Economic Indicators That Affect your Financial Plan

Economic indicator is a statistical data showing general trends in the economy. Most of us don’t know that these economic indicators affect our financial plan. Some economic indicators and their effect are being discussed hereunder:

1. Gross Domestic Product: The Indian economy is crawling with a growth rate under 5%. The Indian economy is expected to continue to be sluggish. Slower growth dents job prospects, forcing many to rein-in their aspirations and reset the timeline of their financial goals.

2. Inflation: Inflation is the rate of growth in prices. Price rise has been one of the chief causes of governments being voted out of power in the past, it would be safe to assume that even laypersons are aware of how inflation affects their consumption spends. Due to inflation your financial plan needs a review and needs to be altered. You should follow consumer price index (CPI) and food inflation instead of wholesale price index (WPI). These indexes tell you about inflation and help you in making appropriate alteration to your financial plan.

3. RBI’s Monetary Policy: The Reserve Bank of India, through its policy measures, influences the interest rate movements in the market using several tools like repo and reverse repo rate. Any action in this concern impacts interest rates in the system, which in turn affects your home loan or fixed deposit rates. So, it is important to understand the implications of changes in policy rates. This helps you understand at what rates RBI is willing to lend and borrow from banks. It helps you know if banks will provide cheaper loans going ahead or will they become more expensive.

4. Exchange Rate: A diminishing rupee adds to the expenses of travelling abroad, especially in US- be it leisure, business or studies. It adversely impacts corporate earnings, barring export-dependent sectors like IT. For individuals, impact can be seen in the form of rise in inflation.

5. Stock Market Indices: An indicator of the economic situation and the level of business confidence in the country, any rise or fall in Nifty or Sensex are directly reflected in your equity investments on a daily basis. They give sense of where the economy is headed. These indices are keenly watched by investment professionals, as they tend to be the barometers of economic conditions in the industry and the economy as well.

You should consider these economic indicators also while reviewing or preparing your financial plan.

FINANCIAL PLANNING FOR WOMEN

Here is the financial planning suggesstions especially for women:

1) TEENAGERS
For teenagers, Sachayika Scheme for women is best as you can invest in it from your pocket money also.

2) TWENTY (20’s)
For women in twenty’s health insurance and equity mutual funds are best as at this age they can take risk in investments.

3) THIRTIES (30’s)
When you reach your thirties term insurance plans, mutual funds, tax plans, real estate and investment in gold are best options.

4) FORTIES (40’s)
Retirement plan is best for the women in forties.

5) FIFTIES (50’s)
As age grows dependencies also increases, so now one should invest in less risky funds.

6) SIXTIES (60’s)
Senior citizen Savings Scheme is the best option for investment at this age.

Hopefully, now women would also consider them as important part in making investments. Invest by planning as it can help you in adverse situations and in good ones also.

HAPPY INVESTING

BEST INVESTMENT OPTIONS FOR 2012

In my earlier posts I have discussed about various investment alternatives. But in this post I will be discussing about 5 best investment options for 2012.

1. DIAMONDS: These are most popular area of investment in current scenario because a number of popular diamond mines are closing so decrease in supply will result in increase in demand and price. The current market is doing well and is proving to be a popular choice for those who are looking to make money.

2. GOLD: The prices of gold is increasing day by day so according to current scenario it is the best option for investment.

3. SHARE TRADING: The prices of shares will drop and rise at any point in time but you should keep a close eye on market and sell the shares when you think prices are at top.

4. REAL ESTATE: Buying land and buying houses is a form of investment and then renting them or selling them will always generate steady income as the demand for housing especially in populated areas is always high.

But you should always do market survey before investing as this is your hard earned money which is to be invested.

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PRECAUTIONS WHILE SELECTING TAX SAVING INVESTMENTS

You must be thinking of using tax saving investments for planning tax but precautions should be taken while selecting these investments. Following things should be considered while selecting tax saving investments:

1. LIQUIDITY: How fast your investments can be converted into cash? When will you be able to access your money in one year or two years or so.

2. RISK AND RETURN: Access what type of investor are you? Whether you are risk averse (do not want to take risk), risk lover (love to take risk) or risk neutral ( risk don’t affect your decision). As criterion that follows with investment is low risk low return or high risk high return.

3. INFLATION PROTECTION: Whether your investment is giving you protection against inflation? This means rate of return on investment should be more than the rate of inflation.

4. TAX EXEMPTION: All tax saving investments are exempt under section 80C but return on few are exempt, so while investing return exemption factor should also be considered.

This year while investing in tax saving investments consider these factors and take precautions.

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INVESTMENT ALTERNATIVES AVAILABLE

There are various alternatives available for investment. Few investment alternatives discussed here:

1. CASH & DEPOSITS: It bears minimum risk.

2. FIXED INCOME SECURITIES: It offers fixed periodical returns.

3. SHARES: The value of share changes according to the market’s view of the worth of the company.

4. UNIT TRUSTS: Unit trust investments can generate income in the form of interests, dividends and capital gains.

5. PROPERTIES/REAL ESTATE: It is less liquid and involves less risk.

6. LIFE INSURANCE: One should not buy insurance solely as investment as it involves cost which other alternatives may not involve.

7. COMMODITIES: Commodities can be bought as physicals where the goods exist and are delivered right away or as futures, where the goods may not yet exist and will only be delivered in future.

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BE CAREFUL WHILE INVESTING

While investing most of us don’t take into consideration some important factors. Today in my post I am going to discuss factors that should be considered while making an investment.

1. Fiscal Incentives: Whether that industry is getting tax concessions or not. If they will be getting tax concessions then they will be returning more.

2. Market Forecast: Market Forecast about that company or industry. Both short term and long term forecast affects your investment.

3. Be Clear in your Investment Objectives: Be clear what do you want from your investment, whether return or growth or both.

4. Economic Report: Economic report of the company should be considered. One should always wait for those quarterly reports and then only make investment.

5.Investor’s Cash Flow: Investor should consider their cash flow situation and set aside money for emergencies before tying up their funds in investments.

6.Investor’s Age and Risk: Investors should consider their age and the associated risk of the product. For example, A person who is about to retire must not invest in high risk products as this can create problem for him in future when he will retire.

So be alert while investing and enjoy benefits of investing.

MUTUAL FUNDS

All of you must have heard of Mutual funds and many of you must have invested in these also to save income tax. But how many of you know what are mutual funds?
Mutual fund is a fund managed by an investment company with the financial objective of generating high rate of returns. These investment management companies collects money from the investors and invests those money in different stocks, bonds and other financial securities in a diversified manner.
Before investing they carry out thorough research and detailed analysis on the market conditions and market trends of stock and bond prices.
People invest in mutual funds rather than investing individually because of lack of knowledge about stocks, bonds, etc. Through mutual funds they get expert’s suggestions for their investment and they can also reduce their risk.

In next post I would be discussing about various forms of securities.
Suggestions and comments are welcome

INVESTMENT AND TYPES

Investment may be defined as sacrifice made for future gain. But investment should be after proper analysis as it involves risk of loss also. In finance, investment means purchasing of securities and other financial assets from capital market.
There are various types of investments i.e. autonomous, induced, financial, real, planned, unplanned, gross and net investment,
AUTONOMUS INVESTMENT: It does not change with the change in income level.
INDUCED INVESTMENT: It changes with change in income level.
FINANCIAL INVESTMENT: It means buying financial instruments such as shares, bonds , etc,
REAL INVESTMENT: It means investing in assets such as building, plant , machinery, etc,
PLANNED INVESTMENT: It is the investment which concentrates in few sectors
UNPLANNED INVESTMENT: It does not concentrates in few sectors, it can be any where.
GROSS INVESTMENT: It means the total amount of money spent on creation of a capital asset
NET INVESTMENT: It means gross investment less depreciation.

This is something about investment and types. In my next post we will be discussing about investment management.
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