Mr. Gerard Colaco: Some aspects of investment have already been touched upon. For example, an emergency fund is in some ways an investment. However, its objective is more insurance oriented, and we therefore do not consider an emergency fund to be part of our investment portfolio.
Similarly, a retirement fund is certainly an investment. The time horizon of a retirement fund is extremely long, that is from the time you start it, right up to the date of retirement. In the case of a young person of less than 30 years, the time horizon of a retirement plan would probably run very close to 30 years. However, a retirement fund is not a general investment fund. Its purpose is specific. It is to take care of your needs during the period of your life after retirement, when your abilities to work and earn are either non-existent or vastly reduced.
Finally, a house is also an investment. However, the objective here is to provide security and shelter to you and your family and not to treat your house as an investment, to be encashed when the price goes up. Therefore, the value of one residential house is also generally not included in the value of your investment portfolio.
When we come to investment, we assume that you have taken out adequate insurance, established an emergency fund and started a retirement fund, no matter how small the monthly contributions to the retirement fund may be. If you have already purchased a house, there is nothing like it. If not, this aspect must also be attended to.
Do not undertake general investment unless and until your emergency fund, insurance and the commencement of your private retirement fund have been undertaken. Also, ensure that you have no undesirable or excess debt. Only then, embark upon a general investment fund, regardless of whatever laudable objectives such as providing for your child’s education and so on you may have. A financial plan cannot and should not be built without a sound foundation. Insurance, emergency funding, retirement funding and the acquisition of a residence constitute the foundation of a financial plan.
The foundation comes first. Then the superstructure. So, your general investment plan comes after a certain foundation is laid. Regardless of when you actually start your investment fund, it is vitally important to be acquainted with a few fundamentals of investment. From this point of view, we are giving you a brief introduction to investment.
Investment is generally made for 3 purposes.