Sitara was a hugely successful film star and earned an eye-popping income. She had an impressive fleet of cars, expensive clothes and jewellery and lived in a palatial mansion. That was during her peak of popularity. Last month, the newspapers reported her tragic death- alone, penniless and abandoned at her old age.
Sitara did not see that her stardom would not last forever. Her income was high, but also carried a high risk of her going out of jobs. Her expenses were driven by her habits. She took too long to curb her expenses. She survived by selling her assets, reducing herself to the penniless situation at death.
Therefore: The first principle in financial planning is to cushion a household's future by creating an investment portfolio that can generate additional income. Mutual funds offer a range of investment products to meet this need.
SAVING AND INVESTING ARE OUR TOOLS TO PROTECTING OUR INCOMES FROM RISK.
Are your assets flexible enough?
Tarun has always been ambitious and hard working. He has to pay EMIs for his house and car, care for his elderly parents and provide for his wife and kids. He is a regular saver. Everything seemed fine, until he suffered an unexpected heart attack at an early age of 42.
The income of Tarun's household which looked stable and adequate is now under risk, until he gets well and resumes work. The family needs support to get back on its feet. . They may also have to manage with a lower income, should Tarun have to take it easy because of health reasons. Tarun fell back on his investment portfolio, built through his careful savings. He partly liquidated his stocks and mutual funds and repaid the loans, so the family is not burdened with the EMI. The lower income would not affect the household, since there are no EMIs to pay. Tarun is confident of building back his portfolio through savings.
Therefore: Every household should ensure that a good portion of the investments are in assets that can be easily utilized to reduce loans and liabilities. Most mutual fund products are highly liquid readily convertible into cash.
UNEXPECTED EVENTS DEMAND HIGHER FLEXIBILITY FROM OUR INVESTMENTS
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