Everyone is interested to know the financial well-being. Financial well-being is nothing but a mindset of financial analysis. Three types of risks are covered under financial well-being. These are Protection Risk, Investment Risk, and Return Risk.
As
an experienced person, my theory says that you should keep your portfolio in
protection because the risk is 15 times the Annual Income. That is called
safety and security risks. Suppose, the Annual Income is Rs.10 lacs. Your
protection risks must be 1.5 crores. Therefore, you may take the option of Life
Insurance, Health Insurance, Building Insurance, Car Insurance, etc under this
category. The 2nd is investment Risk, which is otherwise called Growth and
stability Risk. As you know, human wants are unlimited but you have to satisfy
with your limited sources. Exposure to inflation, underestimating the future
requirement, and too many products making investing decisions difficult are the
main causes of risks. The 3rd one is Wealth creation and investment. Money is
invested like a pyramid. We spend on real estate, fixed deposits, Gold, Equity
Mutual Funds, and Equity Stock but the return pyramids are based on Fixed
deposits, Gold, Real Estate, Equity Mutual Funds, Equity Savings etc.
Investment
in Equity is two types. One is Passive Investing and the other is Active
Investing. As a young and premature new investor, you are investing in passive
investing by watching the flow of Fifty or senses, but Active Interesting is
good, which is in stock.
There
are two types of risk you face in investing. One is Event Linked Risk and the
other is Asset Linked Risk. Event-linked Risks are volatile. The Covid pandemic
and the War between Gulf countries or Russia and Ukraine which is beyond the
control may be natural or gio political. The other phenomenon is Asset like
risks, though it is volatile due to Liquid stock and Risk of Non-performance or
underperformance.
You
may face the wrong approach to investing. The investment is always for the long
term. Do not have faith in uneducated social media. They will blame you and do
not know the investment. Indexing and speculative view etc.
You
have to prepare a basket for the investment. you keep 60% in a Large Cap of 15
stocks or less, 20% in a Middle cap of 10 stocks or less, and 20% in small and
micro caps of 10 stocks or less. What is a balanced basket for you?
Please
note that Nifty which is 18K in 2023 will be 62K in 2030. This is a crucial
period. You might not hear of the operation black swam techniques, which will
create a great recession in the economy. Though our Finance Minister firmly
avoids this situation, in some countries due to the lack of foresight of their
Governments the back swan captured their economic conditions.
In these circumstances, you should invest in SIP. I am telling the Mutual funds Systematic Investment Plan like Recurring Deposits of the Bank, Saving Investment, and Protection of the fund. So, your allocation must be 40% in wealth creation, 40% in investment, and 20% in the protection risks basket. However, it depends upon your discretion and needs on how to invest.
Be Happy - Lead Your Life financially healthy.
