Investment Insurance - How to choose Savings and Investment Products

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Investment Insurance
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How to choose Savings and Investment Products
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So what are the main factors that determine your
investment or are likely to influence which broad
types of investments are suitable for you?

• FACTOR 1) YOUR GOALS
• Remember I said YOUR goals not just goals. You
  may have many reasons for saving or investing but
  essentially everything boils down to three main
  objectives.
• Number one is growth. Growth is nothing but
  increasing the amount of capital you have. Number
  two is present income, generating income now to
  supplement your income or salary etc.
• Number three is future income, generating an
  income that will start at a later date for
  example when you retire and your earnings stop
  completely

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• FACTOR 2) YOUR  INDIVIDUAL RISK CAPACITY -The
  next factor is your attitude towards risk when
  you think of investment risk you probably think
  of losing part of your original investment, this
  is called as capital risk. Investments by value
  of capital cannot fall such as bank fixed
  deposits over a period of five to ten years give
  lower returns than investments such as stock
  market.
• Understandably many retired people are cautious
  with their savings and
• Investment Insurance and reluctant to take
  capital risks.
• Because once your earnings have stopped it may be
  very hard or impossible to make good any loses
  made on your investments. However if all are
  sticking to bonds, fixed deposits and fixed
  instruments it will reduce capital risk, but it
  increases the shortfall risk and the inflation
  risk.
• Acting in a way that minimizes capital risks but
  ignores other risks is sometimes what you can
  call as extreme caution. If you are saving or
  investing only for a short or medium term it is
  usually not appropriate to take capital risk.

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• Different types of Risks So what are the
  different types of savings and investment risks?
  Capital risk. -This is nothing but the amount of
  your original investment falls.
• For example because the price of investment falls
  you have to pay large surrender charges or the
  provided funds to repay the investment as
  promised. Inflation risk. This is where the
  buying power of your income or capital falls
  because it does not grow fast enough to keep up
  with inflation.
• When your inflation is 8 and you get just 4 per
  annum  from your investments over 20 years then
  there is no use in that investment. Shortfall
  risk. This is where you cannot meet your goal
  because the return on the investment is too low.
• Assume, you want to pay for your daughters
  marriage or your sons education. You have a
  predetermined target amount and for 10 years your
  investments return lesser than what you planned
  for. You will not be having enough money for your
  daughters marriage or your sons education.
  Interest rate risk.
• Source http//www.smartmoneygoal.in/blog/how-to-
  choose-savings-investment/

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