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Life Insurance
Everybody needs a life insurance to protect their loved ones from financial hardships in the event that your time on the planet has unexpectedly come to an end. So I wanted to write a post about life insurance. The recommendations made in this post are for people who are planning early retirement. For others, it may not work. You requirements of life insurance will be different pre and post retirement.
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How to Choose a Financial Planner
If planning your finances in minute detail and researching investments that fit your goals and risk appetite is not your cup of tea, then it is better to hire a financial planner who will do the work for you. But how does one find a good adviser? What attributes make up a good financial planner? Here are some tips to help you get started.
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Invest Across Market-caps for Better Returns
If you want better returns for your investments, choose to invest across market caps. Generally, choosing 2-3 good multi-cap funds is sufficient for most investors. However, if you want to be a bit more aggressive with your investments, add some small-cap and mid-cap funds. But how much? That is the question I will try to answer in today's post.
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How to Choose a Mutual Fund
We've all heard it -- don't choose a mutual fund just based on past performance or star rating. Then, how does one go about choosing a good fund? That is the question I want to answer today. While I am not expert at picking a good mutual fund, I did have my share of bad pickings and hence have had some wisdom knocked into me. So here are some tips on how to choose a good mutual fund based on my experience.
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Are Index Funds Better Than Active Funds?
In the US, index investing is all the rage. John Bogle who started the first index fund, contends that an index fund beats almost all actively managed mutual funds (after accounting for fees) in the long run. But does it work in India? That was the experiment I set out to conduct in early 2012.
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The Gilt Experiment
You've probably heard about the inverse relationship between bond prices and interest rates. When interest rates rise, bond prices fall and vice-versa. How can we use this information to make some money without a lot of volatility? Read along about my experiment with interest rate cycles.
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My Asset Allocation
I have discussed the 70:30 asset allocation in my previous 2 posts. However, I did not really follow the rule, not because it did not work for me, but for the simple reason that I wanted to learn market cycles and take risk while doing my investments. I would not suggest anyone play with investments like I did (unless you know what your are doing) and risk losing money. Instead follow the boring simple rule of 70:30 and it works. This is more of a case study of my investing style.
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The 70:30 Asset Allocation
In my previous post, I talked about about allocating 70% to equity and 30% to fixed income and just keep that ratio irrespective of which stage you are in your life. But does it really work? Lets work out some examples to see how it might work under various conditions.
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Asset Allocation Explained
In my earlier post on How to Retire Early in Five Steps, I briefly touched upon asset allocation in step #3. In this post, I go into a bit more detail into how one should go about asset allocation for early retirement. Before understanding asset allocation, you need to understand asset classes. If you have not read my post on asset classes, head on over to that post.
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Let's Understand Asset Classes
Did you know that if you only invested all your money in stocks you would get incredible returns over the long term? But what if you cannot stomach the risk where your investment could erode by 70% within a few months? Would you be able to sleep soundly if you found that your Rs. 50 lakhs investment became Rs. 15 lakhs? If you don’t like the wild roller coaster ride then you might want to diversify your investments into different investment baskets of varying risks. Generally risk is correlated with returns, so lower risk usually means lower returns too. To alleviate risk and to diversify, we need to understand asset classes. But what is an asset class anyway?
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