Thread by @Gravkhatri

"Save for the future." Almost every one of us has heard this in our childhood from our elders, but is savings enough to bear the load of inflation? Well all of us know that savings alone are not sufficient to make us wealthy as a matter of fact it is not even capable of..
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keeping our money intact hence we need to create wealth-generating "assets", in this post I'm going to talk about 6 different assets for people of different age groups. First, let's understand what the word asset means. In the accounting and finance language,..
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an asset is a resource with economic value that an individual, corporation, or country owns or controls with the expectation that it will provide a future benefit.
But I am not here to make things complicated for you so allow me to present the definition of assets in layman
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terms. In his book Rich Dad Poor Dad, Robert Kiyosaki termed the word asset as an instrument that generates value to you or puts money in your pocket. Hence we'll be continuing with this simpler definition only.
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The 6 best investment options are:
1.Stocks/Equities: Equities are the shares of a company that you can buy from the stock exchange through a broker and become a shareholder of the company, the benefits of holding equities are dividend income and capital appreciation..
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On average, the Indian Equity markets provide an annual return of 13-15% which is way above inflation (3-5% ideally) and savings account. You can start with an amount as low as Rs 100. These are highly risky in the short term as the price movements are quite unpredictable.
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2.Fixed income bonds/debentures: Government securities or fixed income bonds are particularly a contract that enables the individual to lend money to govt/institution and in return, the institution agrees to pay a fixed annual return to the individual till the maturity of..
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the bond. Minimum investment in govt securities starts from Rs 10000. These are some of the safest forms of investment as the default risk is negligible.
3.Real estate/REITS: This is a form of investment in which you own a piece of real estate and get income in the form of..
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monthly rentals and capital appreciation. Generally, real estate investments is a capital intensive asset but you can indirectly invest in real estate through REITS which is a fund house where a fund manager collects money from the individuals pool them into a fund and..
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buy real estate from it and gives returns in the form of monthly rentals. Investments in REITs start from 10000-15000. These investments are comparatively safer than equities as the prices of properties do not move immediately.
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4. Mutual Funds: Well all of us have heard the tagline "mutual funds sahi hai", but what exactly is a mutual fund? So a mutual fund is an indirect way to invest in stock markets where you give your money to a fund house and that fund house appoints a fund manager to pool..
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in the money and invest in equities for a fee. There are two kinds of mutual funds active and passive. Let's save the discussion of active and passive mutual funds for our next post. These investments are a safer option to invest in equities as they give you an option to..
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gauge your risk appetite.
5. Gold: According to our ancestors the safest way to park your money was to buy gold from it. But these are modern times and modern gold has lost its shine and other instruments like digital gold and Sovereign Gold Bonds (SGBs) has taken..
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their place. SGBs are just like other bonds which have a lock-in period of 8 years with an annual interest rate of 2.5%. For more details on SGBs read this article (

https://twitter.com/Gravkhatri/status/1393993373694926848?s=20

). One of the safest forms of investment in the Indian context.
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6. Books/Courses: According to me this is the best form of investment one can make, as Benjamin Franklin says "an investment in yourself pays the best interest" if you keep upgrading yourself eventually you'll evolve not only financially but also spiritually and socially..
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Ideally, this form of investment comes with the least risk and highest returns.
7. Insurance: many people do not consider life insurance and health insurance as an investment because they provide you tax benefits but if we go by the definition of Robert Kiyosaki or even..
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the financial definition they are a resource with the economic value which grow in future nor do they provide you with any positive cash flows. So I'll say that yes insurance is necessary but it is not an "asset". Rest I'll leave the decision upon you.
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Now let's talk about investments at various stages.
Let's start with a 21-year-old individual first.
Now at this stage most of the individuals are either starting their careers or are still in their colleges/universities and as a result, they don't have a formal source of..
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income and they can only invest through their pocket money, so the best investments for them will be:
1. Rs 500 per month SIP in index funds: As we all know an index fund is a passive mutual fund that tracks and replicates the broader market indices. These funds have low..
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expense ratio hence they are best suited if started early as you can take the advantage of compounding. So if you are 21 years old start investing in index funds as soon as possible.
2. Books/courses: Start looking for courses/books which can upgrade your skillset and..
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mind set as it will help you in future to increase your perceived value.
3. Stocks: As we know that you can start investing in stocks with an amount as low as Rs 100, all you need is a Demat account and a little investing knowledge and eventually you can upgrade your..
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financial knowledge by learning about investments.
4. Mutual Funds: If you do not know how to invest in stocks then you can opt for the other option of investing in stocks through indirect methods which are by owning mutual funds.
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You can do a little research about your favourite mutual funds and start investing in them via SIP or the Lump sum mode of investment.
As an ideal 21 years old may not have an initial capital of 10000-15000 therefore it rules out the possibility of investing in real estate.
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or government securities. Also, I won't suggest investing in this arena at this age because most of us have a large risk-taking capacity at this age and our initial capital will also be very low so it won't affect us even if we blow our account.
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Now let's talk about an individual who is 30 years old who has a stable job and a family to run.
The best investment for him/her will be according to the formula:
The portion of investment in equity = (100- age)% of the total corpus. Since he/she is 30 years old therefore..
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he/she can invest 70% in equities.
Let's break it down further.
Investment in equities: 70% of his/her total investment corpus.He/she can invest this amount either in active mutual funds or direct equity stocks.This will provide him with capital appreciation in the long run.
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Investment in fixed income securities: This is the segment that he/she can use for a regular annual income. He/she can invest 10% of his/her total investment amount in debt funds/bonds for a regular source of income.
Investments in REITs: Investing in real estate/REITS..
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will provide him with a regular monthly income as well as capital appreciation. He can allocate 10% of his investment to REITS.
Investment in Gold: Gold is always used as a hedging investment for protecting your portfolio from downside risk, hence you can allocate 5% of..
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your investment income into gold investments to have a safe investment option.
Emergency Fund: Ideally it is said you should have an emergency fund which is equal to 6 of your monthly expenses or it should be equal to your 6 months' salary, so it is necessary to have an..
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emergency fund so you can create an emergency fund by investing 5% of your invest income into highly liquid ETFs or index funds.
Lastly, let's take the example of a 50-year-old individual
Now according to the formula provided above, we will distribute this individuals'..
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investment income into various asset classes.
Investment in Equities: According to the formula this individual should invest 50% of his total investible income into equities it can be anything from mutual funds to individual stocks.
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Investment in fixed income securities: since this person is nearing the age of retirement hence we will increase his allocation in fixed income securities from 10% to 15% as it will reduce his capital risk and increase his fixed income.
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Investment in REITs: Because of his age he will now be planning for retirement so we will increase his investments in real estate/REITS from 10% to 20% as it will provide him with a regular monthly income and capital appreciation for his retirement.
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Investment in Gold: Since we are already moving into much of the safer havens hence we'll let the gold investment as 5% only.
Emergency Fund: As we grow older the chances of us falling sick increases significantly hence to be prepared for any financial emergency we'll..
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allocate 10% of our monthly investible income into our emergency fund which will be an ETF or highly liquid index fund.
In this thread we talked about the 6 best investment options and age-wise distribution of our corpus into these options, one more method of investing is..
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based on goal orientation but we'll save that discussion for another post. I hope you liked the thread, if you have any suggestions/recommendations feel free to share them.
Thanks for reading😁
Happy Investing.
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#FinancialFreedom #personalfinance #personalgrowth #investing

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