There is a dichotomy in the behavior of most of us. Before buying a new mobile phone we visit all the possible websites trying to figure out different features of the required mobile phone and its price. We even go to the length of reading all those reviews which are barely readable with naked eyes and finally after talking to a trusted friend we take a decision on buying a mobile phone. Nevertheless, when it comes to buying a mutual fund or insurance or stock, or most of the financial products our most trusted partner in our bank relationship manager or an insurance agent, or a broker who is an expert in giving tips. The reason for such contradictory behavior is primarily due to a lack of knowledge of different financial products and not being interested in knowing more about them. To help all such readers, we bring you a quick checklist of things to look into before buying a financial product.
Returns
Returns is the single most important factor for which you invest. You sacrifice your current expenditure to enjoy its fruit sometime in the future. For this sacrifice you require returns. There are different ways of measuring returns. It needs to be analyzed with the right perspective so that you can make informed investment decisions. All returns beyond one year should be annualized. The purpose of annualizing is to standardize the investment period as though each investment was made only for one year. This enables easy comparison of investments across various time periods. All annualized returns are represented as ‘per annum’. Secondly, these returns should be adjusted for tax.
This story is from the June 07, 2021 edition of Dalal Street Investment Journal.
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This story is from the June 07, 2021 edition of Dalal Street Investment Journal.
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