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Robert answered on
May 09 2022
PowerPoint Presentation
Introduction
Gone are the days when people use to only rely on their savings for future security. In today's world, savings may not be adequate to ensure financial safety. Idle money kept in your savings bank account or locker may also not serve the purpose.
That is because of two reasons – one, the idle cash in your bank account is an opportunity loss as it is not capable of earning more money, and
Second, it does not have the potential to beat inflation.
People no longer rely only on their money for long-term stability. Savings may not be enough to provide financial security in today's environment. Idle money in your savings account or locker may also be in effective. This is due to two factors: first, the idle cash in your bank account represents an opportunity cost because it is not capable of producing additional money, and second, it does not have the ability to outperform inflation.
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Importance of Investment
Investing ensures present and future financial security. It allows you to grow your wealth and at the same time generate inflation-beating returns. You also benefit from the power of compounding.
Furthermore, investments have the potential to meet your financial goals, such as purchasing a house, accumulating retirement corpus, and building an emergency fund, among others.
Investing instils a sense of financial discipline as you develop a habit of setting aside a particular amount every month or every year towards your investments.
Some investment vehicles like Equity Linked Savings Scheme (ELSS), Public Provident Fund (PPF), National Pension System (NPS), etc., help to minimise your tax liability.
Investing gives financial stability in the present and future. It helps you to build wealth while still generating inflation-beating returns. Compounding is also advantageous to you.Furthermore, investing may help you achieve your financial objectives, such as acquiring a home, developing a retirement fund, and establishing an emergency fund, among others.Investing inculcates financial responsibility by establishing a habit of putting away a specific amount each month or year for your holdings.Some investment vehicles, including as the Equity Linked Savings Scheme (ELSS), Public Provident Fund (PPF), National Pension System (NPS), and others, can help you reduce your tax burden.
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Diversification
Diversification is a technique that reduces risk by allocating investments across various financial instruments, industries, and other categories. It aims to maximize returns by investing in different areas that would each react differently to the same event.
Most investment professionals agree that, although it does not guarantee against loss, diversification is the most important component of reaching long-range financial goals while minimizing risk. Here, we look at why this is true and how to accomplish diversification in your portfolio.
Diversification is a risk-reduction strategy that spreads investments over a variety of financial instruments, sectors, and other categories. Its goal is to maximise profits by investing in many sectors that will react differently to the same occu
ence.Although diversity does not guarantee against loss, most investing professionals believe that it is the most crucial component of achieving long-term financial goals while limiting risk. We'll look at why this is true and how to diversify your portfolio in this article.
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For Instance
Let's say you have a portfolio that only has airline stocks. Share prices will drop following any bad news, such as an indefinite pilot strike that will ultimately cancel flights. This means your portfolio will experience a noticeable drop in value.
You can counte
alance these stocks with a few railway stocks, so only part of your portfolio will be affected. In fact, there is a very good chance that these stock prices will rise, as passengers look for alternative modes of transportation.
You could diversify even further because of the risks associated with these companies. That's because anything that affects travel will hurt both industries. Statisticians may say that rail and air stocks have a strong co
elation. This means you should diversify across the board—different industries as well as different types of companies. The more unco
elated your stocks are, the better.
Let's imagine you just have airline equities in your portfolio. Any negative news, such as an indefinite pilot strike that would result in flight cancellations, may cause stock values to fall. This indicates that the value of your portfolio will decrease significantly.You may offset these equities with a few railway stocks, affecting only a portion of your portfolio. In fact, when passengers seek alternate forms of transportation, there is a significant likelihood that stock prices will climb.Because of the risks involved with these firms, you may diversify even further. Because anything that has an impact on travel would harm both sectors. Rail and air stocks may have a high link, according to statisticians.
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Diversification Explained
A diversified investment portfolio includes different asset classes such as stocks, bonds, and other securities.
But that's not all. These vehicles are diversified by purchasing shares in different companies, asset classes, and industries.
For instance, a diversified investor's portfolio may include stocks consisting of retail, transport, and consumer staple companies, as well as bonds—both corporate- and government-issued. Further diversification may include money market accounts and cash.
Different asset types, such as stocks, bonds, and other assets, are included in a diversified investment portfolio.That's not all, though. By acquiring shares in several firms, asset classes, and industries, these vehicles are diversified.A diverse investor's portfolio, for example, may contain equities from retail, transportation, and consumer staples firms, as well as corporate and government bonds. Money market accounts and cash can be used to diversify further.
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Financial Analysis
As per the above analysis we can say that new method that we have choose have gained good...