutual fund.

Had you invested 3300 in 2002 in Reliance Growth- G (NAV 16 Rupees ) you would have had 90000 rupees today. 
or

Had you invested 3300 in Satyum  shares (10 Rupees) after scam in Jan 2009 , you would have had 10000 rupees today . FDs take 10 years to give this much returns.

This is all about high risk profile - high return scenario.

Now suppose you have 1000000 rupees and you are 58 years old. The amount you saved in FDs for your daughter's marriage. Can you afford to loose it little bit not at all. Whatever return you get from FD is enough for you . this is known as Low Risk profile  - Low Return.

You are 30 years old father who's kid is going to join school after 2 years . you set aside 50000 rupees for his school donation . you can invest this amount in SBI / CANARA bank  share  (This type of funds invest 10-20 in equity rest in FDs ,Bonds).  He will get some moderate return in 1-2 years and when ever he get significat return he will sell all shares immediately .
This is how you can describe Medium risk profile -  Medium return.

Your profile decide how much you can invest in different investment instrument.

Tip : Never invest with borrowed money, Never!!!
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