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Breakthrough Strategies To Prepare F

O November, 2013

Do Your Assets Match Y

Need H

Of course, we have got to prepare ourselves for End of India. And we are likely to be confronted with an extremely uncertain economic environment. Consequently, we have to ensure that the most important and most basic needs of our family are taken care of in the most secure manner. And what better way to do this than invoke the hierarchy of needs theory by the famous psychologist Abraham Maslow. People familiar with his work would know that his need hierarchy pyramid ensures that our most basic needs are given topmost priority, exactly the objective we want to achieve. The bottom of the pyramid denotes the means to satisfy most basic and elementary needs. As one moves up the pyramid, elementary needs being taken care of, once can afford a slightly higher risk profile to seek better returns to satisfy tertiary needs.

The Need Hierarchy

Safe debt instruments (10-20%) Gold (5-10%)

Safe stocks (20-30%) 20-30%)

Unleveraged property (3040%)

Cash (5-10%)
Source: Equitymaster

Allow us to elaborate on the means to secure elementary, secondary and tertiary needs. (1) Emergency liquidity: The need for cash to meet very short term and emergency liquidity needs is best addressed by keeping a portion of money (5-10%, or maybe more depending upon liquidity needs) in cash or very liquid assets. (2) Owned accommodation: Having an owned accommodation, preferably minimally leveraged one is the top priority for everyone. Therefore once the short term liquidity needs are taken care of, one must try to reduce the debt obligation, if any, on the owned accommodation. The unleveraged property could possibly for

Breakthrough Strategi

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Breakthrough Strategies To Prepare F

O November, 2013

(3) Hedge against inflation, currency risks: In our opinion gold continues to remain the one and only safe haven asset that can act against the risk of inflation and currency volatility. However, speculating on the price of gold is akin to speculating on any other asset class. We recommend investors to hold only 5(4) Safe, low return investments for short term needs: Financial goals that need to be met in a span of less than 2 years need investments that offer very stable returns. Low risk fixed income instruments provide such safe returns in shorter tenure. The returns however cannot beat inflation over the long term. We recommend having 10(5) Relatively risky, high return investments for long term needs: For financial goals that are to be met over very long term one needs investments that can fetch inflation beating returns. Planning for hout making investments in stocks that are certain to offer safe but relatively higher returns over the long term. We recommend having 20-30% of

However, it requires a mention that investing in equities can come only after the investments for elementary and near term needs are taken care of as per the hierarchy.

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