Different Asset Classes and their advantages and disadvantages (Part-III)

Part-III: Cash and cash equivalent.

Most people think that only investments generating cash are assets, however, even cash itself is an asset class as it gives you purchasing power when any opportunity arrives and cash in saving bank account can also generate return. Cash saves you from liquidity crunch. In business world, excellent opportunities does not last longer. In such scenario, those who are having cash in hand have more chance to gain from such short-term opportunity. There is only one disadvantage of cash that it’s return cannot beat inflation. If you keep cash in your bank account for long time, due to inflation, its value will decrease.

To overcome this problem, you can invest in liquid funds where you can withdraw your money within a day. Liquid funds normally gives better return than saving bank. Alternatively, you can park your money in “sweep in FD”. Kotak is one such bank providing this facility. All you have to do is link your existing Fixed Deposit to your Savings or Current Account in Kotak bank.  In case you are falling short of funds in your account the deficit will be withdrawn from your Fixed Deposit. The Sweep-In facility helps you enjoy liquidity in your Savings account while earning high returns with the applicable interest rates of a Fixed Deposit.

With the Sweep-In facility you can link your existing Fixed Deposit to the Savings/Current Account. Whenever there is a shortfall of funds in the Account to clear a cheque, we will utilize units of the Fixed Deposit to clear the cheque. On this utilized amount, you will earn a rate of interest for the period that the Fixed Deposit remained with the Bank at the applicable rate of interest at the time of booking the original Fixed Deposit. Your balance amount in Fixed Deposits will continue to earn the original rate of interest.

For more details, please contact bank representative. A small disclaimer: this article is not sponsor by any bank; some information about sweep in facility is from Kotak bank website for education purpose.  

It is very important to keep some cash with you and treat it as a liquid asset. Never invest 100% of you portfolio in illiquid asset. Always keep some cash with you based on market situation and your risk appetite. Consult an experienced and qualified investment advisor for making a well-balanced and diversified investment portfolio.

I am an investor and two year back I developed interest in finance and investment. I manage my own portfolio and still learning about new investment options. However, I am not a certified investment advisor and this blog is not an investment advice, it is only for education in good faith.


Different Asset Classes and their advantages and disadvantages (Part-II)

Part-II: Stocks and Mutual funds

In first part I discussed about real estate, which is very popular asset class and investment in real estate is consider quite safe and profitable. However, there is a drawback of liquidity.

To overcome this drawback of liquidity and to increase profitability by taking higher risk you can invest in stocks and mutual funds. You can easily buy and sell stocks and mutual funds using different digital platforms or through recognized brokers and distributers. It has T+2 days settlement cycle. i.e. on third working day, your money will be deposited in your account.

So, the first advantage of this asset class is that it can be converted to cash with in three working days. Secondly, in long term, it can generate better return than FD and rental income. If we consider past few decades, NIFTY-50 and Sensex (benchmark index for share market) has given around 12% annual return. So, if you invest in Index fund you can expect to earn 10-12% annual return subject to market risk. If you do not know anything about share market, do not invest in shares. Better invest in equity mutual funds based on financial advisor and your research.

Debt funds are another type of mutual funds. While equity mutual funds invest in shares, debt funds invest in debt instruments like commercial papers, debentures and government securities.

Debt funds are more secure than equity funds when national economy is in good condition. However, they too involve credit risk and interest risk. Credit risk can be more prevalent when economy is going down. In such times, one has to be very careful and invest only in AAA rated papers or in sovereign bonds to save investment from credit risk.

When interest rate is going down, debt fund yield goes up and when interest rate is going up, debt fund bond yield is going down. This is called interest risk. In such cases, when interest rate are already down, you can opt for floating interest debt funds. When interest rate will increase their yield will not decrease as interest rate is floating i.e variable.

It is important to create balanced and well diversified portfolio to mitigate risk and increase return in both bull and bear market. To achieve this, add both debt and equity in your portfolio based on your risk appetite and time horizon.

In next article I will discuss third asset class which is CASH.

Different Asset Classes and their advantages and disadvantages (Part-1)

Part-I :Real Estate  (Flats/home/Plot/Shops)

Saving is a good habit, investing it is even better. In India, most of people invest based on friend and family advice. Consulting investment advisor or investing based on your own research is very rare. In such scenario, most of people invest in real estate because it is one of the oldest investment class and chances of loss is negligible. Due to ever increasing population, real estate gives good return in long term. However, there are some disadvantages too. Firstly, there is a default risk. Many times it happens that same property is sold to two parties. Secondly, there is a risk of capturing of your land by some goon. In both cases you have to fight long legal battle which will waste lot of money and time. Thirdly, you have to buy property at market rate or below market rate to generate profit in short run. Also, you must have idea of location. If you buy property at wrong location, you have to wait for long time before you see any appreciation. Finally, all type of properties are not good investment. It depends on your goal and your requirements.

Suppose, you already have a home to live, and you buy a flat for rental income. This will be a bad investment because rental income of commercial property is more than rental income of residential property. Also, flat needs constant maintenance and you also have to pay society charges! Which will even further reduce your rental income.

Now, let’s take an example of a Plot or a land. If you buy a plot away from the city area, you have to wait for long time before any significant increment. Plots within the city are very expensive. If property market crashed or there is a slowdown, again you have to wait for long time before making money by selling it.  

One bigger problem with property is that it is not liquid asset. i.e. It cannot be converted into money immediately. It takes more than one month to find a prospective costumer and transfer property on his/her name.

Thus, Even though investment in real estate is good and can be made risk free with proper research and investigation, it is not the best investment for every individual. There are several other asset classes which one should consider before investing in real estate. Different asset classes outperform in different time. For example, during COVID-19 Pandemic, Gold outperform most of asset classes. While rental income hit hard.

Hence, during investing make a diversified portfolio to mitigate risk. Learn about different asset class and take help of financial advisor before investing large sums of money. Your parents and friends definitely gives you right advise from their prospective but they may not be able to give best investment advice until and unless they themselves belongs to financial field. Which is not the case in most of the cases. Doing your own research is very important. Lot of information is available on internet. If you do not like reading, you can watch Youtube videos. Even all financial advisors are not updating their skills and in some cases there can be clash of interest. Suppose your financial advisor is selling insurance too. He might try to sell you life insurance for your whole family when you only need life insurance for earning members! So, the only option left is self-research. It is your hard earned money, so you are the one to take final decision after checking all the options available and your requirements.

In next part I will discuss another asset class – Stocks and Mutual funds. Please press the like button if you like this article.

Is Gold a Good Investment?

Gold is women’s first love in India. Most of Indian families have some amount of gold in the form of gold jewellery. But very few people actually buy gold as an investment. Indians prefer real estate property over other asset class because of ever increasing population. But from last couple of years land, flats and other real estate properties are not giving any return. Also, this asset class has extremely low liquidity. Because of these problems small investors are looking for other assets.

Government is pushing public towards share market as it has huge disinvestment objective. Since last few months stock market is at its highest level even though economy is going down. Stock market can give high return but it is very risky and need lot of research to make money. That’s why it is better to enter in stock market through mutual funds and always buy on the advice of your financial advisor. To learn about mutual funds please read my blog by clicking here

Keeping money in banks is no longer beneficial due to high inflation. Your savings in banks will reduce with time due to inflation. Thus, to beat inflation, investment in gold is good idea. Gold has higher liquidity than real estate and less risk than equity. Gold can be a good investment if we invest smartly. Besides physical gold, there is several other option of buying gold. You can buy Sovereign gold bonds or you can invest in gold ETF (exchange traded fund) or you can even buy gold mutual funds.

While physical gold can have safety problem, purity problem and buying and selling problem, digital gold can be a better alternative.  Sovereign gold bonds are the best option if you want to invest in gold for longer term. Not only your investment will increase with increasing gold price, but also you will get 2.5% annual return on your gold bonds. You can buy these bonds from any public national bank and even from some private banks that too provides you with the facility to buy them such as ICICI bank.

Other method to investing in gold is ETF gold fund and gold mutual funds. For ETF gold fund you need a Demat and trading account. So if you do not have trading account and don’t want to open one, you can opt for Gold mutual funds which invest in Gold ETF funds. You should also invest in gold to diversify your portfolio. Invest 10-15% of your total investment money in gold. It will diversify your portfolio and save your money from inflation.

Why Mutual Funds Investers suffer losses on Budget day?

This year Budget-2020 is presented on Saturday.  Normally Saturday and Sunday are off days for Indian stock market. However, due to Budget presentation, share market was open and there was a steep fall in BSE Sensex of around 1000 points.

Unfortunately, all mutual funds decided to remain closed on Saturday as usual because as per their offer documents Saturday and Sunday are “Non business days” and NAV is not calculated on these days.

Mutual fund investors face huge loss due to this. All Mutual funds investors were unable to invest or redeem their money on Saturday. Suppose some person wanted to invest money on Saturday in mutual fund then he has to invest it only on monday when again market will be open. On Monday market was recovered and thus he missed the opportunity to buy low.

Logically, when share market is open, Mutual funds should be open too. This is not the first time when budget was presented on an off day. In 2005 also Budget was presented on Saturday. Mutual funds must think about it and in the interest of investors, all mutual funds houses and online discount brokers like Zerodha and Groww must remain open on such holidays. Even if they have to make some changes in offer documents, they must do it.

Millions of Indian Mutual Funds investors are feeling cheated and lose money on third of February 2020. When stock market is open, every investor must have access to invest not just those who directly invest in stocks. I request all Mutual Fund investors to raise their concerns to fund houses to avoid it in future.

Economic slowdown and Indian Budget 2020:

BJP led Indian Government should stop implementing RSS agenda and start listening to economic experts. Presently PM Modi is busy in pleasing few super rich industrialist and businessman. These Businessmen gives highest donation to BJP during election. However, Businessmen are not economic experts; they are expert of running a company profitably. They have their own hidden agenda to generate more profit for their company by requesting government to make favourable policies. They are focussed on their business not on Indian overall economic growth.

Government should trust more on Bureaucrat and let experts do their jobs. If PM or FM need advice they should listen to Nobel Laureate. Even if opposition parties especially our Ex-PM Manmohan Singh, who changed the course of Indian economy in 1991 and again in his tenure as a PM, wants to give advice, Government must be open to listen to his advice. Unfortunately, presently, this is not the case.

A good Government must have a long term vision. Government should focus on new ways to generate revenue rather than selling profit making PSU’s.Reducing corporate tax was a short term solution for long term problem of economic slowdown. Disinvestment of profit making PSU’s is another short term solution. To make a balanced budget, Govt. should focus on Agriculture and farmers.

A realistic Budget is far better than a popular but unrealistic budget. This is because every surprise brings panic in market. Though I am not a economic expert but as much as I learned about economy as an investor I find more and more economic experts suggesting Government to increase spending on infrastructure project which will generate employment and demand in market rather controlling fiscal deficit. Also, reduction in personal taxes are important, which will give purchasing power to people.

An extra ordinary problem needs extraordinary solutions. India is facing huge economic slowdown. GDP is at its lowest level in last 6 years. Everyone has very high expectations from Government, because this Budget will decide our direction in this new decade.  


Fiscal Deficit: The difference between total Income (revenue) and total expenditure of the government is termed as fiscal deficit. It is represented in terms of percentage of national GDP.

GDP= Gross Domestic product: It is a measure of the value of economic activity within a country. It comprise of market values of all final goods and services produced in an economy during a period of time.

Be a Defensive Investor


Broadly speaking, there are two kinds of Investors –Aggressive and Defensive. Aggressive investors are those who are willing to take more risk for more profit, thereby putting their investment at higher risk. Whereas defensive investors are those who are more interested in avoiding any losses on their initial investment. They want to play safe. They are happy with minimum returns.

Investment and gambling are two different things. In investment, you take a calculated risk and do the proper research before investing. In gambling, you leave everything on your luck and wild guess.

So, even if you are an aggressive investor, do proper research before trying to make more profit. Do not just invest blindly on someone advice. Instead of making higher profit you may end up losing all your money. Do not invest on someone’s recommendations or past performance of any share or mutual fund. Past performance does not guaranty future returns.

We all know one universal principle of investing: More risk, more profit. Conversely, it also means that chances of making profit decreases as profit increases. If chances of making profit decrease too much, it becomes gambling rather than investing. In gambling most of people lose money. Similarly, investing with high risk can make you lose your whole money.

Seldom people told stories of peoples making lot of money in very short span of time from stock market. However, there are many more cases where people lost all of their hard earned money. Thus, do not let other’s success stories blind your eyes.

What is the purpose of investing? To make money, right? If instead of making money, you start losing money, there is no benefit of investing. Better, keep your money safe in bank account or in liquid funds. So, by default everyone must be a defensive investor.

If you have some extra money which you do not need for several years, you can invest it in stock market as an aggressive invertor. For high risk and high return, invest in small cap funds or small cap stocks.  

For retail investors and first time investors, defensive investing is the best. Diversify your portfolio and invest in different sectors and different schemes. Be happy with 10 to 15% annual profit on your investment in stock market and mutual funds because no other scheme will give you better returns. It has been observed that in long term (five to seven years), stock market gives good return.  As per your risk appetite, mix your investment in debt and equity.

Below are some other articles on investment:



Disclaimer: Mutual Fund/ stock market investments are subject to market risk. Please read the offer document carefully before investing’

How to Invest intelligently?

Below are some important points about investment which you must keep in your mind while investing.

  1. Diversification: Never put all eggs in same basket. Always invest money in two to three different places like real estate, gold, equity and debt instruments like FD and Debt funds etc.. By doing so, you can minimise your risk of losing your entire investment.
  2. Start Saving and investment early in your life: Time is money. It is not just a saying but a proven fact. Always put your money to earn for you. As you give your investment more time, your return will grow faster due to compounding effect. To reap benefits of compounding, you need to give 5 to 10 years time to your investment. Encourage your youngsters to start investing in safe avenues like PPF and debt funds. Even Rs500 investment over a period of 20-25 years can fetch you big corpus. You can even start with Rs100 in some mutual funds through SIP. To know more about Mutual Funds you can read my article by clicking here.
  3. Discipline and regular investment: Small amount invested regularly can give you bigger amount than big amount invested irregularly. Most often, we wish to accumulate big amount for investment. However, when we have some need, we take out some money from this amount and this way our investment plan remain a plan! Invest monthly whatever surplus you have and discipline yourself to save every month that small amount whatever be the condition. Make regular investment a rule of your life not a habit.Because habits you can change, rules you can’t.
  4. Egg, Chicken and Hen method: Whenever you invest, always invest with short term, medium term and long term perspective.Because you will need money in every part of your life. Thus, investment must be goal orianted like retairement, education, foreign tour and marriage etc. For short term, always keep some money (equivalent to minimum 6 month of your earnings) in saving account or in liquid funds, which can be redeem immediately. For medium term (2-5 years), invest in large cap. Mutual funds, Gold and other such instruments. For long-term investment, invest in PPF, Index funds, FD, NPS, debt funds, gold and govt. securities. You may not get high return but your money will be safe and with time it will grow rapidly.

Happy investing!!!

Caution: Small retail investors must stay away from stock market for some time

Sensex is trading in the region of 43,000 points. A big correction was expected since the start of this year. That correction came in march-April 2020 and within few month, share market again reached its peak. Sensex is climbing higher and higher even after slowdown in GDP and many other negative news such as lockdown due to Covid-19 cases. It seems some players do not wants Sensex to go down and they are pumping money even on small positive news and ignoring negative news unemployment rate, falling sales and Indo-China border conflict.

There is a large disconnect between Indian economy and share market at this moment. Even a slightest negative news can make the market crash. Most of large cap stocks are already overvalued and market PE ratio is at its high, which is the very important indicator of valuation. In such scenario, small retail investors and new investors must not buy new stocks to avoid huge losses. Because stock market can crash anytime and wipe away all your hard earned money in a day or a week.

Wait for correction in stock market for few months before investing. Invest your money in less risky alternatives or keep it in your saving bank account for few months and just wait. If you are very keen to invest, invest through mutual funds which are less risky. To read my post about mutual funds, click here.

Best Investment

Some of us do regular investment in mutual funds, PPF accounts, FD and in some other such instruments to earn passive income. However, there is another type of investment which can give us better returns than any other investment.

This best investment is one where you invest in your own skill development. Here, you can generate several times more return than ordinary investment. Unfortunately, most of us never think about this investment and they have to settle for 10-15% profits.

World is changing very fast. Everyday new technologies are replacing old one. Investing in you is not only rewarding but also necessary. Learn new methods used in your industry, attend seminars, read good books daily, watch YouTube video’s and utilise your free time in creative habits like exercise, playing outdoor games, networking, meeting people etc.

Your health and your knowledge are your best investment. Keep investing to gain best results.