Hello Friends!! Wish you are doing very well in your life. Of course if you are aware of your finance aspects you would definitely do excellent in your life!!!! Finance is the most important aspect of our life.One needs to know equity and debt for better investment returns.
Because even though money is not everything it can buy almost everything.
So just be happy to respect Money!
And one more interesting thing – The person who earns more may be rich, but the person handles the money better, is richer!
And to handle the money better is nothing but to invest it wisely!
Wish to discuss this important aspect of investing money wisely in detail.
Broadly there are two options of investing money i.e. EQUITY and DEBT.
In Equity you have opportunity to have more capital appreciation with the risk of even loss of capital, as it is driven by market forces. So it is high risk high return investment.
Contrary to this, debt is secure investment where one can expect to get fixed return on it. So the risk averse people would be more comfortable with it.
Now the question is how to balance your investment in these two categories.
To answer this, there is one simple thumb rule!!!!
Simply invest the percentage equal to your age in DEBT and balance in EQUITY
So if your age is 25 invest 25% of your total investments in debt and 75% in equity. If your age is 40, then invest 40% in debt and 60% in equity.
Simple justification for this –At early age, you can take more risk because your earning life is more and so you can invest more in equity which high risk and high return investment type.
Of course, there are so many other factors which affect the decision of individual to balance the debt and equity like market conditions, Individual’s preference of risk taking, financial responsibilities of the individual and so on. I have discussed in detail how shuffle investments in debt and equity in my article How to shuffle Investments for Best Returns
But still thumb rule the excellent guideline of balancing the investments in equity and debt.
Hope you enjoyed reading this article and it will improve your investment decisions.
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