What is something more important than chasing returns:
Managing risks!
Here are 10 important aspects in personal finance to manage your risks!!
A thread 🧵
#personalfinance
#investing
Managing risks!
Here are 10 important aspects in personal finance to manage your risks!!
A thread 🧵
#personalfinance
#investing
1. Risk profiling
As complex the word may sound, risk profiling is simple.
It involves understanding your:
~ Risk taking ability
This is based on your age, income, liabilities (dependents) & expenses!
~ Risk tolerance
How much volatility you can bear without losing sleep
As complex the word may sound, risk profiling is simple.
It involves understanding your:
~ Risk taking ability
This is based on your age, income, liabilities (dependents) & expenses!
~ Risk tolerance
How much volatility you can bear without losing sleep
2. Defined financial goals
Know why you are investing in an asset class.
Match the duration of the goal, the expected return with that of the asset class.
Blindly investing without any goal is the most common risk to your investments!
Know why you are investing in an asset class.
Match the duration of the goal, the expected return with that of the asset class.
Blindly investing without any goal is the most common risk to your investments!
3. Debt component
Although unpopular in the current times, debt provides stability to your portfolio.
A sudden need of money during a market correction can be fulfilled through your debt funds, FDs, PPF etc.
Don't just be fully into equity
Although unpopular in the current times, debt provides stability to your portfolio.
A sudden need of money during a market correction can be fulfilled through your debt funds, FDs, PPF etc.
Don't just be fully into equity
4. Asset allocation
Allocate to each asset class as per your financial goals.
Long term: Equity & real estate
Mid term: Balanced mutual funds
Short term: Debt & gilt funds
Immediate needs: Liquid fund, bank accounts
Check this thread to know more:
Allocate to each asset class as per your financial goals.
Long term: Equity & real estate
Mid term: Balanced mutual funds
Short term: Debt & gilt funds
Immediate needs: Liquid fund, bank accounts
Check this thread to know more:
https://twitter.com/Finalysis20/status/1426476192702484484?s=19
5. Emergency Fund
Don't wait for an emergency to teach you importance of emergency funds!
These will allow you to continue your equity investments even in case of sudden needs.
Equity has timeframe of 7-10 yrs. If money is taken out in between you may even get -ve returns!
Don't wait for an emergency to teach you importance of emergency funds!
These will allow you to continue your equity investments even in case of sudden needs.
Equity has timeframe of 7-10 yrs. If money is taken out in between you may even get -ve returns!
6. Insurance
One of the most ignored risk is medical emergency.
If it arises it can't be avoided or postponed.
Instead of selling off portfolio, redeeming mutual funds have a medical insurance!!
Also, have term insurance to protect your dependents in case of an eventuality!
One of the most ignored risk is medical emergency.
If it arises it can't be avoided or postponed.
Instead of selling off portfolio, redeeming mutual funds have a medical insurance!!
Also, have term insurance to protect your dependents in case of an eventuality!
7. Avoid tips & blind recommendations
The most subtle risk to personal finance!!
Peer pressure & conformity with colleagues, relatives makes us invest in the same schemes, funds & stocks!
Study & self research before applying any tip!
It's your hard earned money.
The most subtle risk to personal finance!!
Peer pressure & conformity with colleagues, relatives makes us invest in the same schemes, funds & stocks!
Study & self research before applying any tip!
It's your hard earned money.
8. Track, analyse, evaluate
A risk due to our laziness & reluctance!!
Investments need to be tracked regularly.
Keep track of your:
~ Asset mix
~ Parameters & performance of mutual funds
~ Stocks in portfolio
Here's how I do it:
A risk due to our laziness & reluctance!!
Investments need to be tracked regularly.
Keep track of your:
~ Asset mix
~ Parameters & performance of mutual funds
~ Stocks in portfolio
Here's how I do it:
https://twitter.com/Finalysis20/status/1435064781413629959?s=19
9. Ignore the noise
News often confuse!
Avoid the predictions about market rise & fall!
Reacting to every news, event is a key risk towards achieving your financial goal!
As long as your investments are in good quality assets, the predictions are irrelevant
News often confuse!
Avoid the predictions about market rise & fall!
Reacting to every news, event is a key risk towards achieving your financial goal!
As long as your investments are in good quality assets, the predictions are irrelevant
10. Don't be driven by what's exciting
Here are few excitements that you must be careful about:
~ Hyped assets :
e.g. Crytpo. If you don't understand it, don't invest
~ Stocks whose price is rising
~ Bumper IPOs
~ Overhyped themes: IT theme, pharma theme
Here are few excitements that you must be careful about:
~ Hyped assets :
e.g. Crytpo. If you don't understand it, don't invest
~ Stocks whose price is rising
~ Bumper IPOs
~ Overhyped themes: IT theme, pharma theme
If you have found this thread useful, please re-tweet the first tweet of the thread, in the interest of all!
Let us spread the knowledge!!
Here's the link to the first tweet in this thread:👇👇
Let us spread the knowledge!!
Here's the link to the first tweet in this thread:👇👇
https://twitter.com/Finalysis20/status/1443039389878145024?s=19
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