What difference does it make?

The way in which each conversation starts and ends, it does make a lot of difference. It doesn’t need to be a specific discussion. It can be as simple as your daily commute to work. How your travel to and from work turns out makes a lot of difference to multiple things.

Good experience in any form in these mini journeys create lasting impact. It can be how your co passenger in the bus, train or car made you feel. Or how the cab driver navigated well along  with striking interesting conversation which made you feel connected. That makes positive impact on you and your work day.

Similarly while coming back you get stuck in traffic and feel frustrated. More than you perhaps the person who is driving is frustrated. Some will keep cribbing themselves increasing your frustration. But some may still remain cheerful and feel concerned about you and ask if you have to face it daily. And then may be share their view on the problem or solution to it.

It may not solve anything but it does make a difference. By the time you reach home, although you lost time, but the good experience stays with you and makes you feel better.

 

 

 

 

 

 

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So next comes how much to invest & where which will depend on risk appetite of each individual.

 

Before that let’s cover some risks by “insurance”. Buy your term insurance & buy it online , some companies offer premium differential on that . Most of the employers cover your medical insurance, but in case it is not or the coverage amount is small, take medical insurance.

 

Once the protection is in place, then understand different instruments where we can invest :

  • Fixed deposit
  • Recurring Deposit
  • Mutual fund
  • Stocks
  • Gold
  • Provident Fund
  • Real estate
  • Nps

 

The differentiating  factor is return vis a vis the risk . And when you are calculating return you need to look at it as return post tax.

 

  • Fixed deposit, Recurring deposit will give you fixed returns ie the rate of interest. But as interest is taxable you have to keep the after tax return into consideration depending on your tax bracket .
  • Provident funds returns are tax free and amount you invest also gives you benefit under sec-80 C. But this amount would be available to you post 15 years ( partial after 6 years).
  • You can either invest directly in stock or indirectly through a mutual fund. Here returns are not guaranteed and you can’t rule out negative return or risk of loosing the principal. A stock you have chosen may give you excellent returns as well.
  • Since we have just begun on this journey on investing so we can use the diversification benefit given by mutual funds instead of investing in a single stock.
  • If you do little homework and keep it for a long term horizon (say 5 years plus), then the returns on mutual funds are relatively much higher.
  • Real estate will take up later along with REITS.
  • NPS combines the feature of mutual fund and fixed return instrument along with tax benefit on amount invested; but again amount would be available post you complete 60 years.