Investment Strategy
Don’t put all your eggs in one basket
“Don’t put all your eggs in one basket” means avoiding total reliance on a single option. If one basket falls, all eggs break — the same applies to investments, careers, or plans. Diversifying reduces risk and increases security, whether by spreading investments, developing multiple skills, or expanding markets. However, diversification should be strategic, not scattered. Balancing focus with variety ensures that if one path fails, others can sustain you, protecting against complete loss.
We will look at this investment in a simple and straightforward manner without any confusion. Let me describe meaning of some of words.
- Returns means: Income
- Liquidity means: How quickly you can get cash from an asset without losing value.
- Inflation: Inflation is when prices rise over time, making your money buy less than before.
Before investing, it is important to be prepared. One must have emergency funds saved up. These funds help cover unexpected expenses. Insurance is also necessary to protect against risks. Only after these are in place should one start investing.
Emergency Funds
An emergency fund is a sum of money set aside to cover unexpected expenses or financial emergencies, such as medical bills, job loss, urgent repairs, or sudden travel needs. It acts as a safety net so you don’t have to rely on loans, credit cards, or selling assets during a crisis.
Health Insurance
Health Insurance helps pay for doctor visits, hospital stays, medicines, and medical tests. It reduces the financial burden of unexpected health issues. Without health insurance, medical bills can be very expensive. Having this insurance ensures you get proper care without worrying too much about the cost.
Life Insurance
Life Insurance provides money to your family if you pass away. This financial support helps them cover daily expenses, debts, and future needs like education. It acts as a safety net, giving your loved ones financial security when you’re not around. Life insurance is important for anyone with dependents.
Portfolio Management
What is portfolio: In investment, a portfolio is the collection of all your financial assets, such as stocks, bonds, and real estate. It is managed to balance risk and return according to your goals and risk tolerance.
Financial assets or instruments come in a wide variety and can be categorized in different ways.
Financial assets or instruments can be categorized in several ways but we will discuss only 2 ways. if you want full details click here
- By Liquidity:
- Highly liquid assets: Easily and quickly converted to cash without loss (e.g., savings bank account, cash).
- Liquid assets: Can be converted to cash relatively easily but may take some time (e.g., stocks, bonds).
- Non-liquid assets: Difficult or slow to convert into cash without loss (e.g., real estate, private equity).
- By Risk Level:
- Low-risk assets: Stable returns with minimal loss risk (e.g., government bonds, fixed deposits).
- Medium-risk assets: Moderate risk and return (e.g., mutual funds, corporate bonds).
- High-risk assets: High potential returns but significant risk (e.g., start-up stocks, cryptocurrencies).
Deposits
- Savings Account
- Fixed Deposit
- Recurring Deposit
Gold
- Gold Coins
- Jewelry
Property
- Rent
- Land