Choose your investment goal
- Beating Inflation
- Inflation rate at India at the time of writing this is 2.8%
- But that rate is an average and your segment inflation could be higher or lower
- Living in a tier 1 city with a classy lifestyle - high inflation rate
- Living on a tier 3 city with a minimal lifestyle - low inflation rate
- By beating inflation you can ensure you don’t lose your Purchase Power Parity (PPP) over time
- Beating the benchmark
- To grow your money
- Better returns than the country’s index (Nifty50, S&P500, etc)
Choose your asset classes
Based on your risk appetite and reward expectation choose your asset class(es). The below is a gross simplification of major asset classes,
| Asset Class | Risk (Average) | Reward (Average) |
|---|---|---|
| Crypto (Alt coins) | Super High | Super High |
| Small cap equity | High | High |
| Large cap equity | Low | Low |
| FD | Super Low | Super Low |
| Real estate | Depends | Depends |
Let your asset class decide your country of investment
- A particular asset class grows only if the government of the country wants it to
- India - the government wants the equity market to grow (Ex: Introduces policies that make it harder to move money abroad)
- US - the government wants the equity market to grow
- UAE - the government want real estate market to grow
- China - poor for equity market because the government does not want the market to grow
If you are investing in the Indian equity market, then also invest in the US equity market
Why? Cause an overlaid comparison of Nifty50 and S&P500 would show you the extremely high co-relation btw the markets
Choose your pace
A methodical investor follows some version of the below journey,
- Start with mutual funds - You understand that the 1% fee means crores on the long run
- Index funds - Nifty50, S&P500, etc
- large cap
- Mid cap and small cap
- Derivatives and Hedging
Find your step and follow along!