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(Precious) Words of Wisdom : "Wall Street makes its money on ACTIVITY, you make your money on INACTIVITY." ~ Warren Buffett

Numerology for best investments with maximum returns

Many people have belief in the mystical power of numbers. Hence, they choose to have their "lucky" number for their homes, cars, etc. In fact, so deep is their faith in numerology, that they even juggle with the letters in their name to make it "numerologically" lucky.

We, financial planners, too believe in the power of numbers; but with a difference.

Instead of MYSTICAL, our faith lies in the MATHEMATICAL power of numbers.

I have, from time to time, shared with you many of the tools that form part of what I call the Financial Numerology.

I have, from time to time, explained how you can use them to identify the best investments and strategies, that would yield the maximum returns; besides avoiding the dangerous pitfalls.

One of the most powerful tools in this regards, as you may remember, is Compounding. In my blog post 'Compound Your Way to Wealth', I had presented before you the basic rationale behind compounding. And the magical effect of the same is that 'Housewives too can become millionaires'.

Mis-selling is rampant. Promises of phenomenal gains — e.g. 195% Returns! Interested? — are always misleading and false. Here, IRR or the Internal Rate of Return, comes to your rescue. It helps you calculate TRUE investment returns which can be a lot different from what the agents / banks / companies / adverstisements / brochures proclaim. My simple mantra, in this regards, is Keep bad investments away with IRR.

On similar lines to the false promises of super-normal returns on deposits, you will be offered loans that supposedly come at very low interest rates. Hence my repeated warning... BEWARE!!  8% = 14.68%

Don't know if you are financially fit and fine? Again, financial numerology is your best guide. The key Ratios to evaluate your financial health include Liquidity Ratio, Idle-cash Ratio, Savings Ratio, Debt to Income Ratio and Solvency Ratio. You must evaluate these to ensure that you maintain top financial health at all times.

For the regular and disciplined mutual fund investors, who are often in a fix on how to calculate their gains, here's the Simple trick to calculate SIP returns in excel. And for the lump sum investments, CAGR is the right way to calculate your returns.

Those who have adequate money (for diversification), adequate knowledge (for right stock selection) AND adequate time (for regular monitoring) can consider investing in stocks directly. But for that you should be aware of 
- Qualities of an equity share that can deliver stunning returns;
- What’s PEG Ratio all about; and
- Economic Value Added - Is the company Creating or Destroying Wealth?

Risk-averse investors, however, prefer Bonds. Buying bonds, especially from the secondary market, requires clear understanding of Yield to Maturity (YTM). However, as I have explained There is nothing cryptic about YTM.

Concluding, only with the right knowledge of Financial Numerology you would be able to buy the so-called "lucky" investments that have the potential to multiply your personal wealth.

An Investment In Knowledge Pays The Best Interest ~ Benjamin Franklin

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