It is funny how most of us start yawning at the mere whisper of a financial topic. Agreed, getting a thorough understanding of finance requires a great deal of patience and most of us, sadly, do not have that word in our dictionaries. But here’s the good part: You do not need to undergo the painful process and a handful of well-structured and simplified articles can do the trick. As a matter of fact, an inexperienced investor, with the right kind of resources, can achieve what the wall-street giants cannot even fathom. Unlike professionals, the person in question neither has inhibitions nor any legal restrictions.

As per March of 2018, you are quietly losing ₹0.78 from every ₹100 that you save in your bank account per year. At this rate, expect your money to reduce to half in the next 15 years, thanks to the power of negative compounding

Here’s how: The largest Indian bank, State Bank of India, currently provides 3.50 percent interest on the balance in your savings account, which is 0.78 percent less than the 4.28 percent rise in Indian consumer prices every year as per March 2018. This realization that the value of your money is steadily reducing year-by-year should be a catalyst strong enough for you to explore more options. “I am not interested in investing” cannot not be an excuse for you to stay financially illiterate.

What is your net worth? Do you have the exact number? If you know how much you own, you are then ready to know what you can do with it. If you have no clue, I request you to go through a tiny exercise once every month (preferably on the day your credit card bill gets generated). Create an excel sheet, and have the following columns added:

Specific columns can be added or removed based on your individual circumstances, but basic framework stays the same. This exercise will not only talk about the money that you have but will give insights into how much you saved in a particular month, and where exactly you need to look for in case of an emergency. Now that you know what your net worth is, you can jump one step ahead and see if you can do something about it.

First things first: your investments are NOT going to make you a millionaire overnight. If someone around you claims otherwise, the person is either in a bubble or is trying to loot you. The expectation of surreal gains not only blurs your long-term planning, but also snatches your mental peace away. The ultimate goal should be to maximize the returns while ensuring that the associated risks are managed, since they cannot be realistically eliminated. Naturally, as the risk appetite varies from one person to another, so does the suitability of a particular investment tool.

Before jumping into the available investment options, you need to go through a series of questions to understand the category that you might fall in:

Are you going to incur any major expense in the foreseeable future? Are you going for the fancy master’s degree? Are you getting married soon? How long are you willing to have your money locked by someone else? A week? 6 months? 3 years? 7 years? What kind of returns are you expecting from your investments? Does your risk appetite fall in sync with the expectations?

If you need money in the foreseeable future and cannot risk losing it, put it all in any of the available government-backed Liquid Funds (also known as the money market funds) instead of keeping it in your savings account. The money does not get tied up, you get 6–7% returns and the redemption process requires nothing but a few clicks of the mouse. It is a much better choice as compared to the traditional fixed deposits that offer similar returns but with a lock-in period of 3–5 years.

If an annual return of 6–7% does not excite you, you need to get into the equity business. Most of us neither have any time nor interest in researching about the companies that can potentially provide superior returns. Equity Mutual Funds help you stay in the game without having to learn all the financial jargons. You hire people with credentials to invest in a group of stocks based on their analysis, and then pay them a tiny fraction of your investment. How do you hire a person to handle this for you? Again, a handful of clicks is all it takes.

For the ones who have a considerable risk appetite and do not mind having their skin in the game, equity share market is the ultimate thing. Identify a bunch of potential winners, invest in them and let the fruits ripe. How do you identify good companies? You analyze the financial statements of a company. You follow their results periodically. You stalk their management team. And you do a hundred more things. It feels cumbersome at first but gets extremely exciting with time and experience.

What if dual digit returns do not excite you either? Enter the world of cryptocurrencies, buy a lambo, HODL your coins and land on the moon. The crypto market is still amateur and is more of a speculative asset than an investment tool. While the asset offers an opportunity for you to convert your ₹100 into ₹100000, it is also notorious enough to magically reduce your ₹100 to ₹1. Unless you have some insider information, cryptocurrencies should not take more than 10% of your portfolio irrespective of how knowledgeable or experienced (you think) you are.

No matter how great the talents or efforts, some things just take time. You cannot produce a baby in one month by getting nine women pregnant.

- Warren Buffet

PS: This article is meant to spread a basic level of financial awareness and does not intend to provide an exhaustive introduction to the investment options available. In fact, I might have skipped a few.

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