FLAME Newsletter - January 18, 2012

Investing without research is like playing poker without looking at the cards.
To minimize risks and optimize the possibility of gains, the investor must always do a thorough background check of investment schemes before committing his money and time to it. Investors might be bringing on heavy risks to themselves if they have no idea about the investment they choose. It is better to check the past record of an investment and its future prospects.

A good option is always to start investing early. Investments require time to provide good returns. Also, one must decide the amount of risk he is able and willing to take as investing in equities involves substantial risk. Deciding a time horizon for the investment can help one in planning his investment, savings and expenditure. One must always have an investment plan/strategy in mind to ensure a smooth financial journey. Knowledge and understanding on the part of the investor and some advice, if required, from a trustworthy financial advisor can help an investor make the right investment decisions.
If you were to invest Rs.10,000 every month for 15 years in a mutual fund SIP at the rate of return at 8% you would earn Rs.5,929,472. But if you were to start investing the same amount five years hence, your return would be Rs.3,483,451. That delay would cause you a loss of Rs.2,446,021. 
How to Make An Investment Plan

An ideal investment plan begins by asking oneself the proper questions and coming to the conclusions with a good degree of deliberation and patience. It can be built by looking at the criteria such as the purpose for investing, its use and risks involved, among others.

Purpose: Investments must be made keeping in mind the safety, growth and income they would guarantee. It is important to decide which of these three factors is the most important. An ideal investment would comprise all: complete safety, sufficient income and a growth in principal. However, there is no such thing as a ‘perfect investment’ because if an investment is safe, the income and growth would be lesser. Similarly, if an investment promises consistent income, the growth would be minimal, and if an investment grows, the safety factor would be lower.

It is crucial to determine a time frame about when the investment will be needed. If the money is needed to buy a house in two years’ time, one of the best possible methods could be to lay out a different investment plan than one that will not need funds for another 15 years or so.
Risks: One should always know of the risks involved in investing. Some investments involve high investment risks, those that can empty all the money put in. One way out is to diversify because by doing so, an investor may witness huge swings in value, but the risk of a complete loss is eliminated.
Investment amount: As many investment options need minimum amounts, one must decide on the amount that will be invested before an investment plan is laid out. Investments can be made by lump sums or by monthly contributions. If the sum involved is significant, an investor can choose a variety of options, minimizing the risk of choosing just one.
Right choices: Many people buy any investment product presented to them. It is wiser to thoroughly look into all the choices that meet one’s objective. The benefits and drawbacks of the product should be understood properly before investing in it.

The purchase and sale of identical items in different markets with the intention to make profit.
There is finally a light at the end of the tunnel. After the relentless rate hikes by the RBI to curb price rise while constantly risking growth, the inflation demon has finally shown signs of defeat. In a sharp fall from the previous month’s numbers, the Wholesale Price Index for December came it at 7.47% as against 9.11% in November. Does this mean that a rate cut is on the cards? We will only have to wait and watch. As of now, all eyes are turned towards the RBI’s monetary policy meeting on Jan 24.
Inflation falls to ~7.5% in December
All of us have been hearing the term ‘inflation’ for a while now. We also know that above a certain level, inflation is harmful to the economy. But how many of us actually understand what it means and what its implications are? Read on to find out…
Inflation and Price: Destined To Intertwine
Inflation: The Termite
Are you saving enough for your retirement?
Can’t determine how much is enough for your retirement? Try starting by estimating the amount you might need for a comfortable retirement taking inflation into account. Here is a calculator to help you.
Saving enough for retirement?
FLAME (Financial Literacy Agenda for Mass Empowerment) is an IIFL initiative to promote financial literacy amongst the masses in order to make them an integral part of India's spectacular growth story.
In an era of accelerating GDP and rising per capita growth, financial literacy has become more critical than ever before such that we all reap the tangible benefits of the nation's economic prosperity. Financial inclusion has been quite high on the governmental agenda, given its emphasis on widening the Banking & Financial services network across the country. IIFL's FLAME initiative stands committed to complement this effort by helping common people gain financial growth and security though better awareness and education on the variety of financial products while avoiding the lure of and loss from unrealistic claims made by unscrupulous agents and ponzi schemes.
Our objective is to light a FLAME, as the name suggests, which will set ablaze a chain of FLAMEs across the country. The new-found light of knowledge will undoubtedly dispel the dark clouds of financial illiteracy and ensure the bright sunshine of financial growth and prosperity
This portal is but one of the various IIFL initiatives that would be part of FLAME.

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