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Risk what you can afford to lose

It is not a surprise that long term investments and market funds have a higher rate of returns than short-term funds. Government bonds have low risk with assured returns but will pay you way lesser than a market fund at a relatively higher risk. The simple rule being 'risk is proportional to returns'.

There are no financial products that offer you high returns at no risk. And to get truly wealthy, you will have to invest in some risky assets like stocks - an investment that has a good chance of beating inflation over time.

This one's for the bad times

This is the basic requisite before getting any financial plan into place. Get ready a monetary reserve of about 6 months expenses and invest them in a low risk stable fund. Government securities are also a preferred option here.

In the absence of this saving, an emergency or any unexpected expenditure can throw your investment plans awry. As the years roll on, keep adding to this saving bit by bit, and you just might have a lot more than 'safety money'.

Also read: How to save money on your girlfriend

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