The only thing worse than investing late is not investing at all.
Use the power of compounding
Compounding is the best reason for starting early. The sooner you begin investing the better – every day that you are invested is a day that your money is working for you.

Check out: How the power of compounding works

Invest as per your needs
If you know you will need cash next year (down payment for a house, child’s college fee etc), opt for a shorter term, low capital risk investment (such as liquid/ gilt/ money market funds, bank term deposits or top-rated company deposits/ fixed income investment options).

Similarly, invest money that you will not need for 3-5 years in the stock market.

Evaluate your investing skills
Finding the right money manager for your investments is important. You could manage your money yourself, use professional money managers, or invest through mutual funds.

Financial planning is not about financial expertise and hard work. All it needs is the right approach and discipline.

Investment planning is simpler than you think, and more rewarding than you would imagine.

Your age and investment size does not matter, nor do you have do be a money whiz – just do it NOW. So where do you start?

Identify your financial goals
What are your goals? What are you saving for – A house? Child's education/ marriage? New car? World tour? Retirement? Quantify this in terms of amount of money needed, and time horizons.

To understand the process of defining and quantifying your future goals, use our Retirement Planner . Even if you do not have retirement planning as one of your financial goals, this planning tool should help you understand the process of financial goal planning.

Understand your risk profile
Depending on our income and needs, we all have different capacity for risk. We also have a different risk tolerance, based on our individual psychological make-up. Understand your risk profile and plan your portfolio accordingly.

Find out: Your risk profile

Plan your asset allocation
Returns should not be your primary objective; you could end up taking more risk than you are financially/ psychologically capable of. It helps seek expert advice and create a portfolio with the right spread across asset classes to minimise risk of incurring a loss.

Calculate: Your asset allocation

It is always prudent to buy an individual life insurance policy because
a. The amount of insurance you are covered for may not be a very large sum
b. If your employer decides on cost-cutting, you may no longer be insured
b. If you decide to leave your employer, you may no longer be covered
c. The older you are when you buy insurance, the higher is the premium you have to pay for the same insurance.

Source: SBI Life Insurance

Equity markets are highly volatile. The shares prices vary considerably on day-to-day basis. In such a scenario, if you put a lump sum amount of money, you could either gain a lot or lose a lot. It would then become a kind of a lottery.

Instead, if you invested small amounts regularly, you will average out your total cost of acquisition. Thus, by doing Systematic Investment Planning (SIP) you will cut down the volatility risk and increase your chances of making money.

Debt markets, on the other hand, are relatively quite stable. If you put your money today or tomorrow or next month, it is not going to make much difference. As such, even if you were to put your lump sum in a debt fund, you are not likely to lose.

Therefore, the answer is simple:
• If it is a share or an equity fund, do SIP
• If it is a bank FD, NSC or debt MF, both SIP and lump sum are alright

A person who have dependents (especially if they are the primary provider) or significant debts that outweigh ones assets, then you need insurance to ensure that your dependents are looked after if something happens to you.

However, buying life insurance doesn't make sense for everyone. If you have no dependents and enough assets to cover your debts, survivor living expenses, outstanding life goals and the cost of dying (funeral, estate lawyer's fees, etc.), then insurance is an unnecessary cost for you.

You could use some of the insurance policies as investment products.
Insurance companies now offer a variety of products that allow the insured to choose his investment option. There are policies that offer a fixed guaranteed rate of return, some offer a market-linked rate while some allow the insured to select his investment option. In the current state of the market, yields from insurance products can be expected to vary in the range of 6.5 -7.5 - 8% per annum (pre tax).

Source: SBI Life Insurance

Although past performance is no guarantee for the future, it is a useful way of assessing how well or badly a fund has performed in comparison to its stated objectives and peer group. A good way to do this would be to identify the five best performing funds (within your selected investment objectives) over various periods, say 3 months, 6 months, one year, two years and three years. Shortlist funds that appear in the top 5 in each of these time horizons as they would have thus demonstrated their ability to be not only good but also, consistent performers. You can engage in such research through moneycontrol's Find-A-Fund query module.

Remember that nothing is free of cost. Even if you take ULIP plans, Money Back Plans, Endowment Plans or Whole Life Plans every plan attracts mortality charges which you have to pay. If you take term plan then in very small amount you can take higher sum assured.

When you read you begin with A-B-C. When you sing you begin with Do-Re-Mi. And when you invest in stocks you begin with business-company-shares.

Before you embark on your journey to invest in equities, teach yourself how the stock market works. Read this easy guide

Bond prices are primarily affected by 2 factors:

The current interest rate- The price of a bond, and therefore the value of your investment fluctuates with changes in interest rates. For example, you buy a bond for Rs.1,000 that pays 5% interest. If you hold the bond until maturity, you get your Rs.1,000 back plus the 5% interest payments you've received from the issuer. However, between the time you bought the bond and the date it matures, the bond won't always be worth Rs.1,000. If interest rates rise, your bond is worth less than Rs.1 000. If interest rates fall, your bond is worth more than Rs.1,000.

The credit quality of the issuer- If the rating agencies change the credit rating of the issuer while you hold the bond, the value of your bond will be affected. If the credit rating declines, the value of your bond will also decline. However, if you hold the bond to maturity and the issuer doesn't default, you will get your entire Rs.1,000 back.

When the bonds are initially priced, the maturity also helps determine the price. Longer maturities tend to pay higher interest rates than shorter maturities. That's because your investment is exposed to interest-rate risk for a longer period of time.

The factors affecting interest rates are largely macro-economic in nature:

• Demand/supply of money- When economic growth is high, demand for money increases, pushing the interest rates up and vice versa.

• Government borrowing and fiscal deficit- Since the government is the biggest borrower in the debt market, the level of borrowing also determines the interest rates. On the other hand, supply of money is controlled by the central bank by either printing more notes or through its Open Market Operations (OMO).

• RBI- RBI can change the key rates (CRR, SLR and bank rates) depending on the state of the economy or to combat inflation. RBI fixes the bank rate which forms the basis of the structure of interest rates and the Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR), which determine the availability of credit & the level of money supply in the economy.

While purchasing a property, you have to look at the approved layout plan, approved building plan, ownership documents, carryout title search, etc.

Balanced Schemes aim to provide both growth and income by periodically distributing a part of the income and capital gains they earn. These schemes invest in both shares and fixed income securities, in the proportion indicated in their offer documents (normally 50:50).

Bonus shares are shares issued by the companies to their shareholders free of cost by capitalization of accumulated reserves from the profits earned in the earlier years.

Close-ended mutual fund Schemes have a stipulated maturity period wherein the investor can invest directly in the scheme at the time of the initial issue and thereafter units of the scheme can be bought or sold on the stock exchanges where the scheme is listed. The market price at the stock exchange could vary from the schemes NAV on account of demand and supply situation, unit holders expectations and other market factors. Usually a characteristic of close-ended schemes is that they are generally traded at a discount to NAV; but closer to maturity, the discount narrows.

A commodity futures contract is an agreement between two parties to buy or sell the commodity at a future date at today's future price. Futures contracts differ from forward contracts in the sense that they are standardized and exchange traded. In other words, the parties to the contracts do not decide the terms of futures contracts; but they merely accept terms standardized by the Exchange.

CRR or cash reserve ratio is the minimum proportion / percentage of a bank’s deposits to be held in the form of cash. Banks actually don’t hold these as cash with themselves, but deposit the same with RBI / currency chests, which is considered equivalent to holding cash with themselves.

When a bank’s deposits increase by Rs. 100 crore, and considering the present cash reserve ratio of 6%, bank will have to hold additional Rs. 6 crore with RBI and will be able to use only Rs. 94 crore for investments and lending. Therefore, higher the CRR, lower the amount that banks can lend. Thus RBI can control the liquidity by changing the CRR i.e. increase CRR to reduce the lendable amount and vice-versa.

SLR or statutory liquidity ratio is the minimum percentage of deposits that a bank has to maintain in form of gold, cash or other approved securities. It is the ratio of liquid assets (cash and approved securities) to the demand and term liabilities / deposits.

RBI is empowered to increase this ratio up to 40%. An increase in SLR restricts the bank’s leverage position to pump more money into the economy, thereby regulating credit growth.

Source: sptulsian.com

Cumulative Convertible Preference Share are a type of preference shares where the dividend payable on the same accumulates, if not paid. After a specified date, these shares will be converted into equity capital of the company.

Cumulative Preference Shares are a type of preference shares on which dividend accumulates if remains unpaid. All arrears of preference dividend have to be paid out before paying dividend on equity shares.

Debt instruments typically have maturities of more than one year. The main types are government securities called G-secs or Gilts. Like T-bills, Gilts are issued by RBI on behalf of the Government. These instruments form a part of the borrowing program approved by Parliament in the Finance Bill each year (Union Budget). Typically, they have a maturity ranging from 1 year to 20 years.

Like T-Bills, Gilts are issued through auctions but RBI can sell/buy securities in its Open Market Operations (OMO). OMOs cover repos as well and are used by RBI to manipulate short-term liquidity and thereby the interest rates to desired levels. The other types of government securities include Inflation-linked bonds, Zero-coupon bonds, State government securities (state loans).

The primary issuances are governed by SEBI in terms of SEBI (Disclosures and Investor protection) guidelines. SEBI framed its DIP guidelines in 1992. Many amendments have been carried out in the same in line with the market dynamics and requirements. In 2000, SEBI issued “Securities and Exchange Board of India (Disclosure and Investor Protection) Guidelines, 2000” which is compilation of all circulars organized in chapter forms. These guidelines and amendments thereon are issued by SEBI India under section 11 of the Securities and Exchange Board of India Act, 1992. SEBI (Disclosure and investor protection) guidelines 2000 are in short called DIP guidelines. It provides a comprehensive framework for issuances buy the companies.

What are DVR shares? 29 May 2012 at 11:00 am DVR or differential voting rights shares are like ordinary equity shares but with differential voting rights. Shares can have higher or lower voting rights as compared to the ordinary equity shares. However, Indian regulations do not permit companies to issue equity shares with higher voting rights. Hence, Indian DVR shares provide for lower voting rights as compared to ordinary equity shares.

Companies issue DVRs for several reasons such as prevention of a hostile takeover, bringing in a passive strategic investor or dilution of voting rights. DVR investors are generally compensated with a higher dividend rate. This makes the DVRs attractive for retail investors who do not want control in the company, but are looking at the long-term growth prospects.

DVR shares are listed on the stock exchanges and are traded in the same manner as ordinary equity shares, but they mostly trade at a discount, sometimes as high as 30%, due to fewer voting rights.

Tata Motors, Gujarat NRE Coke, Pantaloon Retail, Jain Irrigation are some of the Indian companies that have issued DVR shares.

E.g.: Tata Motors’ DVR shares carry voting rights which are one-tenth of the ordinary equity shares. The DVR shareholders are entitled to an additional 5% dividend, over and above the ordinary equity shareholders. Tata Motors DVR are trading at 800 or 36% discount to the ordinary shares, which are at trading at Rs 1,245 (as of 23rd November 2010).

Source: sptulsian.com

An equity share, commonly referred to as ordinary share also represents the form of fractional or part ownership in which a shareholder, as a fractional owner, undertakes the maximum entrepreneurial risk associated with a business venture. The holders of such shares are members of the company and have voting rights.

These funds invest exclusively in government securities. Government securities have no default risk. NAVs of these schemes also fluctuate due to change in interest rates and other economic factors as is the case with income or debt oriented schemes.

Growth Schemes are also known as equity schemes. The aim of these schemes is to provide capital appreciation over medium to long term. These schemes normally invest a major part of their fund in equities and are willing to bear short-term decline in value for possible future appreciation.