Skip to main content

Understanding your appetite for financial risk

Chasing returns is a good goal, but ...

Are you underestimating the inherent risks while chasing lofty goals like - 18 percent annualized returns via equities?

Or doubling your property worth in 5 years via real estate?

Or hoping to double your money via cryptocurreny?

Are you someone who looks at fixed returns instruments like FD/ PPF etc as something that is for losers?

Well,

I am no one so say which asset class will give what returns (except fixed returns instruments) but when you are "sold" something with a "grantee" of "assured" x% returns, do you see the risks? Or is seeing risks is for the boring or losers or unexciting people?

When you are chasing 15  percent returns via equities, do you understand that there may be times when the returns may be higher but there may be times when returns may be lower, or even negatives. Historically it has always been good and will hopefully continue to be, but are you so over-enthusiastic that you even put your daily expenses or contingency fund at risk of permanent loss of capital because you chose to ignore the risk?

Or do you ignore the risk of liquidity (rather, lack of it) while investing in real estate to such an extent that you face a liquidity crunch if anything urgent comes up and you may be looking to do a distress sale of your fancy apartment?

Each of us have our own assumptions and expectations and capacity, but are we asking the right questions as far as risk appetite is concerned? 


Comments

  1. This is a knowledgeable post. One should know his goals as well as ability to save for future. One can’t be assured about which asset class will give what returns but by getting some advice from an expert, you can get an idea. I too got consultation and thorough advice from a certified financial planner india india and he provided me a list of best opportunities to invest in according to current market scenario.

    ReplyDelete

Post a Comment

Shop @ Amazon

Popular posts from this blog

Get cashback while doing online shopping

Originally published on BeingFinWise __ Cashbacks are an amazing way to save money while shopping. More so while you do online shopping. In addition to regular deals and discounts, you can get cashback if you go via affiliates . This way you can get cashback on your online shopping, over and above your regular deals. Some of the popular affiliate networks offering cashback on online shopping in India are Cashkaro ,  Gopaisa , Pennyful etc.

What's the purpose of investing?

"Investment" - This word is much used and often much abused one. One keeps on hearing this almost all the time be it in office or catching up with friends or attending a family functions - almost everywhere. More so when we are fed with lot of information about how one needs to make money work to get more money. However, for a lot of people, the clarity on one question is often lacking - What is the purpose of investing? And even if one knows his/ her purpose of investing, it is often not implemented in real life. For instance, purpose of one's investments may be having sufficient funds in times of need. Yet they may opt for a personal loan when faced with pressing need for money. Based upon my observations, below are some of the most common purpose of investments (in no particular order) I invest because there is some sufficient funds lying with me and I can get great returns. I am investing for some specific goal - buying a house, education of kids, m...

An area of darkness ?

The title of this post finds its origins in a novel with simlar name written by VS Naipaul. Set in India, some 40 years ago or so, this is a kind of travelogue of author's brief stay in India where he found it to be full of superstitions, ignorance and darkness! Many decades and many MNCs and malls later, few parts of India seemed to have chucked off that tag, but there are many places that haven't and continue to remain shrouded in ignorance. Move few hours away from a city, travel in a second class train compartment or a dilapidated state transport bus and you get to see the dark underbelly of India Shining. As one of the characters in the movie Rang De Basanti says "Yahan zinda rehne ki jung mein logo ki zindagiyan nikal jaati hai" . So true it seems! My day today was spent being kind of lost in similar thoughts. To start with, I when I boarded the ST bus, a woman was wailing. She may be in her 20s or something, but she was crying in some peculiar musical tone. At...

Somewhere @ Nowhere - The Book

FINALLY .... After a tryst with so-called-creativity, I have come up with a book -  Somewhere @ Nowhere. You can have a sneak peek at the story & a few pages from the publisher's website and order the same & get it home delivered anywhere in India/ Abroad. Details as mentioned below- - Preview and get the book home delivered from HERE Also, you can join the following groups - - Orkut Community - Facebook Page Hope you like the work. Would appreciate a feedback. Till then ... Happy Reading!!! And yeah, please spread the word (relying on word of mouth & word of blog publicity) :-) ___ Update (18/02/2010) - Thanks for the initial response to the book :) Update2 (25/ 02/ 2010) - Thanks for the feedbacks on the book those who have read it. (hope to get a feedback by others soon). Encourages me to overcome inertia and write more! Meanwhile, those who ask for why is it currently not available in traditional retail outlets - well, I hope it wil...

Snaps from The Himalayas

Some glimpses of one of the best landscapes in the country. Why long for Alps when our own old, enigmatic yet beautiful Himalayas provide such magnificent and picturesque sceneries!! Have a look. Enjoy. Location - Garhwal Region, Himalayas which lie in the state of Uttrakhand.