Summary of "NISM VA Mutual Fund Chapter 1- Investment Landscape | 2024 - New Syllabus| #nism #nismcourse #nism5a"
Summary of "NISM VA Mutual Fund Chapter 1 - Investment Landscape | 2024 - New Syllabus"
This video by Deepak from "Finance with Nobita" serves as an introductory guide for the NISM Mutual Fund Distributor 5A certification, focusing on the first chapter: Investment Landscape. It simplifies the lengthy syllabus into manageable parts and emphasizes understanding financial goals, investment principles, risks, and asset classes.
Main Financial Strategies and Concepts Presented:
- Importance of Setting Financial Goals:
- Investment decisions should be based on individual financial goals, which vary by age, needs, and life stage.
- Examples of financial goals include retirement planning, children’s education, buying a house, marriage expenses, vacations, starting a business, or emergency funds.
- Goals must be specific, prioritized, and time-bound.
- Three-Step Process to Achieve Financial Goals:
- Set Goals: Define what you want to achieve.
- Set Priorities: Distinguish between important and desirable goals.
- Investment & Time: Allocate money and allow sufficient time for investments to grow and meet goals.
- Difference Between Savings and Investment:
- Savings is setting aside money for safety and liquidity, usually with low returns.
- Investment involves putting money into assets or businesses with an expectation of higher returns.
- Both are essential; savings provide the capital to invest.
- Factors to Consider Before Investing:
- Safety: Protecting the capital.
- Liquidity: Ease of converting investment to cash without significant loss.
- Return: Expected profit or yield.
- Convenience: Ease of investing (e.g., online Mutual Funds).
- Minimum Investment: Some investments require minimum amounts (e.g., Mutual Funds starting from ₹100).
- Taxation: Different investments have different tax implications.
- Asset Classes Overview:
- Real Estate: Mostly for self-use, less liquid, can provide rental income.
- Commodities: Gold and silver are popular; Commodities can be risky and short-term.
- Fixed Income: Bonds, debentures, government securities provide regular income with varying credit risk.
- Equity: Shares offer capital growth and dividends, generally higher returns but higher risk.
- Inflation and Its Impact:
- Inflation erodes the purchasing power of money.
- Investments must generate returns higher than inflation to grow real wealth.
- Formula for future value considering inflation: A = P (1 + r)n Where P = present value, r = inflation rate, n = number of years.
- Distinction between Nominal Return (not adjusted for inflation) and Real Return (adjusted for inflation).
- Types of Investment Risks:
- Liquidity Risk: Difficulty in selling an asset quickly without loss (e.g., Real Estate).
- Credit Risk: Risk of default by bond issuers.
- Market Risk: Price fluctuations due to market conditions.
- Includes market-wide risk, company-specific risk, and industry/sector-specific risk.
- Interest Rate Risk: Inverse relationship between bond prices and interest rates.
- Behavioral Risks: Emotional biases like availability bias, confirmation bias, herd behavior, loss aversion, overconfidence, and recent market event impact.
- Risk Management Techniques:
- Risk Avoidance: Avoid investments without proper knowledge.
- Risk Mitigation: Adjust portfolio based on market expectations (e.g., shifting bond maturities).
- Diversification: Spread investments across asset classes to reduce risk (Warren Buffett’s “don’t put all eggs in one basket”).
- Risk Profiling:
- Assess investor’s risk appetite based on:
- Need to take risk (financial goals).
- Ability to take risk (financial capacity and investment horizon).
- Willingness to take risk (psychological comfort).
- Use tools like SEBI’s riskometer for Mutual Funds to match investments with risk profile.
- Assess investor’s risk appetite based on:
- Asset Allocation Approaches:
- Strategic Asset Allocation: Fixed allocation based on goals and expected returns.
- Tactical Asset Allocation: Dynamic adjustment to exploit market opportunities.
- Rebalancing: Periodically adjusting portfolio to maintain target asset allocation.
Step-by-Step Guide to Financial Goal Achievement and Investment:
- Step 1: Define clear, specific financial goals (short, medium, long term).
- Step 2: Prioritize goals into important and desirable categories.
- Step 3: Determine the amount to invest and the time horizon.
- Step 4: Understand inflation and ensure investment returns beat inflation.
- Step 5: Choose asset classes based on risk, liquidity, and returns.
- Step 6: Assess risks involved and manage them through diversification, risk
Category
Business and Finance
