Too broke to invest your money?

QUICK money. Fast buck. Easy moolah. Call it whatever you want, but now is a financially good time to be in for the young.
But then again, this is a call not to lose sight of a few basics in money management.

Here are five mantras. Take a printout, write them down, whatever. But do not lose sight of them!

1. Set your financial goals

Planning for future studies, buying a car, laptop or a pool table, whatever your goals, identify them. Put a monetary value to them. You can achieve your goals only if you save for them systematically.

2. Buy an insurance policy

For those with dependents, insurance is a must. The sooner you get insured, the better. It will also work out cheaper because you have age on your side.

3. Spend less on credit cards

Plastic money is very convenient. Most of us prefer it to actual money, its sheer convenience forcing us to overspend.

Make sure you read the fine print before using your credit card, lest you be shocked with the bills later. Do not forget the basic rule: Don’t spend what you don’t have.

4. Think future

It is never too early to start preparing for your future. Plan for your retirement now.

You will see the power of compounding when you start investing small sums of money, but see it grow gradually to the target amount you set.

5. Invest regularly

There are various options to invest your money. One of the most popular and rewarding options is to invest in mutual funds.Choose from a variety of options (equity, balanced, debt), and a variety of fund houses. Besides, most fund houses have fairly easy procedures for Systematic Investment Plans (SIPs).

Systematic Investment Planning is a simple process of investing the same amount of money every month over an extended period of time, regardless of whether the market is up or down.

Let’s say you invest Rs 1,000 every month.

Invested amount

Current value	Rs 36,000	Rs 60,000
Scheme A (mid-cap fund)	Rs 60,820	Rs 219,325
Scheme B (large-cap fund)	Rs 61,392	Rs 176,181

(All data as of July 2006)

This goes to show the virtues of starting early, investing regularly and staying invested.

It is a time to enjoy life and a time to plan your future, so that you can enjoy the rest of your life, too.

My money mantras

i. Set your goals.

ii. Do not spend what you do not have.

iii. Start saving for your goals; small but systematically.

iv. The future is not too far away. Don’t ignore it.

v. Postpone your expenses, not your investments.

Author: Lovaii Navlakhi
Source: Wealth, MoneyControl

When the stock market crashes

THE last three to four years have proved to be a roller coaster ride for the stock market.

The Sensex doubled from a level of 3000 on May 3, 2003, to 6000 in January 2004. When the Bharatiya Janata Party lost the elections in May 2004, the market plummeted to 4500 (a 25 per cent drop in just four to five months).

But within six months, the market recovered and again, the Sensex touched 6000 before the end of 2004. Thereafter it was almost a one-way journey right up to May 2006, when the market hit the 12,000 mark.

Later, the market saw a sharp correction when it dipped to 9000 level in June 2006. But pretty soon, it crossed the 21,000 mark by January 2008.

Since then, we have witnessed some pretty sharp falls. And the fact that it doesn’t seem to be bottoming out, is making investors a lot more nervous. Of course, volatility is not something new. But the sharp ups and downs are scaring even the old-timers who are in this business.

Read: Don’t look in the rear view and drive

What next?

First, cut out all the noise and clutter around you and get back to basics. This is because 90 per cent of the people around you are as clueless as you are. So, when you let the facts speak for themselves, you have a better chance of eliminating ambiguities. Let’s find out what these are.

Fact 1: The equity market is NOT a lottery ticket. Every share has a fundamental value and is based on the company’s performance.

Fact 2: It is possible for share prices to be widely different from their intrinsic value.

Fact 3: In the long run, share prices always move towards their true value depending on the profitability and growth potential of the company.

Fact 4: Irrespective of whether the United States goes into recession or the sub-prime problem generates more losses, India’s economic growth rate will still be comparatively high.

Fact 5: Unless we have some serious calamity, a political crisis or poor monetary or fiscal policy, we may continue to see over 7 to 7.5 per cent growth rates over the next 5 to10 years.

Fact 6: If the economy continues to grow at such a healthy rate, it has to reflect in the corporate performance as well. This will lead to appreciation of the share price sooner or later.

Keeping these facts in mind, the long-term outlook for India still remains quite positive.Read: The stock market made this nimbu paani owner rich!

Quick lessons!

1. Do not panic.

2. If you have invested in good companies and mutual funds, stick to these choices.

3. It’s a good time to invest in the market.

4. Be patient and disciplined. You will be rewarded!

Author: Sanjay Matai
Source: Wealth, MoneyControl