PRISM

Based on my learnings from the book (Rich dad...) and other inputs I put to-gether a simple investment principle called the PRISM.

PRISM stands for 5 different investment avenues that people can look at. I have shared this with many people.

Provident Fund
Real Estate
Insurance
Stock Market
Mutual Funds

Why PRISM?
PPF is awesome tool available in India, it works on Compound interest and the rates are always good. The catch is that there is limit of 70k INR per FY. Everyyear I max this limit and look forward to have a corpus build before retirement.

Real Estate is by and large the best in terms of returns in any part of India. 2003 was the tipping point for RE in Bangalore. People who invested before 2003 made a killing by booking good profits. Some unluckyones missed the wave. But another wave will come (we do not know when) and smart guys will make a killing. RE is a good investment vehicle and any point in time one should have EMI going and planning for the next. Apartments are believed to return less profit than sites. Today to my mind the best is a plot in a good gated community.

Insurance is must and a wise investor will always cover his liablities. Any point in time the total cover should be equal to the total liablilty. In any eventuality the family should not be additionally burdened with debts/loans. The best and cheapest form of Insurance is a term cover with no returns.

Stock Market is a very tantalizing in terms of returns, it can be very risky as well. Like the current recession / slow down, many investors are fleeing the market, some are ready to book losses. I look at the SM from a very large window, in bad times the window just gets bigger. I have 3-4 year windows to book profit. Being a salaried person - I do not want to park my lumpsum bonus / incentive in SM, but a self governed SIP in the SM is a good idea. I have selected a set of Class A stocks from BSE and have started a SIP into them. If I get good returns - I will book profit - take my cost out - leave the profit there and exit the stock. In todays situation this looks foolish but with a large time horizon this is the best time to invest.

Mutual Fund was my first investment vehicle, investors should consider this and the ratio between SM and MF will a function of propensity towards equity trading.

Fixed Deposits and Recurring Deposits cannot be key investment options for the wise investor, at best it is a feeder to say something like a Real Estate investment.