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<blockquote data-quote="esanthosh" data-source="post: 1923760" data-attributes="member: 33844"><p><u>Gold</u>:</p><p></p><p>Gold is a hedge against <em>Inflation</em>. Gold is not a hedge against Equity markets. It may have worked in recent years due to Helicopter Ben, but it has not always.</p><p></p><p>Here is the analysis of last ten years of returns: <a href="http://www.vips.edu/vjr_causal.pdf" target="_blank">http://www.vips.edu/vjr_causal.pdf</a></p><p></p><p>Another one: <a href="http://www.equitymaster.com/5minWrapUp/charts/index.asp?date=05/26/2012&story=1&title=Returns-from-Sensex-vs-Gold-since-1981" target="_blank">http://www.equitymaster.com/5minWrapUp/charts/index.asp?date=05/26/2012&story=1&title=Returns-from-Sensex-vs-Gold-since-1981</a></p><p></p><p><u>Why I suggested what I suggested</u></p><p></p><p>From his query, </p><ul> <li data-xf-list-type="ul">I assume [USER=38834]@avi[/USER] is going to earn more in the days ahead. He just does not need these funds for the next 3 years. This is not his entire networth that needs to be allocated.</li> <li data-xf-list-type="ul">But, since he says he needs it after 3 years, capital preservation is the key.</li> <li data-xf-list-type="ul">He says he does not know about investing money.</li> </ul><p>My suggestion:</p><ol> <li data-xf-list-type="ol">Investing in FD ensures safety of capital. It does not protect him from Inflation.</li> <li data-xf-list-type="ol">I mentioned 6 months expenses for Emergency FD. If he is serious, he needs to track every expense and know for sure what he needs for 6 months. That, in my experience, is a good habit to have.</li> <li data-xf-list-type="ol">Watching your money grow in FD is worse than watching a paint dry. If it works out well i.e., he really does not need the funds for the next 3 years, he will remember how long it took to earn modest returns. He would not make the mistake of assuming 1 Crore in FD is enough for retirement.</li> <li data-xf-list-type="ol">If it goes wrong, he will know that even though we can plan all we want, life can bowl a googly any time to disrupt the plans. That will make him become nimble with his future financial plans and be alert to any changes.</li> <li data-xf-list-type="ol">In case it works out, an RD + SIP combo will be decent. Again, not talking in terms of returns, but in terms of experience. When markets go up, he would wish that he had invested more in the Equity portion and when the markets go down, he would know that RD was a better route. In the end, if all goes well, he would have experienced volatility of markets in the short term, need for safe keeping some funds away from the markets, but also (hopefully) returns from equity over the longer term. <br /> More than anything, this would induce discipline - not to touch your excess funds. Secondly, it will help avi learn about his own risk appetite.</li> <li data-xf-list-type="ol">In the mean while, if he gains knowledge, he can experiment with a small portion of what he earns in stocks, add more to existing SIP, start another SIP etc., etc., </li> </ol><p>That was my intention for this suggestion. What you read from other's views (including mine) is just information. When you take the idea and implement in a manner that suits you, it becomes knowledge. Information has limited shelf life, knowledge becomes ingrained into the psyche.</p></blockquote><p></p>
[QUOTE="esanthosh, post: 1923760, member: 33844"] [U]Gold[/U]: Gold is a hedge against [I]Inflation[/I]. Gold is not a hedge against Equity markets. It may have worked in recent years due to Helicopter Ben, but it has not always. Here is the analysis of last ten years of returns: [url]http://www.vips.edu/vjr_causal.pdf[/url] Another one: [url]http://www.equitymaster.com/5minWrapUp/charts/index.asp?date=05/26/2012&story=1&title=Returns-from-Sensex-vs-Gold-since-1981[/url] [U]Why I suggested what I suggested[/U] From his query, [LIST] [*]I assume [USER=38834]@avi[/USER] is going to earn more in the days ahead. He just does not need these funds for the next 3 years. This is not his entire networth that needs to be allocated. [*]But, since he says he needs it after 3 years, capital preservation is the key. [*]He says he does not know about investing money. [/LIST] My suggestion: [LIST=1] [*]Investing in FD ensures safety of capital. It does not protect him from Inflation. [*]I mentioned 6 months expenses for Emergency FD. If he is serious, he needs to track every expense and know for sure what he needs for 6 months. That, in my experience, is a good habit to have. [*]Watching your money grow in FD is worse than watching a paint dry. If it works out well i.e., he really does not need the funds for the next 3 years, he will remember how long it took to earn modest returns. He would not make the mistake of assuming 1 Crore in FD is enough for retirement. [*]If it goes wrong, he will know that even though we can plan all we want, life can bowl a googly any time to disrupt the plans. That will make him become nimble with his future financial plans and be alert to any changes. [*]In case it works out, an RD + SIP combo will be decent. Again, not talking in terms of returns, but in terms of experience. When markets go up, he would wish that he had invested more in the Equity portion and when the markets go down, he would know that RD was a better route. In the end, if all goes well, he would have experienced volatility of markets in the short term, need for safe keeping some funds away from the markets, but also (hopefully) returns from equity over the longer term. More than anything, this would induce discipline - not to touch your excess funds. Secondly, it will help avi learn about his own risk appetite. [*]In the mean while, if he gains knowledge, he can experiment with a small portion of what he earns in stocks, add more to existing SIP, start another SIP etc., etc., [/LIST] That was my intention for this suggestion. What you read from other's views (including mine) is just information. When you take the idea and implement in a manner that suits you, it becomes knowledge. Information has limited shelf life, knowledge becomes ingrained into the psyche. [/QUOTE]
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