August 2010

Selling Options : Sometimes it can be made to good use.

Selling Options , Calls, Puts, Tutorials, Options Strategies, Butterfly, Straddle, Strangle,  What Investors should know.

Options, by definition, are a wasting asset. The time decay, declining volatility etc. eat away into the premiums of the options.

Many option buyers learn this fact the hard way by watching their option contracts expire worthless many times. The majority of options expire worthless (estimates are somewhere > 80%). Given that the majority of option buy positions are worthless at the time of expiration, some investors decide that they will sell options and collect the premium. Prima Facie, this sounds like an easy way to make money.

However, there is no free lunch in the investment field as well. There are stories of how some of the brightest people in the world have blown up their accounts while selling ‘Naked’ options. Selling options, when there are no underlying holdings to support in case of adverse move is known as ‘Naked’ Selling.

Nevertheless, Options selling, when used intelligently, can be used to complement/protect your portfolio holdings to a certain extent and also make income in return.

Investors earn a premium for every put and call option which they sell. This premium is paid by Option Buyers.

Selling Short

When you sell shares of a company which you do not own, then it is called short selling. Selling a stock short is taking a view that the shares will keep going down. One way of doing this is by selling Futures. And another way of doing this is by selling Call Options.

In a short sale you have to buy back the shares at some point. And thus, short selling exposes you to unlimited risk, if the price of the stock starts to increase.

There are numerous strategies in Options. I will present just one example of how the selling of call options can be used by investors :

 

Covered Call Strategy

A covered call strategy is strategy for bullish investors to make some money and benefit from a stock that will move little over the short term.

This is often employed when an investor has a short-term neutral view on a stock or when the Stock has made a decent up move in a relative short period of time, and is expected to be range bound in the near term.

Let us take the example of Larsen and Toubro (LNT) recent price action again.

Assume, Investors bought the stock @ 1400 or Traders bought it at the breakout above 1660 in early June. Next, the stock made a decent up move in a month’s time frame and touched almost 1900. Investors could have written an options contract selling one call option of LNT Jul 2010 strike price 1900 at Rs 40. (However, Remember that one call option gives an investor the right to buy 125 shares).

You would earn income because the buyer of the call option has to pay you a premium for the option. If the stock’s price drops stays below the strike price (In this case , LNT did close well below Rs 1900 by Jul end) , the call buyer will never exercise the contract and the entire premium is yours to keep (Remember one lot of LNT is 125 and that makes the premium monies Rs 125 * 40 = Rs 5000).

If the stock’s price increases above the strike price, the call buyer may choose to exercise the contract. You would then either have to buy shares on the open market or deliver your shares to the buyer.

This is one of the common ways in which large institutional players generate income on the basis of their large holdings which they can always use to hedge in case of any adverse move against their options position.

Again, the intention of this article is to arouse interest and make aware of Options Selling. It does not advocate that you start selling options. Please understand, when selling options, remember that although your profit potential is limited to the amount of the premium that you receive, your losses can be rather large.

Also, My personal view is that selling PUT Options carries higher risk than Selling CALL options. This is because , in general, stocks generally use the stairs when going up (Sellers of Call Options can manage risk here ….) , But Jump out of the window when coming down. (Sellers of Put options can run out of exit options or get trapped …)

LNT has indeed made a good move from 1660 to 1900 and which I have been tracking since Early June …

You might be interested to know about Buying Options here…

July 2010

Buying Options : What Investors should know

“The greatest ignorance is to reject something you know nothing about”

If you are invested in Equity Markets or Mutual Funds, it is wise to be AWARE of the derivative product called ‘Options’.

Buying Options , Calls, Puts, Tutorials, Options Strategies, Butterfly, Straddle, Strangle,  What Investors should know

Options have seen increase in popularity over the past few years. Television shows like CNBC, NDTV Profit, ET Now etc devote a significant amount of time discussing option strategies for investors. Investors and traders are attracted to options due to the low cost involved. There is a possibility of high return potential in case of options trading as well. However there is an equal or more probability of downside of trading in options which needs to be understood as well.

Let us take a look at a few of the more popular strategies for buying options.

Types of Options

Call Options

Call options give an investor the right to buy shares at an agreed upon price. Investors that buy calls are not obligated to ever exercise the option. Call options can be owned for as short as a few days or long as a year. Investors that purchase call options are bullish on a particular stock.

Put Options

Put options are just like call options except they give investors the right to sell shares of a stock. Bearish investors buy put options so that they can benefit from a stock that they expect to decline. Watching the activity in put options is a great way of judging when investor sentiment is turning bearish.

Buying call options are cheaper than buying shares of stock.

Call options allow investors to buy shares of a company for a much cheaper price than buying the actual shares themselves. For example, say you wanted to buy 125 shares of LNT (Larsen and Toubro) at 1700. Your total cost would be Rs 2,12,500. I have taken the figure of 125 shares because lot size of LNT is 125. (Pls note that futures and options are bought in lots)

A cheaper option would be to buy call options. You could buy one CALL option of Jul 2010 series , strike price 1700 (lot size 125) for Rs 50. Your total cost would be Rs 6,250 (125 shares x Rs50). You would only pay Rs 6,250. If shares of LNT are higher than 1750 (Strike price + cost of purchase Rs 50) by series end, you could exercise the option and make a profit. If not then you can just let the option expire. Your total risk is only Rs 6,250. For this investment you could control 125 shares of LNT.

Buying put options can limit your downside risk.

Buying a put option is a great way for investors to limit their downside risk. It is like taking insurance against your assets.

Let’s say you already owned 125 shares of LNT and the stock is currently at Rs 1700. Let us assume that you are sitting in good profits, you are afraid that the stock is going to decline, and at the same time you do not want to sell your shares.

You could protect your profits by buying a put option.

You could buy one PUT option of Jul 2010 series, strike price 1650 (lot size 125) for Rs 50. . If shares of LNT are lower than 1650 (Strike price – cost of purchase Rs 50) by series end, you would exercise the option and make a profit. By doing this, you have unlimited profit potential on downside and at the same time have limited your losses (which is depreciation of holdings of LNT against profits made by the PUT option.)

This strategy is known as a protective put strategy. If the stock drops substantially, you can always exercise your put option. If shares rise you can do nothing and just let the option expire.

Put investors can also employ a married put strategy. A married put strategy is when an investor buys shares of a stock and buys a put option on the same shares at the exact same times. The stock and option are considered married since they were both purchased at the same time.

If used properly, options can cost less, limit risk, and have the potential for higher returns.

Many investors are completely unaware about options. The intention behind this article is to make aware of the basics of options. Nevertheless, One should definitely understand the implications and understand the risks involved before buying or trading in options.

ps: I have used the example of LNT (Larsen and Toubro), because it has been on my radar since it broke out of 1700 range earlier this month. More here …..

I will cover selling options and implications later sometime.

RBI hikes short-term rates; CRR unchanged

rbiThe central bank raised interest on Tuesday in the face of inflation has been above 10 percent for the past five months. The Reserve Bank of India said it would continue to normalize policy in line with the growth and inflation rate in the economy.


The RBI lifted the repo rate, at which it lends to banks, by 25 basis points to 5.75 percent, which was in line with expectations, but raised the reverse repo rate, at which it absorbs excess cash from the system, by a steeper than expected 50 basis points to 4.50 percent.

The central bank left the cash reserve ratio (CRR) unchanged at 6 percent.

Inflation in India emerged last year in the wake of a poor monsoon that drove up food prices but has spread broadly throughout the economy, spawning protests against a government whose voter base is predominantly poor and rural.  New Delhi’s decision to increase fuel prices is expected to add nearly a percentage point to wholesale price index (WPI) inflation starting in July and led the opposition to call a one-day nationwide strike early this month.

The government is hoping on normal summer monsoon rains to results in better crop yields and ease pressure on food prices, and has said inflation should decline to 6 percent by December, which in my opinion is a task in itself…..

The Simple rules to Successful Investing – Part 1

The Simple rules to Successful Investing , Understanding Investing, Stocks, Mutual Funds, Tax, Insurance, Estate, Wills.

“No amount of talking or reading can teach you swimming. You will have to get in the water.”

There are these little general rules which are applicable and useful for decision making and taking actions. And these simple rules are applicable in so many aspects of life, they are just some small reminders, some common-sense stuff which are really useful.

And yes most of them are applicable in investment planning as well.

a. Perfect Plan – Forget it.There is no such thing as a perfect investment plan and no such thing as a perfect time. The right time is now. Tomorrow is and always will be uncertain. Perfectionism is the enemy of action. Do not let perfect investment plan or a perfect time to invest stop you from starting.

b. Analysis Paralysis – Too much thinking will often result in getting stuck.Some thinking is good — it’s good to have a clear picture of where you’re going or why you’re doing this — but don’t get stuck thinking. Just do.

c. Get the Broad Picture and Start. You need to get the broad picture in your mind. You need to understand your future requirements or what do you want to achieve (goals). You need to know the time you have to meet those requirements. And, then you should have the broad plan to meet the goals. Once you have the broad picture. Get going.
All the planning will take you nowhere unless you take that first step, no matter how small it is.

d. Keep things Simple and take Small Steps. Small steps always work. Little tiny blows can break down that mountain. And then each step counts. Keep the big picture in mind, but start by taking small steps.

Understand the advantage of Investing Early here.

The Little Rules to successful action To be contd … Part 2.

Octopus Outshines Investment Bank Experts….

Opaul_the_octopusctopus Paul , has been making headlines world over in this years FIFA world cup. It’s predictions on winner of football (soccer) matches is hitting Bull’s eye. Specially after the German defeat in Semis to Spain, the popularity of Octopus Paul has soared to new heights. It is a superstar. Although Germans are now demanding death threats. PETA is demanding the octopus be let free.

Well, almost anyone who is someone (except human ‘Pauls’) has an opinion on Paul …….

At least my children now know a little more about the octopus species. OK So much for that……

Now, I knew the following would come comparing the Octopus to Investment/Bank experts …And here we go at a cnbc story…  UBS, for example, gave Spain just a 4 percent chance of winning the trophy with their past performance model. The Netherlands, who meet Spain in the final Sunday, had just an 8 percent chance, the bank said. And our dear expert – Paul has nearly been flawless – o to say – ….. More at the following cnbc report

Somehow , Brought to my mind the famous orangutan coin flipping competition.

In 1984 Columbia Business School hosted a celebration of the fiftieth anniversary of Graham and Dodd’s book Security Analysis. The two principal speakers were Rochester’s Michael Jensen, an academic who had come out strongly in favour of the Efficient Market Hypothesis and Warren Buffett. Jensen stated that it was hard to tell if any of the followers of Graham and Dodd were really superior investors. He argued:

If I survey a field of untalented analysts all of whom are doing nothing but Flipping coins, I expect to see some who have tossed two heads in a row and even some who have tossed ten heads in a row.

This was a perfect entry for Buffett who envisaged a national coin-tossing contest. Each day, everyone in the United Sates flipped a coin with only those who continually flipped heads staying in the contest. After twenty days only around 215 flippers would remain. Buffett continued (Buffett, 1984):

But then some business school professor will probably be rude enough to bring up the fact that if 225 million orangutans had engaged in a similar exercise, the results would be much the same—215 egotistical orangutans with 20 straight winning flips.

Buffett then argued that there were important differences. What if, for example, all the orangutans came from the same zoo? When you replace head-flippers with “superinvestors”, he argued that this is precisely what happened. Buffett declared that there was an unusually high concentration of successful coin flippers, that is, “superinvestors”, in the investment world that “came from a very small intellectual village that could be called Graham-and-Doddsville”.

So coming back to Octopus Paul and the few super analysts in the investment world who get it right.
The big question to ponder is : Is it chance or is there something more to it….

Larsen and Toubro showing good signs after a long time.

lnt-jul20102

LNT Stock is a favourite of Investor community and is also one of the top holdings in most of the Mutual fund Portfolios.

It has recently broken above 1700 levels after almost 9 months with decent amount of volume backup.

If you are one of those who wants to own this in your portfolio , then, now – it can be accumulated on dips for investment purposes.

The 50,100,200 Exponential Moving averages levels mentioned above in the chart can be used to accumulate.

May 2010

You can SIP in stocks – The 10 Steps

You can SIP in stocks , Systematic INvestment Planning, The 10 Steps, Dollar Cost Averaging, Rupee Cost Averaging, .

SIP or Systematic Investment Planning is a concept. It means that you periodically invest your money. It inculcates discipline, takes out the emotional part of decision making and allows you to seamlessly participate in investing.

However, many people associate or assume that Sipping is available only with Mutual Funds. Thereby, they miss the whole essence of what SIP is all about. Indeed, mutual funds offer automatic withdrawals from your bank account to be invested in Mutual funds. And they promote SIP (albeit, not aggressively, you see, they want you to make the payments upfront and not by SIP).

However, it is to be noted that SIP is a concept and can be applied while purchasing shares or equity as well. Yes, you heard me right, you can SIP in stocks.

There are many cases, when you would want to SIP in equities like – (a) You want to build your own portfolio of stocks with a tilt towards a particular sector (b) You are a Buy-and-Hold type of Investor (c) You are interested in investing in good Dividend Yielding Stocks (d) You do not want to incur the annual AMC charges in the range of 1.75 -2.5% on your portfolio value year after year which all the actively managed Mutual Funds charge. Check this post. (e) You are interested in investing in ETF’s (Exchange Traded Funds) etc.

There could be ‘n’ number of reasons where you are interested in investing in stocks. Once you have made up your mind that you want to invest in equities, you can go about doing a Systematic Investment Plan for your equity investment.

10 Steps to SIP in Stocks :

1. Decide on the intervals (or periods) in which you would like to SIP. eg: Monthly 25th of every month

2. Decide on the periodic SIP amount you would like to invest e.g.: Rs 14,000/- every month

3. Use a Calendar to set reminders. (I am a google addict You can use google calendar) or use whatever means (Physical Calendar, tell your wife etc.)so that you will receive a reminder call about the periodic investment. And you can set aside the funds to be allocated for investments.

4. Decide on the asset classes to invest. e.g.: ETF’s like Goldbees, NiftyBees, Stocks like HDFC, Cipla, BHEL, ITC etc. Debt ETF like Liquidbees (can be used for the for the debt component)

5. Decide the amount to be allocated to each asset e.g.: Rs 2,000/- each.

6. And that’s it you are all set to start sipping. Execute the Plan. Once you get a reminder Just go ahead and buy the assets.

7. Do a periodic review of your purchases every quarter in order to assess the performance.

8. Have a performance yardstick. Aim for good returns (Hey, there is no harm for trying to beat the index by a couple of percentage points year on year).

9. Measure your performance against the returns. Review.

10. Apart from TIME-WISE SIP, you can also go a step ahead. You can also do a PRICE-WISE SIP as well intelligently. If there is a > 10% drop in price of a stock between your two planned purchases, you can go ahead and pick up the stock and skip the next installment of that particular stock.

Eg: You pick up Rs 2000/- worth of Cairn India @ Rs 200/- on 25-Jan-2010. You have plan of picking up Rs2000/- worth of Cairn India on 25-Feb-2010. However , if Cairn India were to drop by > 10% or more in Jan itself , then go ahead and pick up in the stock in Jan and skip the Feb-2010 installment.

There are many Index ETF’s which are available and which are a good, low cost alternative to mutual funds which you can (or rather should) avail.

Understand what type of Investor you are, if You are the Saver Kind of Investor, go ahead SIP in Stocks. Step-by-Step over a period of time you would have created a portfolio of stocks which will generate income for you in form of dividends and which will also appreciate with time to generate wealth over a period of time.

March 2010

Costly Investment Mistakes to avoid at all Cost – Final Part – IV

Costly Investment mistakes Part 4, Investment Planning, Financial Advise, Stocks, Mutual Funds Investing, Life Planning, Goal Oriented Planning.

In the process of investing, one often makes mistakes.

Here are some of the most common investing mistakes which investors generally make and some of which even I had made in the earlier part of my investment years

Of course, learning from the mistakes, continually, the investing experience has truly been rewarding experience.

You can also cultivate good habits of investing by avoiding the following mistakes.

This series is in continuation to the earlier 3 posts which contains the first 7 common mistakes committed by investors. You can read posts here. (Part I, Part II and Part III)

This post (Part IV) will throw light on the following common 3 mistakes generally committed by investors:

#8. No proper grip on Diversification – If Too little is bad , Too much is no good either

Don’t put your all your eggs in one basket.

There is wisdom is this old saying. Diversification is essentially spreading out investments across different types of asset classes.  (Different kinds of asset classes like Equities, Debt, Gold, and Real Estate etc.)

Even within one asset class – say, equities / mutual funds, portfolio has to be diversified eg: having stocks spread across sectors like Power, Banking, Oil, Telecom sectors, FMCG etc.

Example of over diversification: Having 20 different mutual funds, 50 different stocks and portfolio size is say 5lacs.

Example of under diversification: Having 2 stocks each of 2.5Lacs and both are from Oil sector.

Now, Great investors like Buffet and Munger of Berkshire Hathway, do engage serious money in specific stocks. However, you need to understand that they do intensive research, have access to top management of companies and are into serious investing business.

But for people , looking for investment avenues with the objective – that over a period of time it beats inflation, generates sufficient retirement corpus, provides emotional security, beats the debt instruments by couple of percentage points annualized, which does not provide sleepless nights —- for all such investors,having an optimal diversified portfolio is the way to go.


#9. Not paying attention to Fees, Expenses, Commissions, Taxes involved

If you think education is expensive, try ignorance.

Do you know that themajor earnings source of Mutual fund Providers(Players) are not via entry load (which is now banned by SEBI) , or via exit load (Incidentally these costs are the most advertised). They make their money thru thejuicy AMC charges, which each mutual fund charges you annually. So if you own around 10lacs of mutual fund. You are paying around 25,000/- Rs annually just for holding the units(Assuming highest expense ratios of 2.5% pa). The expenses get factored into the NAV (Net Asset Value) of the Mutual Fund Units. It is intangible and most investors do not feel the pain.

Do you know that over a period of 10 years, or 15 years what kind of negative impact this annual expense ratio business can have on your portfolio? This is over and above the widely known fact that around 80% of the mutual funds worldwide areknown to underperform the Indices. And the fund manager is also subject to performance pressures from the fund house and so has to keep churning his portfolio in order to keep up with the pressure of performing leading to further expense costs. This is one of the reasons I personally do not like mutual funds which do a lot of churning. (You can get the information on portfolio turnover and various expenses of mutual funds from websites like www.valueresearchonline.com or www.mutualfundsindia.com.)

Do you know that ULIP’s (an Investment+Insurance product) carry various expenses which ca be as high as 45 – 60% in the first year. There are umpteen number of charges like (premium allocation charges, mortality charges, admin charges, fund management charges etc, service tax) However the same is never explained by agents.

Do you know the various types of charges associated when you buy/sell shares? There are brokerage charges, service tax, education cess, securities transaction tax (STT), Stamp Duty, Exchange Levy etc.

It makes sense to be aware of these and various other charges involved so that you can make informed choices towards your way to successful investment.

#10. Stop trying to Copy others and Understand your self

Always be a first rate version of yourself instead of a second rate version of somebody else.

Please understand that there is no one-size-fits all solution in the field of investments. Needs and Wants, Risk taking capabilities, vision, emotional quotient, varies from person to person. Many investors make a mistake in simply copying a friend’s (or a relative’s) strategy. Please understand that the strategy might work for him or her. But you need to assess your own situation before jumping into investments and regretting later.

Example: You friend might be doing Futures and Options and Speculation and he might be perfectly all-right with it. He might be having a substantial portfolio base (maybe a good ancestral inheritance) and would be willing to take the additional risk in search for higher returns. However the same strategy of jumping into F&O might not be good for you, if you are basically looking for investments to fulfill your child’s education needs.

Avoid the above common investment mistakes mentioned in this series and become a aware, intelligent and wise investor.

Costly Investment Mistakes to avoid at all costs – Part III

Costly Investment mistakes Part 3, Investment Planning, Financial Planning, Stocks, Mutual Funds Investing, Life Planning, Goal Oriented Planning.

In the process of investing, one often makes mistakes.

Here are some of the most common investing mistakes which investors generally make and some of which even I had made in the earlier part of my investment years

Of course, learning from the mistakes, continually, the investing experience has truly been rewarding experience.

You can also cultivate good habits of investing by avoiding the following mistakes.

This series is in continuation to the earlier 2 posts which contains the first 5 common mistakes committed by investors. You can read posts here at ( Part I and Part II )

This post ( Part III )  will throw light on the following common mistakes generally committed by investors:

#6. Having Unrealistic Expectations from Investments & Wrong understanding of Risk

Indexes (Sensex and Nifty) have gained more than 85% returns from the lows of March 2009. All the TV channels and newspaper headlines have started to focus on this aspect a lot andfuel greedin common people. Similarly just 2 months earlier to March 2009, or so,  when there seemed no end to the global markets falling down, were down more than -ve 50% , the same TV channels and newspapers were fueling fearsinto the minds of the people.

Expecting similar returns consistently from the stock markets is one of the common mistakes. This happens when expectations from the market are unrealistic (like doubling money in 1 year. etc).

The other side is when there is fear in the markets there perception that markets are extremely risky and all investments should be moved to safe instruments like FD’s etc.

Point is :

Markets test patience and reward conviction.

1. Equity Markets cannot keep rising 100% year on year every year & cannot keep falling 50% year on year every year.

2. There are various phases to the markets, long periods of range bounded ness, sudden spurts either up or down due to sentiments, global factors etc.  All this causes violent moves in the markets in short term. In the long run or long periods of time 5yr, 10yr, 15yr the ups and downs and returns from the marketseven outtoyield mean (or average) realistic returns. Being aware of this point is important.

3.Riskin equity marketsappears very highin short period of time. HoweverRisk in Equity markets is reduced significantly when investments are spread over long periods of time.

4. Risk and Returns are inseparable. Once the objective is clear which is get better returns over a period of time, then you must be willing to invest in instruments which carry more risk, intelligently. And marry the risk with passage of time to yield good returns.

#7. Leaving Investments in Auto Mode – No Periodic Assessment, No periodic Re balancing

You do periodic health checkup with the objective of finding if there is any need to take preventive measures to keep the body in good shape. If you are gaining weight and becoming overweight, you need to start taking steps to cut down on the weight. Similarly, if you are losing weight and have become underweight, you need to start taking steps to regain health.

Similarly, periodic assessment of portfolio (once a quarter, every 6 months at least) is necessary. This has to be done with the similar objective of taking preventive measures (if at all required) to keep the portfolio in good shape. Portfolio rebalancing has to be done as per asset allocation.

However, many investors make mistake of leaving the portfolio in auto mode once the investments have been made. Investments is indeed a long term process, but If some investment goes sour, and it is not acted upon in a timely manner,  it probably becomes too late / or too costly to get the portfolio back on track , if preventive measures are not planned and executed.

Final Part to be contd…… You can read the final installment here at Part IV

February 2010

Purpose of Investments

Purpose of Investments, Wealth Management, Wealth Generation, Accumulation, Distribution, Estate Planning, Tax Planning, Power of compounding.

The world of finance can be intimidating, But as Raplh Waldo Emerson says “Fear always springs from ignorance”. The stock market and so called greater financial world is not complicated once you become aware of the basics of investing and dispel fear of ignorance.

First let us see What is not a Investment? Now, This is fun….

First of all, Investing isn’t a get-rich-quick scheme. (There are other risky, very risky avenues of speculation to get-rich-quick which very often turn to get-poor-quick for people with no discipline and patience. Remember – High Risk , High Return, Less Risk, Less Return) . Investing is not speculation. Investing is not buying stocks on a “Hot Tip”. Always remember a Hot Tip leads to a bottomless Pit.:-). Investing is not following the herd which often leaves the investors high and dry. Investing is not listening to channels to analysts and always clicking on your portfolio to see it (along with your heartbeat) fluctuate on a daily basis. Investment should not be done emotionally (Oh, my uncle’s wife’s son’s friend’s sister wants to sell me a insurance cum investment policy, How can I say No. Well — Learn to say No. There are many things in life where you have to say No. ).  Investment is also not just about returns.

So that brings us to What is a Investment : Well, What does wikipedia have to say : “Investment is the commitment of money or capital to purchase financial instruments or other assets in order to gain profitable returns in form of interest, income, or appreciation of the value of the instrument”

Investing is putting your money to work for you in order to generate wealth. Generally Money is earned by income generated for some work done for which we trade our precious time. Problem is: for more money, you have to work more hours and give more time. And time is a limited resource. One way is to make your money work for you and start earning. Quite simply, making your money work for you maximizes your earning potential.

goal_purpose

Again, Investments have to be planned and done with a purpose, a meaning, and should be done to realize goals of life. Investments are not a one-size-fits-all manner and are individual specific, situation specific. Goals like, Retirement , Child Education, Child Marriage, House Purchase in future, Purchasing assets in future, — goals in different times/ stages of life. etc. And so Investment Planning is utmost important. Plan , Plan , Plan and then execute. Look at the big picture and do not miss the forest (long term enrichment goals) for the trees (unplanned short sightedness)

There are many different ways you can go about making an investment. Stocks, Mutual Funds, ETF’s , Money Market Liquid Funds, bank FD’s etc., or real estate , or  starting your own business. It does not matter which method you choose for investing your money. However, the objective is always to put your money to work over long periods of time (5 yrs-10yrs-15yrs+) with adequate margin of safety, and let the magic of compounding take over,  so that it beats inflation and generates wealth and fulfills the purpose and more or less  achieves the goals.

This is the most important concept in investing.