Some Basic Rules To Get Optimal Returns on Investments

Some Basic Rules to get Optimal Returns on Investments

Some Basic Rules To Get Optimal Returns on Investments

What are investments?

Investment is one of the most critical pillars of a well-planned financial future. In these times of rising inflation, merely saving a portion of your income is never enough. We should invest to help our money grow faster than it does in a dormant savings account. This expansion helps us in achieving many of our long-term and short-term objectives. Investments assist us in combating inflation, allowing you to save money.

 

Where can one invest?

You can invest in a fixed deposit plan, mutual funds, provident funds, real estate, and a variety of other options. However, there is one type of investment that many people have found to be the most appealing. The high potential for high returns that it makes is the explanation for its success. Of course, we’re referring to the phenomenon of stock market investing.

So, instead of thinking of the stock market as a way to make quick money, see it as a long-term investment option. Stocks should be purchased with long-term returns in mind, as stock market investments outperform other assets in the long run.

 

Follow Three Investing Rules:

Rule #1: I Do Not Invest In Individual Stocks. When you invest in single stocks, you’re practically wasting your resources at a single place.

Rule #2: Understand the risk tolerance in the context of where you are.

Rule #3: Don’t Worry, Just Stay Calm.

Most investors want to make investments that will provide them with high returns as soon as possible while minimizing the chance of losing their principal. This is why so many people are on the lookout for top investment plans that will allow them to double their money in a matter of months or years while posing little to no danger.

Just follow the below given strategies to get optimal returns on the investments:

 

Lay Down a Financial Map

Some Basic Rules to get Optimal Returns on Investments: Before you make a financial decision, sit down and take an honest look at your entire financial situation. The first step is to figure out your goals and risk tolerance, either on your own or with the help of a financial planner.

Evaluate Your Comfort Zone in Taking Risk

Every investment involves some degree of risk. The reward of taking risk is the potential for higher investment returns. If you have a long term financial goal, you are likely to get better returns by investing in equity funds rather than restricting your investments to less riskier assets like FDs.

 

Always Consider Risk of Inflation and Taxes

The biggest concern with less riskier assets is inherent habit of generating negative real returns.

 

Proper Mix of Investments

A mix of asset classes like equity funds and bonds, along with cash can help you to optimize your returns and reduce your risk of losses during different market conditions.

 

Multifariousness

Always reduce your overall diversify your funds even within an asset class that should help risk considerably.

 

Consider Rupee Cost Averaging

Regular or periodic investments by way of SIP or STP will help you to invest in different market cycles and generate better returns. This strategy can be used especially if you are investing for the long term and in equity funds.

 

Rechecking

This helps bring your portfolio back to your original asset allocation plan in case it deviates. This will help you book profit on the assets that have performed well and also buy assets cheap during slowdowns.

 

Think Twice before Investing in Junk Schemes

Every extra amount of return that is above the market return comes with some extra risk. So avoid junk schemes which offer to double your money within a short span of time. Invest only in products from institutions regulated by the government.

The basic objective of running any business organization is to earn profits. Profits determine the financial position, liquidity and solvency of the company. They serve as a yardstick for judging the competence and efficiency of the management. profit planning is therefore a fundamental part of the management function and is a vital part of the total budgeting process.

The management determines the profit goals and prepares budgets that will lead them to the realization of these goals. However, profit planning can be done only when management is aware about the various factors which affect profits. Some of the important factors affecting profits are as follows:

  • Selling Price– Variation in the selling price causes variation in the amount of profit also. An increase in the selling price increases the profits and vice versa.

 

  • Cost:- The term ‘cost’ means ‘ the amount of expenditure (actual or notional) incurred on or attributable to a specified thing or activity’. A variation in the cost also affects the amount of profit.

 

  • Volume:- The term ‘volume’ refers to the level of activity. This may be expressed in any of the following manner:
    • Sales capacity as a percentage of maximum sale;
    • Value of sales;
    • Quantity of sales;
    • Production capacity as a percentage of maximum production;
    • Value of production;
    • Quantity of production
    • Direct labour cost;
    • Direct labour hours; and
    • Machine hours.

Units for a desired profit = (Fixed Cost + Desired Profit) / Contribution per unit

Sales for a desired profit = (Fixed Cost + Desired Profit) / P-V Ratio

 

Takshila learning lets you explore the understanding about investments and the optimal strategies that can give you the best returns on investments. This understanding is very significant for an aspirant to know before going further in the program and appearing for the subsequent exams.

Takshila Learning provides CMA Video Lectures which you can browse any number of times. The CMA Online Classes and CMA Pen drive Classes offered by Takshila Learning have been designed by the expert faculty covering the entire syllabus embraced by ICMAI for the CMA Exam for June / Dec Session.

Takshila learning gets you ready for the Government sector after the CMA program

 

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April 13, 2021

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