Transcripts
1. Introduction: Hey, everyone. Welcome to
Personal Finance for real life. If you have ever felt
uncertain about money, where to save, where to invest, how to avoid debt traps, or how to build long
term financial security, this course is designed for you. In this course, I break down personal finance into clear
structured building blocks. You will learn how to manage income, spending,
saving, investing, and financial protection in a practical real world context. We cover emergency funds, fixed and recurring deposits, provident funds, equities, mutual funds, index
funds, bonds, credit scores, loans,
insurance, gold, real estate, alternative investments,
and most importantly, asset allocation and strategy. But this course is not just
about financial products. It is about decision making. I emphasize why behavior matters more than income
in wealth creation, why discipline builds,
financial security, and how building systems is more powerful than
relying on motivation. This course is ideal for
students, working professionals early investors and
anyone who wants structured financial clarity
without jargon or hype. At the end of the course, there's a practical project that will allow you to apply
what you have learned, helping you translate
theory into a structured financial
framework you can use. This course is created strictly
for educational purposes. It does not provide
personalized or generalized financial legal
or investment advice. All financial decisions
should be made based on your individual
circumstances and where necessary
professional consultation, I am Ricky Lahiri, a decision scientist
with seven years of academic experience in
marketing, consumer behavior, and decision science,
and five years of industry experience in financial and operational
consulting. Let's begin.
2. Personal Finance Foundations: Hey, everyone. Welcome
to a new lecture. And today, I'm going to talk about personal
finance foundations. What is personal finance? Well, it's all about
managing income, spending, saving,
investing protection. You make some income, you
have an income source. You spend some
money out of that, hopefully not more
than 30, 40, 50%. Rest of it, you save.
How do you save? You invest it in equity, you invest it in shares, stocks, fixed deposits, mutual funds, bonds,
et cetera, right? And how do you protect
your investment? Well, you may have insurance. For instance, health
insurance and life insurance. That is a means of protection,
or you may have insured your long term welfare by investing in some
things such as gold, such as cryptocurrency,
et cetera. So essentially, the behavior, the spending, saving,
investing protection, the financial behavior is more than or more important than
income and wealth creation. Why is this so? Because discipline builds
financial security. The more you save, the more you invest properly, maybe risk free or maybe
with certain risk attached. The more you protect your
investments, that way, you end up saving more and ensuring your
long term wealth. Now, what do I mean by that? Imagine someone earning
$100,000 a year. Over a period of 20 years, he makes $2 million, and he has bought a 600,000
or $700,000 worth house, and he's paying mortgage,
and he spends a lot, so he spends around 70,000 out of that hundred
thousand every year. So how much is he
spending over 20 years? He's spending, including
mortgage and other, you know, loans, et cetera, for a car, for a
very expensive car that he probably cannot afford, he's spending nearly
1.4 million every year. In comparison,
someone, let's say, earns only $50,000 a year. And he saves 30,000 out of that. $50,000 a year means
he makes $1 million, but he saves 500,000 out of that because he's
saving $50,000 per year. So this guy's
savings is 500,000, and the guy who spends
like crazy and spends 1.4 million out of
2 million income, his savings is only 600,000. So 100,000 more than the person who was earning $50,000 a year. So essentially, just by saving disciplined investment,
saving and protection, you can ensure that
in the long term, you will end up saving
as much as someone who is earning double
of what you're earning. In fact, it's
possible you can save more than someone who's earning triple of
what you're earning, let's say someone is earning, let's say, $150,000 a year but spends $140,000 a year
on expensive vacations, on expensive clothes,
expensive cars. He changes cars every
year, expensive gadgets, all of this, compare that to someone who
saves 30,000 a month. This person is saving 10,000, someone who earns 50,000
is saving 30,000 a month, who comes out and talk, the one who's saving 30,000. So saving is important.
Investing money in the sense, whatever you're setting
aside for savings, investing it properly,
protecting, it's very important. So what are the practical
insights, in this case? Well, you've got to
control expenses first. You cannot be spending 70, 80% of what you're earning. Maybe, when you're young in your 20s, you can
spend that much. But once you have a family, you start saving more, right? Kid. You have kids, you have kids on
the way, you have a wife, you have a
husband, et cetera. You got to start saving,
and that starts. That absolutely starts
thru expense control. You got to avoid bad debt, and you got to do it early. You cannot accrue a huge
amount of credit card debt because paying that off will be a headache because credit
card debt keeps increasing. I'll explain this
later in the course. Because of interest. So you don't pay back your
credit card debt. It keeps increasing because
of interest, right? And you got to build
systems, not motivation. You have to have a
system in place. What you're going to do, how you're going
to do it, right? You're going to save this
much, you're going to invest this much in this avenue. You're going to invest this much in another avenue, et cetera. You got to have a
system in place. And if you follow the system
over a period of 20 years, by the time you retire
at the age of 60, you will come out on
top, I can assure it. Thank you so much. I'll catch
you in the next lecture.
3. Emergency Funds And Savings Accounts: Hey, everyone. Welcome to a new lecture in
Personal Finance. And today, I'm
going to talk about emergency funds and savings. Why are emergency
funds important? The first thing you
got to learn is, and this is very educational. This is something I learned
at a very early age. You need to have a
savings account. You need to have a savings
account that can be liquidated anytime you
need emergency funds. So you need to have
three to six months of expenses stored
in that account. Suppose you lose your job,
you need to have, let's say, six months of expenses stored
in that account so that you can easily access the money and use it to run
your household, to use it to run
your life, right? Essentially, what is required
is a savings account. Now, in some countries,
savings accounts provide some interest. In a sense, your money
appreciates by a certain amount. Let's say, 3%, 4%, 2% a year. And in some countries, the
interest rate is very low, such as in the US, where
it's like 0.01% or 0.1%. But in general, if you have a savings account, you're
earning some interest, but you are also ensuring that you have enough
money stored there. That can be liquidated. At a moment's notice,
on a moment's notice, and the money you have to
store over there has to be three to six months
worth expenses, worth funds so that
you can easily access it and it can
cover any emergency. And that is why you
need a savings account to cover emergencies, right. So essentially, you got to think about capital
safety or returns. What do I mean? Capital safety means that you lose your job, you fall ill. You need to have three to six months of
expenses ready so that you can access that money easily on a moment's notice and get it out of the bank and use it to
run your household, right? So what are the important key practical
insights in this case? You have to keep funds
easily accessible. Now, in the past,
there were no banks. People used to store their money in piggy banks, et cetera, or they would store their
money in their locker at home. But now we have banks. You can easily store your
money in the savings account, transfer some money
from your checking account to your savings account. If you're earning interest, well and fine, even
if you're not, at least you are
earning some extra some appreciation,
right is happening. So what you do is you keep enough funds for six months
in that bank account. So that you can easily withdraw it without any questions asked, without any issues while
liquidating it, right? So you can easily liquidate
a savings account. It's not for wealth creation. This is not for wealth creation. You're not earning a huge
amount of interest or interest income on the savings on the money you have
in the savings account. This is for emergencies. This is not for wealth creation, and you need to have
a strong foundation before you start investing. So have five to six months of emergency expenses
in a savings account. Which can be easily liquidated and which you can easily
access and withdraw. And even if you earn some
interest income on this, because the bank is providing
a compound interest rate of let's say, 2%, that's fine. But the idea is
to have something ready in case you
need it, right? And even if you're earning 2%, your money is
appreciating by how much, 1.02 times every year, right? How your money is appreciating. But the main concern
over here is building a strong foundation and
keeping funds accessible. So it is essential to
have an emergency fund, and you can do so through
a savings account. Now, what exact savings
account use, et cetera, you need to go to your
financial advisor and ask him in different
countries, there's varies. Different countries
have different systems, different
savings account, different products with regards to savings accounts, et cetera, different banks, different accounts,
different interest rates. So what exactly works for you, you need to go to a
certified advisor. This is for educational purposes to help you understand
that it is essential to have emergency funds and it is essential to store
these emergency funds in a savings account, which you won't psychologically feel like accessing every
time you're short on money, but which is there in
case you lose your job, you fall ill etceter
you cannot go to work. That is why savings
accounts are important. Thank you so much. I'll catch
you in the next lecture.
4. Fixed Deposits And Recurring Deposits: Hey, everyone. Welcome
to a new lecture. Today, I'm going to
talk about fixed deposit and recurring deposits. Very important concept. Now, fixed deposits
are available in most parts of the world, but in places like America, in certain European countries, you do not have fixed
deposits that return a huge amount of money
return on investment. But still, you know, since students who will be taking this course are
from all over the world, you have to understand
what fixed deposit and recurring deposit is. So fixed deposit and
recurring deposits are capital protected
instruments for investment. What
do I mean by that? You get fixed interest
and fixed tenure. So you set aside a
certain amount of money, put it in your fixed deposit. You get a fixed interest. In the sense, you get a
fixed 7% to 10% interest, depending on the country. On it, and you have to put it, you have to lock it for
five years to ten years, even one year to three
years, et cetera. So it'll be fixed. It'll be locked for a five
year teno, let's say, for a longer teno than
most other investments, and it cannot be liquidated
before that unless you go through a whole process
of getting it liquidated. But you get fixed interest. Remember that, there's
hardly any risk involved. If the bank tells
you they'll give you 7% to 10% on your
deposited money, that means over a
period of five years, you'll earn seven to
10% compound interest. So over a period of ten
years, for instance, if you have invested $50,000
pounds or rupees or euros, et cetera, or yen, you will get double the amount
of money. Why? Because if interest is 7% to 8% over a
period of ten years, that doubles your money because
your interest income is getting added to the principal
amount you invested. What is the principal amount
is the initial amount you invested in the fixed
deposit. So this is fixed. This deposit is fixed because the interest rate is fixed and the
tenure is fixed, and you cannot withdraw
money before that. If you do break
the fixed deposit, if you do withdraw money, that means you'll have
to pay either a fine. In many countries, people
are asked to pay a penalty. So you'll not get the amount
of money you are due. You'll get lesser than that
because the bank will extract some penalty amount from your return on investment from the money you're
supposed to get. But usually, it's a fixed tenure or
fixed interest deposit, and it's a long term deposit.
That is fixed deposit. What is record deposit? Well, it's again, another
lower risk sort of investment. Recurring deposits
are essentially you setting aside some
money every month, every year or every month. And this money is
going into a deposit. This money is going into
an investment instrument, and over a period of time, compound interest or interest
that is applied to money, which makes money appreciate. What do I mean by that?
Well, if you invest money in a fixed deposit
or a recurring deposit, the bank is using that money to invest in different ventures. The bank will use that money. The investment
banking section of the bank will use that
money to invest in, let's say, infrastructure
companies, different new startups, different companies in
different fields, et cetera, and the bank earns
some amount of profits out of
those investments. They earn profits either because
they have bought equity, means they have bought stocks and shares in those companies or because they have invested money and they're getting
some return on investment. And it is this return
on investment that the bank gets which is
distributed to people, right? So if you are investing money and you are
told that you'll get 7% interest rate compounded
quarterly every year. That means the bank
is going to give you 7% increase in the amount
of money you have invested. So your money appreciates
by 1.07 times. So if you have invested $10,000, your money will
appreciate by how much? Over the first year,
it'll appreciate by around 800 to $100 because of the seven to 8% compound interest quarterly
interest rate. So what happens your money
it becomes 11,000 from 10,000 because $800,000 in interest income has been
added to your money. And then in the
next year, another 1.071 0.08 depending
on the interest rate, income is added to the money that is already
there in the deposit. So the next year,
it becomes 1.07, 1.08 times of the $11,000. And that becomes
around $12.2 thousand. And this keeps increasing over a period of time until
after ten years, your money is double or what
it was or more than that, depending on what sort of
interest rate you're getting. So essentially, it's a very
low risk sort of instrument, financial instrument,
investment option. And the thing is, you know, the return on investments
you make that is taxable. You have to declare
it on your taxes. You don't get levy with that, you know, you have to
declare it on your taxes. So essentially, what is fixed
deposit is fixed amount, a certain amount
is set aside and invested for a fixed duration
at fixed interest rate. And recurring deposit is you're investing a certain amount every month over a
period of five years, let's say, then maybe there's a two years moratorium period. What do I mean by moratorium? Two years when you do not get
any return on investment. And after that, let's say, your money starts
appreciating or maybe after you have invested $100 per month for five years. From the sixth year onwards, your money starts appreciating. Or maybe once you
start investing $100, your money starts appreciating
from that day onwards. So the next time you put 100 that appreciates
and the money you have already put into the
deposit, that appreciates too. So the hundred dollars
is becoming $110, $110. And the next month, you
invest another $100, and you have $210 now
in the investment, and 7% to 8% interest
is applied to it. So that becomes $230. In the third month, another
hundred is invested. So that is 330 and over that, 1.07 or 7% interest
or 1.07 times, you know, appreciation
is applied, and the $330 becomes $340. And like this, your money
keeps increasing in value. It's a very smart way to invest. So what is fixed and
recurring deposit good for? Well, recurring
and fixed deposits are good for short term goals. If you have, let's say,
a five year plan, right? Let's call it short term. If you have a five year
plan and you decide, well, I'll invest it
for five years and my money is going to become
1.5 times what it is. But when I say short term, let's talk about
medium term also. If you invest for ten
years, for instance, your money is
likely to double if the interest rate
offered is seven to 8%. If the interest rate offered
is one to 1.5 or 2%, which is the case in America, your money will just become 1.31 0.4 times what it
is over ten years. That is why I say
short term goals. This is for the
American students. For you, for the Americans, fixed deposits and
recurring deposits are short term methods appreciating your money
of increasing your money through investments for
my Indian students, Asian students, fixed deposits, and recurring deposits are long term to medium
term, both medium term, long term methods of increasing your money by a huge amount because for example, in India, you get six to 7% interest rate, which means that effectively, over a period of ten years, your money will get doubled. If you go through some
nationalized bank or even if you go
through a private bank, they offer great rates in India, at least eight to 9%, 10%, your money may become if
you invest for ten years, it'll become 2.3, 2.2
times what it was. And at the time of investment
when you invested, right? So this sort of a method, especially recurring deposits
where you're investing a small amount every month
systematically every month, it encourages saving discipline because that way, you know, you know you have to save
a certain amount of money every month to feed
this recurring deposit, to put money into this
recurring deposit. And always remember, the problem with the issue with fixed deposit and
recurring depositors, if inflation is high
in a country and it depends on which country
you are living in, if inflation is
high, for instance, let's say in a country
like Sri Lanka or Pakistan or in a
country like China, where inflation is well,
in the first two cases, inflation is high in
a country like China, where inflation is not as
high, for instance, there, you have to understand
and decide if the returns you're getting on investment can
counter inflation. So if inflation,
let's say, today, you can buy mangoes for $5. Tomorrow, you need to pay $10 to buy mangoes ten
years down the line. Now the question is,
is your savings? Is your return on investment on the fixed deposit and
recurring deposit allowing you to counter, allowing you to make
certain that you can afford to pay $10 for
the mangos you are paying $5 for ten years back. So that's the question whether the returns will
counter and cancel out inflation so that there is some degree of what I
would call equilibrium. In a country like India, it does because India has inflation rates that are
at this point in time, stable and static does not change much over
a period of time, but like I said, if the
return on investment on a fixed deposit
in a country like India does not help
you counter inflation. If inflation is so much that the extra money you
have made over ten years of investing money into a fixed deposit does not
account for anything, does not provide you any
added benefit because inflation is eating up
all your interest income. Well, then it does
not make sense to invest in a fixed deposit. But in general, like I said, in a country like India, inflation is not very high. And when you put your
money into fixed deposits, the interest rate
is very, very good. So essentially, you
come out on top, and that is all
about fixed deposits and recurring deposits.
5. Provident Fund And EPF: Hey, everyone. Welcome
to a new lecture. Today, I'm going to talk
about Provident funds and employee profit in funds. Now, these are long term
retirement savings. It's called Provident
Fund in India. And in India, most
private companies have this employee
Profit in Fund also. And there's something called the government Provident Fund, also, GPF in India. In America, it's known
as four oh one K. In other countries and
different countries, it's known differently. Now, what does this do exactly? It's a long term
retirement savings, right? So every month, a certain
portion of your wages, certain portion of your salary goes into a provident fund. Now, what does your
employer do with that? Well, the employer adds
the equal amount of money or a certain percentage of the money you have put into the Provident Fund or
four oh one K plan, so the employer
adds money to that, either the same amount
or something lesser, let's say, 50% of
what you added. And together, that amount is invested through
investment banks, through mutual funds,
through hedge funds, rather, et cetera,
into the market. It's invested into the market, and depending on
market forces and how well the investment does, the investment portfolio
does in the market, depending on that, you get a certain degree of
appreciation for the money you invested in the Provident Fund
or four oh one K plan. Right? Fairly simple by
appreciation, I mean, some degree of interest income
is added to that money. So the company you're working for it takes some of your money. Let's say if you're earning $4,000 or 4,000 pounds a year, it'll take 500 to 100, let's 100 pounds out of that and add another 500 pounds or $500, or the company will
match what you have invested into
the profit in fund and add another $100
and that entire amount combined for
every employee, depending I mean, not depending on how
much every employee has invested because
it depends upon the employee how
much he wants to invest in a profitent fund
or four oh one K plan. So notwithstanding that
different employees will invest different
amounts of money, the total amount that is
invested into the market or is aggregated and finally invested into the market after
a period of time. And based on how well
that investment does, that investment can be
investment in bonds, equity, and a variety of other
different avenues and based on how well
that investment does, you get appreciation for
the amount you invested. So let's say you
invested $1,000, your company invested $600, did not match your investment,
but invested $600. This $1,600 is invested
into the market. And after ten years of
you investing money every month into this sort of a provident fund
account, after ten years, your entire investment
plus whatever the company or the
government invested to match your
investment or invested to basically increase
your investment. If that may appreciate by 15%, let's say, 10%,
let's say, right? So $1,600 per month is being
invested in your name. Thousand of that you are
investing and and and 600, the company is investing
and $1,600 sees a 10% increase because of the investments made by the company through different institutions
into the market, right? So that money becomes
what is 10% of 1,600, 160 so that money
becomes $1,760. And over a period of ten years, this money keeps
accruing and at the end of your tenure at an office, at a firm, you get all this money as
your retirement fund, and you can live off it during
your retirement, right? During your retirement age. So essentially, that is
a provident fund, right? You are investing some
amount of money every month. The employer or the government, if the government is employer
is matching that or at least increasing that amount by a certain percentage of
the amount you invested, and then it is investing it in the market through
institutions, and based on the return on investment for
those investments, your money is appreciating is increasing due to
interest income. That is a provident fund or a four oh one K plan different companies
have different norms. So companies match how muchever you are investing if you invest oneten
hundred dollar and the company
will match it and invest another
$1,000 in your name, that is in your account. For you. That is what
the company does. The company will invest
the money for you on your behalf from
their own account to match whatever you have invested or to increase your investment by some amount of the
amount you invest right. So it's government
backed security. It's a very secure way of investing money and
aggrandizing and, you know, increasing your money. Appreciating your money. And the best part
is tax efficient. If you're investing
in most countries, if you're investing
in Provident Fund or four oh one K plans, you can show that on your tax
returns and get a rebate, get some degree of rebate on the tax amount
you need to pay, right? So this is deducted.
It's a deductible. This is deducted from tax, right? In many countries. Now, every country is different, and I cannot talk about all the 198 countries
in the world. Some countries will allow
a greater tax deduction. Some countries will allow
lesser tax deduction, right. But ultimately, if
you're investing in four oh one K or
a profiting fund, you can show Johnny your
tax returns and tell the government while
filing your taxes that, you know, you are investing
your money in this. So essentially, you may not need to pay taxes on the amount
you're investing and the amount that is
getting accrued in your retirement account because of these investments
and by accrued, I mean, the money you have invested plus the
interest income, right? So that is not taxable. So what are the
practical insights? Well, withdrawal is restricted. If you need to withdraw in a country like
India, for instance, you can withdraw after 15 years, but you may need
to pay a penalty, financial penalty
for withdrawing. Usually, this sort of
an investment account, it is there, locked till the end of
your tenure at a company. If you're working
for a company for 20 years, after 20 years, you get all of the
money you have in your provident fund or four
oh one K account, right? If you're working for a company till the end of
your working life, at 60, you get a
retirement fund. You get the retirement
pension, not pension, but retirement money into
your bank account, right? And you can live off it, right? So this is ideal for conservative investors because there's hardly
any risk, right? You know that if you
invest $1,000 every month, your company is going
to either match it or add $500 to it, and then the entire
amount will be invested through
some institution. Usually, such pension funds, such four oh one K plans, et cetera, invested through institutions that believe
in conservative investment. So they'll use the money
to invest conservatively, and you'll get a five to 6%
to seven to 8% appreciation on the money you have put into the four oh one K or probiton
fund account, right? And if you start early, if you start this at the
beginning of your work life, it'll compound more, right, because you're giving it
more time to appreciate. The more time you give such
an investment instrument, the better your returns because time means
more compounding, more compound
interest being added. And that means more
interest income, right? So if you are in this game for the long
term, for the long run, that means your investment will appreciate more than
someone who let's say, someone who starts in his 30s, someone who starts investing in a four oh one K plan or
Provident fund plan in his 30s. In America, for instance,
it's voluntary. You can choose to invest in
a four oh one K plan or you can choose to take all of your salary back
home and spend it. In other countries, in some
countries, it is necessary. The government demands it. At least if it's not necessary for private entities for
government organizations, it is necessary for a country
like let's say in India, which has a general provident fund or rather government
provident fund, which essentially is a
very simple concept. It is the same as
this. The employee, the government employee puts in a certain amount of
money into the fund, and the government matches
it or matches it by 0.5 times or matches it by 50% of the amount
invested by you. And together, this entire
amount is invested, and whatever interest income is made on this entire amount, you get it at the
end of your tenure. Or let's say after 15 years when you want to
liqdate it, right? So that is how this works. This is a very safe and
secure long term way to appreciate your money, and this takes care
of inflation too, because usually when your
money is in Provident funds, you can be certain that
it will be invested by institutions handling
provident funds conservatively and you'll get, if nothing else, decent appreciation for
your money, right? Especially when
the government is adding money to
match your money or, you know, a certain
portion of your money. So that is all about
provident funds. Thank you so much. I'll catch
you in the next lecture.
6. Equity Investing: Hey, everyone. Welcome
to New lecture, today I'm going to talk about
Equity Investing stocks. What is equity? It's
ownership in a company. You buy a portion of
the company, right? So let's say a
company has released 1,000 shares in an IPO, initial public offering, and you buy out of
those 1,000 shares, you buy ten shares, right? You buy ten shares at a certain price as soon
as the IPO happens. And those ten shares mean
that you own how much, you own 1% of the company, right, those ten shares. And now, if the
company, let's say, was valued at $1,000,000.05
years down the line, it is valued at $100
million and you still own 1% shares in the company
or 1% of the company, that means the valuation of your investment
today is $1 million. That might be a lot
for many people, may not be a lot
for many people, but essentially
equity investment means that if the company
does really well, whatever ownership you
have in the company, that increases in value. So let's say if you invested in ten shares and you paid
$100 per share, right, you invested how much $1,000
in the company when it first started releasing shares into the stock market after an
IPO initial public offering, and the face value
of the share was how much $100, and you
bought ten of them. So you bought $100
worth of shares, and for $1,000, you ended up
owning 1% of the company. So essentially, that
1% of the company, if the company's
valuation increases 1000000-100 million
or 1 billion, right, you end up making a ton of money of a very
small investment, off a very small
investment, right? So your $1,000
becomes $1 million, right? Now, why do I say that? Imagine people who
invested in NVDA. NVDA was not doing well. They were about to shut
the lights at their store, right, at their shop,
rather, not store. But after a while, when AI came in, came
into the picture, and NVDA started supplying
their GPUs to AI companies, NVDAs stock prices rose like Anything today is the most valuable company in the world. So anyone, let's say,
who owned 1% of NVDA, let's say when NVDA was
valued at $5 billion, 1% of 5 billion is how much. 1% of 5 billion is around
around 50 million, right? It's 50 million. And their stocks were
worth 50 million. But when NVDA became a
$5 trillion company, their stock their 50
million investment became worth how much, multiply 5 billion
by 1,000, right? That's 5 trillion. So their 50 million became 50
billion in investment. Their 50 million
became 50 billion, right? So that's what
I'm talking about. Now, if this was a hypothetical scenario,
hypothetical case. But like I said,
you know, depending on depending on if the
company is doing well or not, ultimately, what
matters is company how much of the company
you own and if the company is able to do well. If the company does not do well, let's say you invested
$1,000 in a company that was worth $10,000. And in the next instance, that company is worth $5,000. The value of your
ownership falls down to $500. You are
losing money, right? So that is equity investment.
Why is it good well? There's a lot of growth
if the company is doing, well, if you are smart enough
about where to invest, if you have invested smartly, if you have decided
which company to invest, and if you have a broker, that person is technically qualified to help you with this. This is just for general
educational purposes to help you understand
what equity is. So growth plus dividends, right? That is equity. Returns depend
on growth plus dividends. So the value of valuation
of the company grows and the valuation of
your ownership in the company grows.
What are dividends? Now, there are two
types of stocks, right? Common stock preferred stock. Preferred stock means if the company makes a profit
and is giving out dividend, that is giving out
portions of the profits. Profits made to
the shareholders, the preferred stockholders
will get the dividend. That is the share of the profit before the common
stockholder gets it in that. In most cases, the
common stockholder does not get a dividend. Only the preferred stockholder
gets a dividend, right? And if the company liquidates, then the preferred
stockholder gets back his money before the
common stockholder gets back his money. So that's the thing, right?
Preferred stockholder means you have preferred stocks, so that means you get a portion of the profits if the company is giving out a portion of the
profits and has decided to do so and not
reinvest in the company. So that is when you
earn dividends. But for common stockholders, if the company is
doing great, right? And Warren Buffet only ever
bought common stocks, right, if the company is doing well, he bought a ton of
stocks Coca Cola, when the company was available at a very good value, right, when the company's
earnings were great, but the price of the
shares were low. Warren Buffet invested then
and over a period of time, investment multiplied by a
huge number of times, right? Because Coca cola became a more and more
valuable company. So common stockholder
means like, you know, you buy a certain portion
of the company shares, and if the company's
valuation grows, your investment grows, too. But the problem
is, you know, it's a long term sort of
investment in the sense that, you know, there'll be
a lot of volatility. For instance, in
the Indian market, there's a lot of volatility. The market rises
and falls, like, you know, like
someone's moostrings. But essentially, if
a market is not as volatile and if you can keep
your nerve, hold your nerve. When there is a loss when the
company's valuation drops, then it may be possible in the long run
that you'll come out on top if the company does really well and the valuation
increases by a lot, right? So that is Equity Investing, right, essentially
stock markets. And you have to understand that stock investing requires
risk tolerance. You got to be tolerant of risk. There's a huge amount of risk. The share prices will
fall, they'll increase. Then they'll fall again, depending on market forces, depending on how
people are investing. So you got to go into
it for the long run. You got to be in it for
the long haul, right? And you have to
understand, right? Share market, the stock market is driven by earnings
and sentiment. If a company is doing well, it balance sheet of a company, which is usually
available quarterly, if it shows that the
company is doing well in terms of what
sort of sources of income it has and
how much capital it has and how much
fixed assets it has, for instance, these
are accounting umbo, jumbo. You don't
need to learn this. Essentially, based on how
the company is doing, stock prices fall, and it's based on
sentiments, too, how? Because, you know,
if people feel that company A is
going to go down, then they'll start
selling the stock the stock prices will plummet. If they feel company A will
be acquired by Google, then the stock prices
will start rising, and a lot of people who have
been holding onto stocks for a while expecting a rise
will see their valuation, the valuation of the investment
rise really rapidly. Or if you hear
that company A and company B will merge, again, then people start buying one
of the company's shares, and when people start buying, there is less supply of
shares in the market, so the prices skyrocket, right? So, essentially,
this is best for long term wealth creation,
not for short term, right? You got to be restorerant. Like I said, you
know, the market goes up and down up and down. And it's like mood
strings, right? Sometimes the market is happy, markets showing that, you know, everything is hunky
doy and sometimes it's just going down and you
cannot do anything about it. But if you can tolerate that, this is a good long term
wealth creation method. But like I said,
Bisk is involved, and second you got to
be very smart about it. If you invest in a
company that turns out to be a d, you'll
lose all your money. So you got to know what is hot, what can give you better
return on investment, which technology firm
you're investing in is likely to
become a huge firm. So you got to be very, very
thoughtful and cunning before making the call before making the call to
buy shares in a company. That's all about
equity investment. Thank you so much. I'll catch
you in the next lecture.
7. Mutual Funds And SIP: Hey, everyone. Welcome to a new left. Today,
I'm going to talk about mutual funds and systematic
investment planning. Now, what is a mutual fund? A mutual fund is like
a fixed deposit, but only it's much
different in the sense that you get variable
interest rate. You get much more
than a fixed deposit. In a fixed deposit, your tenure is fixed and your interest
rate is fixed, right? So you know how much money you'll get at the
end of the tenure. But a mutual fund, essentially, if it promises a maximum of 12%, it comes with a
caveat and the caveat is it's subject to market risk. What do I mean by that? Well, you invest money
in a mutual fund, the bank or the
financial institution that is floating the mutual fund will use that money to
invest in some companies, some infrastructure, technology
companies, et cetera, all different companies where the institution of the bank
will invest low money. Now, the bank, depending on
how well the investments do, we'll make some profits, we'll make some growth, we'll make some decent, hopefully return on investment. And based on that, they will determine what rate of interest, what rate of compounding they are willing
to offer to you. The maximum you'll get
if the mutual fund says it's 12%, is 12%. But let's say the investments made by the bank
is not doing well. Let's say the bank has
made bad investments, given out bad loans,
using what money, using money that you
store in the bank in fixed deposits or
through mutual funds, or even the institution
that has floated the mutual fund is
not doing great in terms of return on investment on the investments
made using your money. In that case, you won't
get 12% rate of return. You won't get 12% compounding, you'll get maybe 10%. If it's doing really
poorly, you'll get 5%. If it's doing disastrously, you might get even
zero to one person. So no appreciation
for your money. And if it's facing huge losses, then the amount of money
you have invested, you may not get that
back even, you know. If you have invested $10,000, you'll probably get back
$8,000 at the end of three, four years or whatever the
tenure of the mutual fund was, right? That is a mutual fund. Essentially you're
investing money, in a mutual fund and the
bank is appreciating the money for you by investing your money
in different avenues. And whatever return on
investment the bank gets, well, the bank will keep a
certain percent of it because it needs to keep a certain
percent of the profits, rest of it is going to
give it back to you based on what the maximum
interest rate offered was. And if the bank is
not doing well, then, well, you can expect
lesser compounding, lesser compound interest rates, return rates, and sometimes you'll get lesser
than what you put in. For instance, recently, I put in a certain amount
of money in a mutual fund, which was a huge
amount of money, and I lost 20% of that money because a mutual fund I invested in suddenly started
doing poorly. But I decided instead of liquidating it,
I'll stick at it. And over a period of time, the rate stabilized and it
started increasing again, and ultimately I
made a 20% profit. But remember this, if the bank offers you
12%, 20% profit. What do I mean by that? I'm not talking about compound
interest rate, right? The valuation of my
principal amount, the money I invested initially, increased by 20%, so
increased 1.2 times. But if a bank promises 12%, institution promises 15%, do not think your money will appreciate by 12% every year compound. Every year compound it, right? It will not appreciate
by 12 to 15% every year because
depending on market risks, depending on the
situation in the market. How well the institutions banks investments are
doing in the market, depending on that,
you might get lesser. Or sometimes you
make a loss too. So that is the risk associated
with a mutual fund. And what is a SIP? SIP is a systematic investment planning simple as a
recurring deposit, but this means that every month or every quarter
or every year, you are investing
a certain amount of money in a mutual fund, and as soon as you invest
that money will start appreciating by a certain amount depending on market risk. And over a period of
time, you'll invest the same amount every
year, again and again, and these will accumulate and interest income will be added to these amounts that you are depositing every
month or every year. And it can be a very small
amount to begin with, maybe 100 rupees or $10
a month, et cetera. And over a period of time, all this will accumulate, the amount of money
you've invested, the interest income
you've earned, depending on market risks. And then at the
end of the tenure, maybe seven year ten or
eight year tenure, right, of the mutual fund, you'll get back a certain amount,
and if you're lucky, a decent amount,
if you're unlucky, you may get 1.1 time appreciation or 1.2 time increase in value
of your investment. That is also possible, right? So essentially, that
is a mutual fund, and SIP is essentially
portfolio, right? It's all about portfolio. You are investing in
certain mutual funds, certain bonds, et cetera,
and that is your portfolio, and based on how well you
have invested based or if you have invested in the
best mutual funds with the best institutions, you may expect a decent
amount of compounding, you may expect a decent return on investment as
compared to if you invest in a bank that
is not very well known or institution that
is not very well known. Because in that case, you're not sure if the bank will
invest your money in the market conservatively
or will the bank take risks? A lot of big banks
invest conservatively, and while doing so, they keep in mind that their investors need
to be kept happy, and you are investor because you are investing money in banks, mutual funds, in institutional, mutual funds, et cetera, right? So that is mutual fund and SIP. Now, remember this, systematic investment planning
is not a guarantee. Nothing in that will tell you that it's a
guarantee that you'll get 12 to 15% return on investment or 12 to 15% appreciation every year compounded quarterly. The rates will vary, but it's suitable for long term goals because
ultimately at the end of the day, if you invest in a
decent mutual fund, especially in nations where the market is less volatile and usually there is better return on investment than is
suitable for long term goals. In a country where the
market is volatile, I usually advise
people not to go for mutual funds that over
promise, 15%, et cetera. I advise people to go
for other schemes, be it fixed deposits that offer a lot of return
on investment or even pension schemes or even other schemes
with reputed banks. Because ultimately if your
mutual fund return on investment is dependent
on market risk, then it becomes a problem because if the
market is volatile, if the investments made by
the bank are not doing well, if the bank has made
bad investments, maybe politically
motivated bad judgments, influenced by politics, while investing in
certain companies, then you can be certain
that you will not receive the interest
rate promised, the highest interest rate
promised because ultimately, there is a caveat, right? But mutual fund reduces
emotional decision making. Your money is locked in
over a period of time, it'll either appreciate
by a lot or by little. And if you want to liquidate, well, you have to pay a penalty. The bank or institution
will charge you a penalty. But like I said, you
know, it's fairly safe in nations in the
western hemisphere or rather the global North, what we call, you know, the West, you know, all the developed
nations, fairly, fairly, fairly risk free because
investments made in those markets are not really subject to
market volatility. But in emerging markets,
in developing countries, I believe there are many other
investment ventures which I'll talk about in
subsequent lessons, which might be better options. But with that being
said, that is all about mutual fund and systematic
investment planning. Thank you so much. I'll catch
you in the next lecture.
8. Index Funds: Hey, everyone. Welcome
to a new lecture. Today, I'm going to talk
about index funds, right? Now, what are index funds? Index Funds are essentially
like, you know, mutual funds or any
other sort of funds, any other sort of
investment instrument. Were you invest money
with an institution, you invest in some sort
of an index fund, right? Which's called an index fund. For instance, if you invest through a bank or institution
into a mutual fund, right? That's a sort of investment instrument,
index fund is the same. But what is the
difference between an index fund and
the mutual fund? The mutual fund is dependent
on market volatility. It's dependent on market risk. But an index fund is just
the sort of fund which risk conscious or basically risk averse customers or people
should invest in why? Because it matches
market performance. If the market is doing well, and the standard and
poor index says that companies are doing well and your index fund basically has
invested in such companies, then you can be
assured you can rest assured that you will get a decent return
on investment, right? If the index fund promises a certain amount at
the end of a tenure, at the end of ten
years, let's say, and they say that is dependent
on market, performance, then if the market is
performing very well, then you can rest assured that you will get what
they have promised. If it's not performing properly, if there's a recession in 2008, there's a housing
crisis and the market collapses, then of course, the return on investment on your investment in
the index fund will actually be lower than what you anticipated lower
than what you expected, right? So essentially index
funds track the market using standard and POs
and other such ratings. You know, which company is
good, which company is bad, how the market is
doing how NASDAQ is doing how Dow and
Jones is doing how the National Stock
Exchange in India is doing how the London Stock Exchange is doing in the UK
Etcetera, right? So how much money you
get back depends on how much well or how well the
market is performing. It depends on that.
If the market is performing well, you'll
get a lot of money back. If it's not, then obviously, the amount of money
you anticipate it, well, you may not
get that, right? So you have to understand the
importance of Index Funds. Well, you do not need to
stop pick stocks, right? You invest your money
with an index fund, and the index fund will pick the stocks which the index fund will invest in using your money. So you don't need
to pick stocks. You don't need to pick, okay, this stock is doing good. This stock might do good. You don't need to go through all those calculations, right? You don't need to do anything. You just need to hand over
your money to the index fund, and the index fund will
decide which company, et cetera, to invest
your money in. Think of it as a financial
advisor who tells you, Okay, invest your money in this stock, invest your money in this particular company,
et cetera, right? But the index fund is an
institutionalized sort of fund, sort of system where a
lot of people put in money and the index
funds invest that money into companies
which are either on the stock market or even if a company is not in
the stock market, the index fund can actually
invest money privately. But whatever it does, ultimately, it matches
market performance. If the market is doing well, the return on investment of
the index fund will be great. If the market is not doing
well, it will not be great. So it's actually ideal for cost conscious
investors in the sense that if you are risk averse, if you are conscious
of, you know, what sort of cost you may have to pay at the
end of the day, if the market is not doing well, index fund is a good
option because in stable markets in markets
that are not volatile, index funds work like a
charm in American markets, you know, in the UK market. The market is not as volatile as some other stock markets, such as, let's say, the
Indian stock market, right? And that is why index funds don't really
work that well in India. No one trusts them enough to invest their money
with their index funds. But in the West, where the
markets are far more stable, index funds usually provide a decent return on investment. It's a long term
strategy, very simple. You invest your money with them, they'll decide which companies to invest in which stock to buy and which company
stock to invest in, maybe through the stock market, invest in common stocks or maybe invest it outside of the stock market into
privately held companies, and based on the
investment and based on standard and poor
ratings for companies, you end up and for different index funds
and bonds, et cetera, you end up getting
a decent amount of return on investment, if not spectacular,
but still respectable. Those are index funds, right? That is what an index
fund is all about. Thank you so much. I'll catch
you in the next lecture.
9. Bonds And Debentures: Hey, everyone. Welcome
to a new lecture. Today, I'm going
to talk about bond and bonds and debentures. Now, these are debt instruments. So essentially, if a
bank floats a bond, if an institution floats a bond, or even if a country
floats a bond, right? For instance, during
World War two, you had war bonds in the UK and other countries they do
so so that the public, the general public
will buy those bonds. What do I mean by
that? They will invest money by
buying those bonds. So they will lend money to the institution or the
government in question who is or who float this bond
or these bonds, right? That is what bonds are, right? So, essentially, if there's
a debenture on a bond, and I'll talk about
debenture separately, if a bond is floated, let's say, a bond is floated
by the Indian government, which says that if people from around the world
buy those bonds, then they are giving the
Indian government money to invest in infrastructure in
India, let's say, right? And if the infrastructure
projects go really, really well, well,
then obviously, the government will pay
back the debt will pay back the money they have borrowed from people around the
world using bonds, by returning the money, by paying back the money,
along with interest. So that is what bonds and
debentures essentially are. You lend your money to a bank, the bank invest that money.
It makes some profit. It makes some decent
revenue out of it, and then the bank
returns your money to you along with an
interest payment, right? So if you invested $10,000
rupees or yen in a bond, and the bond states that
at the end of 20 years, you'll get back four times the amount of
money you invested. That means for 20 years, for a period of 20 years, the institution which floated the bond is borrowing your
money and investing it. It has taken on a debt and it's giving you at the end of 20 years
four times that amount. Now, usually in practice, no one will give you four times the amount of money you invest. Usually, what happens is there is a tenure of investment
for investment. So the first year and
it's sort of an annuity. So every year, right, you invest the same amount
of money every day. Not an annuity is the wrong word to use in
this case, right? Is the wrong word to use. So every year, uh you
invest the same amount of money and you give it to the
bond issuing organization. And what happens at
the end of ten years? Well, after the ten year period, there's a three year
moratorium, and after that, your money will be returned
to you in the 14th year, and it will be maybe twice the amount of money you invested that
you'll get back. Now, what are you getting back? You're getting back the
amount of money you invested plus an
interest earning. And where does this
interest earning come from? Well, the institution or bank which has issued
the bond is using the bond or using the
bonds to borrow money, which they are investing in different projects infrastructure
exx Infrastructure is just one avenue of investment
in different projects, different, you know,
maybe real estate, maybe other projects, right? So these are debt instruments, and what are deventures exactly a company might
float debentures. They might tell people you invest money in the company
through the debenture. So we are taking on a debt. We are borrowing money from you, and at the end of, let's say, five to ten years,
we will return the money to you along
with an interest payment. So if the interest rate is 10%, we will return the money to
you at the end of ten years. As an amount which
includes the principle, which was the initial
money we borrowed, along with compounded
interest, compound interest, along with a certain
degree of income associated to compounding right? So that is what deventues are. So these are both
debt instruments. You use them as an
institution to borrow money. But as an investor, what we do is we lend money to a bank or to a
government or to any institution. And then after we have lend that money
after a period of ten, 12, 13, or five, six, seven years, whatever
the tenure is, we get that money back
along with interest. By interest, I mean,
what compound interest? Maybe compounding
quarterly or yearly. Now, some bonds might state. They might not state a
certain amount of interest, compound interest that
will be paid to you. Some bonds might state that if you invest with
us for ten years, at the end of 15 years, you'll get twice your money. They'll give you $1 amount, they'll give you a root amount. You'll get back this much,
you're investing this much, and at the end of 15 years,
you'll get back this much. This is very popular by the way. And a lot of Indian banks, institutions such as LIC, all the private
banks, and, you know, a lot of these banks,
even Goldman Sachs, I India today are issuing
these sort of bonds. So you are investing every year for a period of ten years, like an annuity, almost
like an annuity. And then at the end of 15 years, you're getting back a lump sum, which includes a certain
degree of appreciation. And that is what actually bonds are all about
appreciation of your money, but risk free, lower
risk than equities, lower risk than owning portions
of the company, right? Because certain
either in the case of deventus a certain rate
of interest is promised, certain interest amount is promised and is
highly not variable, and in the case of bonds, a certain amount or certain
interest is promised, and you will get exactly
what is promised. So these are fixed
interest income. The interest amount
you'll get is fixed. It's not variable like in a mutual fund or even
in an index fund, which depends on market
performance and tracks, standard and pores
and et cetera. So though that is all
about bonds and depension, but you have to understand
the importance of these. Well, these are sensitive
to interest rates, right, in the sense that if
the company tanks, the company might then think about how they're going
to pay you back, right? And having no option, they might file for
bankruptcy because most companies are limited
liability corporations. And that means that
if the company tanks, the directors of the company, those who float the company, are not liable, the company is liable and if the
company does not have anything in its account to pay you back, you
won't get paid back. So companies might tank. So you got to be very sure which company you
are investing in, which company you're
buying bonds from, whether they are reputed, whether they invest in
volatile stocks or volatile, you know, companies that
are likely to fail. So you got to keep track
of all of these things. Again, if you have a
financial advisor, and I suggest you get one, you ask him the specific Bonds, the specific investments
you should make based on his experience with
different companies or his knowledge of
different companies, different avenues of
investment, right? So, like I said, you know, bonds are essentially stability. Bonds give you stability. You know how much you'll
get in the end as long as the company
remains a float, right? You have a very
good idea how much you'll get in there
in India, at least, with a lot of these bond
issuing institutions, you know for certain that you'll get back a
certain amount. You know it at the
beginning itself, and that is a way to
appreciate your money, risk free, long term, and in a stable manner. With that being said,
thank you so much. I'll catch you in
the next lecture.
10. Credit And Credit Score: Hey, everyone. Welcome
to a new lecture. In today's lecture,
I'll talk about credit and Credit Score.
So what is credit? Credit is basically you
borrowing money from the bank. It's debt. Nothing else. It's not free money. So you've got a credit card.
It's not free money. Many people think, you know, we are using a credit card, and we are not using our money, which is there in our account. We're using someone
else's money. It's not the case. Credit card basically allows you to
borrow money from the bank. When you swipe a credit card, use a credit card
for a purchase, you're borrowing money from the bank to make that purchase, and you have to return
that money to the bank. Now, what is the credit score? Well, before issuing a
credit card or a loan, and a credit line is
essentially a loan line, right? It's the amount of money you
can borrow from the bank. Before the bank issues a credit
card or gives you a loan, it wants to see how good
your credit report is. It's a measure of trustworthiness, borrower
trustworthiness, right? And how it is calculated
is very simple. You know, it's based
on repayment behavior. Are you repaying
every month on time? Do you pay late? Do you have you paid late fees? How many credit cards
have you applied for? What your credit utilization is? For instance, let's
say, you have a credit line worth $10,000, and your utilization
is just 20% of that. You use no more than $2,000
out of that for purchases, et cetera, for different
things, right? So in that case, your credit
worthiness or rather, your credit utilization is 20%. No banks look at credit utilization and
other such things. You know, how much of
your credit you're using. If you use a lot of your
credit line, for instance, I believe that banks feel that you require
too much debt. To run your life, right? For instance, if you apply for too many credit
cards and have a huge credit limit credit line because you have ten
credit cards and you use all ten credit cards and you consume half the credit line, then banks feel like you
require too much debt. So you're risky
because you're using your credit cards maybe indiscriminately or
maybe way too much, and banks feel like, well, if you're using 70 to
80% of your credit line, that means you require a lot
of debt to run your life. That reduces your credit
worthiness, right? So experts have
mentioned in a lot of online articles and in blogs and many other places that banks like people who keep their credit
utilization below 30%. So they spend no more than 30% of their
credit line, right? So taking into account
all these factors, including how old your
credit line is, right? That's a very, very
important factor. If your credit line is so
old and you have established good repayment behavior
over a long period of time, then banks charge you to be credit worthy
in a lot of cases. So, you know, typically
the rating is 300 to 900. If it's over 800, you're
in excellent territory. If it's around 700 to 800, then also you're set
in the sense that, you know, you can
apply for loans, credit cards, et cetera, and
get a house loan, et cetera. If it's below that, then
banks start considering different elements related
to your Credit Score, related to your
credit report, right? So why do I talk about credit rating and Credit
Score and credit? Because many have a tendency to overspend on
their credit cards, and then they are not
able to repay the money. And because many
credit cards offer nine months interest
interest free, rather, interest free zero minimum amount to be paid
sort of schemes, a lot of people basically use their credit card
indiscriminately absolutely thrash their
credit card in the sense that they use it everywhere and run a huge debt and
accrue a huge amount of debt. At the end of nine months
when they cannot pay it back, either their balance transfer
to another credit card, if it's possible for
them to get another one, or if they are not
balance transferring, they essentially say that, well, we will allow it to escalate and interest then starts being added to the amount
you owe to the bank. Now many credit cards
have the system have the basically have the scheme where you have to pay
back every month, right? Most student credit
cards require you to pay back
every month, right? A lot of secured credit cards require you to pay
back every month. Secured credit card means that, you know, you give
$200 to the bank, and a bank gives
you a credit card that is worth
around $300, right? So a lot of these
cards, you know, they require repayment
at the end of the month. Usually, even if you have a
nine month, zero interest, zero minimum payment
required sort of scheme going on, it's advisable. At least well, I'm not going to give you advice
about what to do, but what I usually did and
still do is I pay back whatever I spent using
the credit card. Whatever debt I have accrued, I pay back at the end
of each month so that everything remains in control, nothing goes out of control
in terms of escalating debt. But some people say that,
well, we'll not spend. Well, rather, we will not
repay for nine months, we'll run a huge
credit card debt, and then at the end
of nine months, they don't have money to pay. Maybe they lost their jobs. Maybe they have
some health issues, which require a lot of money
being spent on medicines, et cetera, and they don't have the financial capability to pay back their credit card debt. And what happens then, then
the interest rate kicks in. Credit card money
is not free money. Interest rate kicks in. And if you have
accrued a $3,000 debt, and if the interest
rate is 20% per annum, payable monthly,
then every month, your credit card debt will
increase by 2% or 1.02 times. So your $3,000 soon
becomes $3,060, right? $3,060, and then $3,060 soon becomes in the next
month, around $3,160. And this keeps increasing
over a period of time. And at the end of the year, you'll essentially end up owing the bank 20% more than what
you spend on the credit card. So essentially, if
you spend $3,000, you'll end up owing
the bank around 3,600 $700 depending
on the interest rate. And this keeps increasing because then the interest
will be applied to the 3,600 $700 if you do
not repay so that is why it is essential to repay what you borrow
using a credit card. And if you don't repay, your credit score will
tank, and if it tanks, you won't get a lot of benefits that are higher
Credit Score allows. For instance, you won't be
able to get a loan easily, a car loan, maybe, a house loan maybe. It becomes difficult because credit rating agencies
track all of these things. So essentially, the important
factors are pay on time. Even if you have nine
months zero interest, you still try to pay back on time at the end of each month whenever the bill becomes due. And the rule is, and this has been this rule has been discussed everywhere. It's almost beaten to death. Keep your credit
utilization less than 30%. That gives you peace of mind, knowing that you will
be able to pay it back, and that also protects you from making wrong decisions
with regards to credit. Because if you use too much of your credit limit
and because maybe, you know, you have
a lot of cards, which a lot of us have had, you have to be disciplined
enough to know that you cannot use all of your credit limit because if
you do and cannot pay back, you will end up with a
mountain of debt very soon. So avoid excessive loan
applications, right? That is one of the
key things I can talk about because I
myself have done this. I have avoided excessive
loan applications, mainly because that sends
the wrong signal to banks. They think, Well, you are
in constant need of debt. If they see utilization and is less than 30% and
you were decent, you have a high
enough credit rating, that's good for you
in the long run. With that being said,
thank you so much. I'll catch you in
the next lecture.
11. Credit Cards And Debit Cards: Hey, everyone. Welcome
to a new lecture. This is going to be a
very, very short lecture. I have already explained
what credit cards are, right? It's not free money. It's the bank giving you an instrument which
you can use to borrow money from the bank to cover your expenses,
make your purchases. At the end of each month, you are required to pay back unless there's a nine
month moratorium, during which time you do not
need to pay back anything, even the minimum balance, you do not need to
pay it back because there's 0% interest. After nine months, they'll
ask for all of it back. If you cannot pay,
interest will accrue. Whatever you owe will keep escalating and increasing
and basically, you'll end up accruing a
huge amount of debt, right? That is a credit card.
It's an instrument which you can use to
borrow money from the bank instantaneously without an application in the sense that you have sent
to your application, you have received
your credit card, and now you can have on, right? Not really. Now you can use your credit card to make
purchases and buy things, and bank pays the money through the credit card
to make those purchases, and you have to
return the money to the bank if at the
end of each month, if you don't return the money, then at the end of each month, interest will be applied
to whatever is overdue, and this amount will keep increasing until you
pay it all back. What is a debit
card? Very simple. It's a card that allows you to make purchases, buy things, manage your expenses
using the money in your bank account is tied
to your bank account. There's no question
of repayment. There's no question of the
bank lending your money. You are just using money that
is in your bank account. It's a great way to
conveniently use the money in your bank account and also make certain that you're
not overspending, but where do credit
cards come in? It's very simple. It
builds credit history. If you use a credit card and keep repaying on
time every month, and you have let's
say three, four cards and you're using
one card to buy, make purchases and keep repaying the amount due at
the end of every month, you are going to
build credit history and a decent credit history, which will ensure you can
get more credit cards. You can easily get
car loans or you can easily get, you
know, mortgage. So everything the
mortgage car loans, every loan you
take, it depends on your credit history
and credits go. So it's essential to
build credits go, but very, very responsibly. That's the advice
I can give you, and that's absolutely
general advice. I'm not providing you specific
personalized advice or even general advice where I'm saying this is
good and this is bad, and this is where
you should invest. This is the credit card
you should get now. I'm just telling
you a principal. I'm just explaining a
very simple principle, use your credit
card responsibly. So essentially, you
have to remember, you have to always pay back
what you owe, pay full dues. And avoid lifestyle EMI. What is EMI? You buy something
using a credit card, let's say an iPad and you say at this money that
I owe the bank, I will pay it back part
by part every month. So if I owe $1,000 or
50,000 rupees to the bank, I will pay back the money
part by part every month. Now, the bank is in
business is not a charity, so it's not going to
allow you to pay back the money part by part unless you are paying a
certain interest. On, Jack. So the bank expects you to not pay back
the money part by part, but paid back part by part
along with an interest amount, which is known as
the EMI interest. So though your amount, the amount that you have
spent is amortized, is distributed over two years or three years or four years, however long the EMI is, however long the bank
allows the EMI to be, even though the
money is distributed and amortized over a
period of four years, you will have to pay
interest every month. On the amount of money
you owe every month, and you have to
pay, like I said, even though it's distributed, you have to pay every month, and you have to
pay a small amount of money every month as compared to the whole
cost of the iPad, right? If the iPad cost $1,000
every month, let's say, you're paying $50.03 year EMI. I'm just saying these numbers
off the top of my head. Every month you're paying $50. Over that, you have to pay
another $6 in interest. You have to pay $56 because $6 is interest and
$50 is the amount is the iPads the cost
of the iPad price of the iPad amortized and
distributed across 36 months. Each month you're paying
$50 plus $6 in interest. That is an EMI,
use strategically, do not use your credit
card emotionally. That's a very simple principle, if you follow this, you'll
never be in trouble. Use it strategically to
improve your credit rating. Do not overextend, do not
buy too much out of creed, do not use it for
lifestyle purchases. For instance, you decide one day that you want to go to Ibiza
maybe you live in Florida, you could have gone
to St. Augustine's, you could have gone to the Keys, but you decide, I
want to go to Ibiza, how are you going to fund? Your Ibiza trip,
maybe, you know, you just got a beginner's
job, a fresher job. You know, you are
a new employer, a company, and you are
making some money, and but still, you know, maybe Ibiza is too
expensive and you say, I'm going to use my credit
card to pay for abiza. The next instance, you
come back from Ibiza, your boss tells you you're fired because AI has replaced you, and then you don't have
a job, how are you? How are you going to pay back? How are you going to pay
back the amount of money you borrowed for your
Ibiza trip, right? You could have just gone to St. Toast Dine and had a good time. I've not been there, but anyhow. Thank you so much. I'll
cash you the netflix.
12. Loans And EMI: Hey, everyone. Welcome
to a new lecture. And this lecture is also
going to be very short. Now, what are loans and EMI? That's what I'll talk
about in this lecture. EMI, I have already explained in the previous
lecture, you know, you buy an iPad for $1,000
or 50,000 rupees and you say to the bank that I want
to convert this amount, this charge into a EMI. The banks as well. Okay, you
pay back over 24 months. We will distribute the amount equally across 24 months.
We'll amortize it. But because we are allowing you to pay back over 24 months, you need to pay an interest, and that interest will
be 15% to 17% or 20%, 25%, depending on the bank, depending on which bank
you are dealing with, depending on the
product, the amount, et cetera, and the
banks as well. Each month, you're
paying back $50. Along with that, you have
to pay $6 in interest. So that way, you know, we get something out
of the deal because otherwise we would just
be allowing you to buy stuff and allowing you to pay back for
it over 24 months. That does not give
the bank any profits. So if you're paying
interest to the bank, that gives the bank
profits, right? And capitalism is
all about profits. So if there's no profit, what's the point of doing
something, right? So the bank is not
going to allow you to distribute your expenditure, you charge over 24 months and not extract some
extra money from you. So they are going to
apply an interest rate. That is an EMI principal plus
interest. What is a loan? Well, it's a longer term, longer tenure loan, right? You're borrowing money from
the bank for a longer tenure. So essentially, you pay
more total interest. Now, EMI interest
maybe 15 to 16%, is usually I is usually 2015, 16 to 20, 25%. But when you take a
loan from a bank, that interest rate will be
nine to 8% or lesser depending on which economy you
are in nine to 8%, but over a period of
four or five years. So ultimately, you will probably end up paying more
total interest amount. But if you're taking a loan, you're usually you're going to usually taking a loan that is higher than the EMI charge
or EMI amount, you know. So let's say you
want to buy a car, you could have bought it
using your credit card. Let's say you're buying
a second hand car, you could have bought it
using your credit card. But then the issue is the bank
will not allow you to have a lower interest rate just because you
bought something more expensive than an iPad,
for instance, right? The bank will still charge
you 15 pt 25% in interest, and it'll ask you to pay
back the entire amount, the entire amount you
borrowed from the bank using the credit card to
pay for a second hand card over two years. But if you're taking
a loan from a bank, and the bank says, Okay, fine, we'll give you $10,000 to
buy a second hand card, but you have to repay that
loan over eight years. Now over eight years, your principal
amount, loan amount, which is the amount of money
the bank is lending you, that amount is distributed
over a long period of time, for instance, right
over eight years. So that is how much 96 months. But so you're paying essentially
very little every month. You're paying like
20 $30 every month. But the bank is not
going to allow you to get away with it. Scot free. Bank needs to make a
profit, so they'll say, you pay nine to 10%
interest on that amount. And so every month, you're paying, let's say, 40, $50, $10,000 divided by eight
years, $1,000 per year. Yeah, so you're paying
$100 per month. All known. Give or take, and $100 plus, you're paying nine to 10%
interest. So $10 extra. So that is how the
bank runs the bank. In the sense, the bank makes an income so that it
can pay off, you know, pay its employees and
make a profit etcetera because all banks are in the business of doing
business, right? So that is what a
loan is, right? You use a loan to buy a house, you know, to buy a car. You use EMIs to buy gadgets, you know, laptops, et cetera, especially in India,
EMI is a huge thing. Some people also take
loans to buy gadgets, et cetera, or a house
or a car, et cetera. But what you must remember
is there are good loans. What are good loans, education
loans if you do take one. If you do take one,
it's a good loan because you're
spending on yourself, which allows you to make
more money in the future, because you have
already spent the money to learn skills that will
make you more money, right? You're taking a home loan, a home is always a
good investment. A real estate is good
investment, right? Because why you own the
place. Simple as that. If you're renting, you're
not owning the place, right? If you own the place, you can
just sell it for a profit. If the market is good,
if the market is good, doing well, and real
estate prices are high, you can sell your
home for a profit. If you rent something, you
cannot sell that for a profit, if you need to
raise instant cash or you need to move
somewhere, right? And if you're taking
a loan for business, for instance, it's a good loan, it's considered a good
loan because you're taking a loan to maybe fund
your marketing campaign, et cetera, and at the end
of the day, you know, it'll have some
return on investment. Now, what sort of loans to avoid, Luxury
consumption, right? That's not a good loan, is it? You want to buy an Armani suit and you take
a loan for that. Well, okay, you might mean you need not take a loan
for an ramani suit, but let's say you want to buy a BMW and you take
a loan for that, and you just make
$70,000 a year. Just lease it for heaven's sake. You know, you want to
buy it, you take a loan and you're paying
the loan amount, you're paying the
principal plus plus interest throughout
the next ten years. You know, the next ten years, every month you're paying
the principal and interest. So do not take such
loans, you know? Be smart about what
sort of loans to avoid and what sort of
loans to take, right? And align EMI with cash
flow very important, right? This is just a principle, right? You have to understand
how much money you can afford to pay the bank, how much money if you can
afford buying something, and how do you judge that bow, if you have enough money to pay the EMI plus
interest every month without breaking a sweat without finding yourself
under financial duress. That's what loans and EMIS are. Thank you so much, gratateE.
13. Insurance: Hey, everyone. Welcome
to a new lecture. Today, I'm going to
talk about insurance, life and health, right? What is life insurance? Well, life insurance is
you paying a premium, let's say, over a period
of time as an animity. And then if something
happens to you, then your family gets a
lump sum amount, right? And that helps your
family ride the storm. That helps your family
provide for themselves. If you die, if you are the
principal breadwinner, that helps your family
survive without you, right? That is life insurance,
essentially, but there are other
types of life insurance. What type of There
are life insurance. For instance, you pay a premium
every year for ten years. Then at the end of 16 years, you get a certain amount every year for the
rest of your life. So you invest money
with the bank, you pay, let's say, $10,000 per year, $100 per year, right? You pay $1,000 per year, one lac rupees per
year for ten years. And then at the end of 16
years, the bank says, Well, we are going to pay
you $500 every year, till the end of your life. That is another type of
life insurance, right? But usually such
schemes require you to pay very high
premium every year. And what is the premium premium is the amount you pay every year or basically every quarter
or every year, whatever. Usually every year, till a certain period of
time for 20 years, let's say, and
then at the end of your life, you know, a lump sum, which will be the premiums aggregated along with
some more money, be it insurance money or be it some form of amortized
return payment, combining your principal
and interest money, right? That is paid to your
family after you are gone. And if not that,
then, like I said, you can go for schemes which require you
to pay a premium, usually high premium
for ten years, and at the end of 16 years, either you get a lump sum or you get a promise that till
the end of your life, you'll get $500, $600 per year. And everything depends
on how long you live. And if you come out on top, that will depend on
how long you live. But then again, there might be another addentum
to the scheme, if the scheme is really good and the bank is really great, it might say that,
Okay, we'll pay you $500 per year till you die. After you die, your
family will get $10,000. The premium you paid
for, let's say, ten years, $10,000 back. Now, usually, such schemes are they require
higher premium, right? Notten hundred dollar per year. They require $5,000 per year for ten years,
et cetera, right. But like I said,
there are schemes, and you need health insurance. Remember this, right?
Without health insurance, you're just naked. You're naked in the burning
heat of the Sahara. Now that's a poetic metaphor, but it means that basically, you need to protect yourself. And to protect yourself, you cannot be naked
while you're, you know, surveying the Arctic Circle or spending a holiday
in Antarctica, you need to protect yourself. And to do that, you pay
a premium every year, and that ensures that you
get a medical coverage. So if you go to the hospital, if you are admitted
to the hospital, you don't have to pay anything
out of your own pockets. Usually, if the coverage
is really good, if you get a good
insurance plan, that means the insurance
company will pay everything. You just need to show
your insurance card, and the hospital will directly contact the insurance company. Your treatment will
be done free of cost, and the insurance company
will pay the hospital. Where does the insurance
company benefit from this? Well, it's very simple, right? If 100 people buy
insurance, out of that, one or two people will fall
sick any given year, right? If 100 people buy insurance and you're talking about millions
of people buying insurance. So out of that, about
10,000, 12,000, maybe 20,000 people will
fall sick every year. So the insurance company
comes out on top. They get these
premiums from people, they invest it, they
make a profit right. So essentially, that's how
insurance companies work. But like I said, you need to get insurance because if
something happens, God forbid, you know, you end up in an accident and, you need to be hospitalized
for two months, three months. The bill will be huge,
and in that case, the insurance if your insurance is high enough, it'll
cover everything. But if it is not, you'll have to pay the onus is
upon you then to pay. And if you cannot
pay, you have to file bankruptcy bankruptcy, as in America, it's called
Chapter 11, I believe. Yeah, you have to file
bankruptcy in any country. That's the law. That's
the rule, right? So, essentially, ensure that your life insurance is ten
to 15 times your income. Per year, right? If anything happens to you then your family gets ten to
15 times what you earn. You need to pay a
hefty premium for that and show your medical insurance is also kind of like that, especially in countries
where health care is very expensive,
such as in America. In countries when you are for instance,
healthcare is free. I mean, a portion of
it, you have to pay, but you can get an
insurance for that, too. In other countries, different countries have
different systems. So healthcare is free,
private healthcare is not. If you're looking at private healthcare,
you need an insurance. Otherwise, you
know, you end up in hospital for a month,
it'll bankrupt you, it'll ruin your finances, cause untold of hardship. So essentially, you got to
buy early. Remember that? Get your insurance as
soon as you turn 19. You might think,
I'll live forever. I'm 19. What will happen to me? But if I got my
insurance when I 21, 22, because I was very
smart about this. Initially, obviously, you know, I was in college, I wasn't
doing my undergrad. So I did not have the
money to pay the premiums, but my dad covered the premiums, then I started covering it. For the simple reason that, you know, if anything happens, I know for certain that the
insurance company will pay for all of my hospitalization
tenure right. I'll pay all the hospital bills. I don't have to pay a ten
get a good insurance, get a great insurance
as soon as you start working. That's my advice. And that's just a
general principle does not mean telling you to get one particular insurance or generally which
particular insurance is better, which is worse. I'm just teaching
you what is there? What is out there, all the principles that
you need to follow. To be smart about this, right? So, essentially, to prevent
financial catastrophe, get health insurance and get it early because remember this, if you get it early and then your insurer has your health record for
a long time, right? And they see that
you're not falling ill, your premium won't increase
with age that much. You know, if you get
it when you're 40, your premium will increase
because you're a health risk. If you get it when
you're 22 and you're not a health hazard,
you're not a health risk. You're not at risk from disease. You get it then, the company knows that for a
period of 18 years, you've been doing really
well, you've not fallen. The company does not
increase the premium. If you get it when you're 60, when you're 50 and you
have some disease, your premium is going to
be astronomically high. So be smart about this.
Thank you so much. I'll catch you in
the next lecture.
14. Gold And Commodities: Hey, everyone. Welcome
to a new lecture. Today, I'm going to
talk about investments in gold and commodities. Now, that's the sort of investment that hedges against
inflation. What do I mean? Hedge. Hedge means
protect and inflation, obviously, you know
what inflation is. Today, you can buy
mangoes for $5, a kilo or a pound, and tomorrow, it costs or
ten years down the line. It costs $10. So the value of money
has reduced by 50%. So what could be bought yesterday with $1 million
can only be bought today. For $2 million, right? So there has been 50% inflation. And because of that, the value of money gets eroded. If there's hyperinflation,
the value of money gets completely wiped out, right? So if you have invested
in commodities, and I'm not talking
about commodities as in, you know, you investing
in gold bonds, et cetera, I'm talking
about commodities such as gold, silver, actual physical, gold, silver, physical
cattle, physical, and, you know,
physical commodities. Inexhaustible, hopefully, and
even if not inexhaustible, then something that
will last for years. Well, if you have
invested in that, right, ultimately, at
the end of the day, you can hedge against inflation
because if you notice the prices of gold keep rising and over a
period of time over 20, 30 years, the price of
gold has quadrupled. In many cases, right? If you consider what
it was 40 years back, it has become much, much, much higher, much higher. So if you invest in such commodities,
you know, gold bars, gold coins, silver bars, et cetera, you can hedge
against inflation. You can just sell off
the gold, silver, and, you know,
other commodities, if you have invested
in land, for instance. So essentially, you can sell
it off and you'll be good. When you buy such things, you do not generate income. You do not earn
interest on it, right? Especially if you're
buying physical gold. You're dependent on the value of that commodity rising higher and higher for a period of time
and rising high enough to counter inflation or even beat inflation by a country mil. You understand what
I'm saying, right? You are buying the commodity, you're not earning
any interest on it, but because the value of the commodity is increasing,
you can sell it off, and then you'll have cash, which you can liquid cash, which you can invest further. You can invest in other
things such as other schemes, such as fixed deposits, mutual funds, index funds, whatever or stocks, you know, whatever you want to invest in. But like I said, gold prices show only short term volatility. If the prices of gold or the price of gold is measured over
a period of 40 years, there has been short
term volatility, but no long term volatility. It has just increased,
increased, and risen. That is how gold has risen. Now, some people say
buy a gold bond, that will be useful. Well, you don't want
to own physical gold. You can buy virtual, in the sense that you can
you can invest money with a bank and buy virtually
one KG of gold, let's say, and that will
cost a huge amount of money. But over a period of ten years, when you are holding
onto those bonds, at the end, what will happen is you'll get
a fixed interest, simple interest rate every year. So every year, you'll
get 2% of the worth of that investment of that
gold bond that you bought and you'll get 2% the
worth of the investment added to your principal which you use to
buy the gold bond. And at the end of ten years, whatever the price of
gold is in the market, that price, when you sell
your gold bond is liquidated, you'll get that particular price for the 1 kilogram of gold. So it's fairly simple. You buy 1 kilogram of gold, you're not taking
physical delivery of it, but you are buying it in
the form of bonds as bonds. And then every year
you're earning 2% interest on the amount
of money you invested, and that's being added
to the principal amount, and it keeps increasing
for ten years. And at the end of ten years, when the bond is liquidated, at that time, whatever
the price of gold, according to that, the one KG of gold will be
evaluated and you'll get the same amount as concurrent with the price of
gold in the market, right? That is what gold bonds are, right, if you're interested
in silver bonds, et cetera. So essentially, the idea is to have certain amount of
gold in your portfolio, certain amount of physical
gold or commodities, right? You can have sovereign
bonds. I just explained the gold
sovereign bonds to you, 2% per year, 3% per year simple interest over a
period of ten years, and at the end of ten years when the bond is
being liquidated, the bank will see what the price of gold is in the market will give a value for that one kg
of gold accordingly, right? So you can have sovereign bonds, and like I said,
it's protection. It's a safeguard. It's a hedge. It's not really a growth entity. It's not going to grow fast. Even bonds in a gold bonds, it's not going to grow fast. You'll get a certain
amount of interest return, interest money on the
investment you make. But ultimately, you know, you'll get the price of
gold after ten years. That's for a gold bod.
For physical gold, well, you're not getting any
appreciation every year. What happens is based
on the value of gold, the price of gold increasing
over a period of 20, 30 years, at the
end of 50 years, let's say, the value
of gold that maybe your grandmother bought or your great grandmother bought
or your mother bought, at the end of 50 years,
that will be a lot. And that is how you hedge
against inflation because let's say you bought the gold
for hundred dollar a kilo, you're selling it
for $10,000 a kilo. This is just this is
just a made up number, by the way, right?
So that can happen. The price of gold can
increase tenfold, 20 fold over 20 years,
30 years, right? So that is how you think about investment,
thank you so much. I'll catch you in
the next lecture.
15. Real Estate: Hey, everyone. Welcome
to a new lecture. And today, I'm
going to talk about real estate investments and real estate investments without owning real estates.
Now, what do I mean? Well, suppose you
have some money, you buy some land, you set you build something
on it, right? That's one type of real
estate investment. You build your own house on it. Now, you build it for a
certain amount of money, maybe you're moving ten,
20 years down the line, you sell it off, and it's worth five times or ten times the amount
you made it for, right? Or you buy old houses, you refurbish them, and you
let it out for rent, right? You earn rent income from there, and that hedges
against inflation because rent income
will always come. It'll always be there as long
as you own property, right? So real estate allows rental
income plus appreciation. If you're buying multiple
real estate, real estate, houses or real estate
projects, for instance, you know, you can
make money from rental income or you can make
money from appreciation. If you absolutely
refurbish an old house, for instance, you can
let it out for rent. But after a while, you decide
after ten years, Okay, how do you want to sell it
and invest in something else, you can sell it for
appreciation, right? For a lot more money
than you bought it for, and the issue with this is the problem with this
is it's low liquidity. In the sense that
you just cannot sell off houses just like that. You need to get a
real estate agent. It takes time, you know, and you have to negotiate, bargain, et cetera,
do all of that. And secondly, it has
high capital needs. You need to have money to invest in real estate in
the first place. You need to have
money to buy a house. Now, a lot of people
buy it on mortgage. You need to have money
for the town payment. Then you pay the
mortgage every month, and the rental income
will cover the mortgage, for instance, in most cases. So it's a good it's
a good investment. It's a good way to make money. And location is
critical, for instance, if your real estate
is near a college, for instance, that
increases its value. If your real estate is near, let's say, you know, an office block or an office, commercial area,
where, you know, people need to rent
apartments so that they could go they can go
to office from there, you know, walking
distance from the office or from the commercial area. In those cases, definitely, I would say, it makes sense
to invest in real estate. For instance, if you buy a
house near a college, right? College students will
need a place to stay. You refurbish that house, or you build a new apartment, you buy an apartment complex
or whatever, you know, you buy an apartment and
let it out for rent, and the rental income
will cover the mortgage. Right? So that is how
real estate works. Now, there is another type
of real estate investment, which is real estate investment
without owning anything. Let's say a developer
is trying to build an apartment complex or let's
say a gauged community, or let's say a developer
is building a really, really tall skyscraper and he is raising money and you
invest in it, right? You invest in it and you
own 5% of the project. Now, after the project is done, let's say the and on every floor, there's
an office, right? The space, the space is
let out to officers, to businesses, to different, you know, enterprises,
et cetera, and they pay rent for the
offices they have occupied. They pay rent, and that rent gets distributed
amongst the investors. So if you own 5% of
that real estate, you're not actually
owning the real estate, but you're part owning it. If you you know, if you have 5% of that
entire project because you invested 5% of the money
that went into building it. Well, after the rental
income starts coming in and may say many offices, businesses have rented offices
there, et cetera, well, you get 5% of the rental income, the revenue generated by the industrial property or
skyscraper or whatever, right? That is another type of
real estate investment. Now, like I said, rates is
property without ownership. You're not an owner, you're a part owner, you're
an investor, rather. And because you are an investor, you're
not owning property, but you have invested in the project and the
returns on the investment, the revenue generated will be distributed amongst
the inventors, amongst the investors rather. And it has a lower
entry barrier. Like anyone can own real
estate in this way, not own physical real estate, but a portion of
a project, right? And this allows for
portfolio diversification. It's a great tool. If you are owning real estate or real estate
without ownership, you know, anything of that sort. It might be capital intensive depending on what you're buying, but let's say you're buying something you're buying
a property or a house, uh, house in Ann Arbor near
University of Michigan. And what you can do
with that, well, you can let it out to students and students will pay the rent. You can let it out
to 5678 students, and they'll pay their rent. And using that rent, you
can cover your mortgages, and you can also make a profit out of it over the long term, after the mortgages
are paid or even in the short term because
mortgage may not be that high, but the rental income will be definitely higher
than the mortgage you'll have to pay
because mortgage, you know, it stretches
out over 40 years, and rental income is currents
coming every month, right? So let's say near Ann Arbor, it'll be $1,000 for
every single unit, for every single room
or every single unit with a kitchen and with
a restroom, bathroom. So, you know, if
you take that into account, it's a good business. You make money from rent. If you buy a property
near some college or, you know, wherever
people need to stay. You don't buy a property in the suburbs because people stay there in permanent homes, people buy homes in the
suburbs so that they can stay there and students
won't stay in the suburbs, for instance, or office goers
won't stay in the suburbs. If they are renting property, they'll try to rent it in
the middle of the city or near the offices or near the
industrial commercial area. Uh, so location matters. And if you can get that correct, if you can get that, remember, ultimately, you'll have to pay a down payment if you
have enough money for a down payment and
enough money to refurbish. Let's say you buy an old
property worth no more than 70, $80,000, you refurbish
it for 20,000, $30,000. Well, you know, out of that, your down payment will be
no more than, let's say, tenod 15,000 and the
rest of it, well, it'll be mortgage and you can pay off your
mortgage using rent. So that's all about
real estate and real estate without
property ownership, right. Thank you so much. I'll catch
you in the next lecture.
16. Alternative Investments: Hey, everyone. Welcome
to New let chain. Today, I'm going to talk about some alternative
investments. So you can invest in crypto. All of you have heard about block chains and bitcoins and, you know, chromium and all these different
cryptocurrencies. You can invest in that. You can invest in actually NFT, non pungible tokens, which
are bought using cryptos, and you can own them, and then you can sell them off using not sell them off using, but sell them off to get
more cryptos for them. So a lot of people do
this. They buy NFT, and then they sell it
off after a while. When the valuation of that non fungible token is determined to be much higher than what it was
when it was bought, you can buy private equity, for instance, art, right? What do I mean by
private equity? Well, you can invest in
companies which are not public. They are not probably
on the stock market, but you can invest
in private companies as an angel investor, as a venture capitalist and angel investors do
this all the time. They find out opportunities where they can
invest seed money, seed money as in, you know, money that is required
by the company to set up basic operations. Maybe someone has an idea. They have basic
products in place, and then someone invests seed money for a high
percentage of the company. And then as the company grows, as the company goes to the
market, then goes public, that particular percentage
of equity that you have acquired because you are an angel investor
in the seed round, that is in the initial
round of fundraising. You valuation the valuation of your investment is
much, much higher. Than it was when the company was just
starting out, right? So that you can do,
you can invest in art. You can invest in
different things such as, you know, old
fossils, et cetera. Anything that
appreciates overtime, you get your hands on a pica, so you get your hands
on a whole bean, you get your hands
on a moon man. You get your hands
on a rem Brandt, you get your hands
on a Danci Raphael. You get your hands on any
of these artists, right? You get your hands on a
ango, any of it, right? Modigliani, these things
appreciate over time. You keep it in your private
collection for a while. Even if you get something from an up and coming artist and that artist ends up
becoming like huge, like Rembrandt or Monet, right? Genre defining age
defining artist painter. Then the valuation of that art becomes more and
more and more expensive, more and more and more
high, right, rather. And you can sell it for a huge
amount of money later on. Same thing goes for
different things, right? 2000, 3,000, 5,000-year-old
artifacts antiques. You know, fossils that are 8 million-years-old
that are hard to find, except for all of
these things, right? You actually can
sell them off at auctions and get a very good amount of
money for all this, especially if you have something by an artist such as let's
say in the Indian context, Wada Avi Burma or in the Indian
context, Mulfaa Hussein, who are great Indian
artists were and are And you get their
paintings when they're, you know, starting out,
and later on, you know, the valuation of the
painting increases by a lot, and then
you sell it off. So you can do all of
that, but the problem is it's high risk,
high uncertainty. How do you know it'll sell? How do you know
something that you buy using a certain amount of bitcoins or certain investment,
certain amount of money? How do you know it will sell so there's a huge
risk involved, right? There's uncertainty and risk. You don't know what
the valuation will be. Let's say if you
have a Roman coin, or let's say in the
Indian context, if you have something
from the Mughal era or from the British era and
you want to sell it off, there's high risk people
might not want people might not want to buy
for a huge amount, there's uncertainty that
pawnshops, et cetera, will actually pay the
amount of money you think you should a low liquidity, you just cannot sell off
paintings, et cetera, just like that or NNT, non fungible tokens, bought
using crypto, just like that. You need to go through
a whole process. Then someone needs
to be interested, they'll pay you, et cetera. So there's low liquidity in
these sort of investments. The idea is to have a small
portion of your portfolio, which is dedicated to such investment opportunities or such product or
art or et cetera, that can be sold off later on. And it's not a begins. For instance, let's say you
have the first Bhagwat ta, one of the oldest Mahabta
Bagua itas in Indian contest. In print, you just
cannot sell it off. You need to find out
what is truly worth. You need to get an
expert involved, and the expert needs to be paid, at least if not paid upfront, then at least as a percentage
of the sale, right? So all of these things
are important, right? Anything from old books, antiques, you know, the
first printed edition, Indian printed edition
of Let's Jane Austen, all of those things have a
huge amount of value, right? And like I said,
it's speculation. And it's not co investing. You do your co investing using, FDs, mutual funds, endons, et cetera, even equity, bonds, all of those
things, right, Debentures. And then, you know, this
is speculation, right. Because you don't know
how much it'll be worth. You have something you think it's going
to be worth a lot. You need to get it
appraised and then, someone needs to be
willing to pay for it. You know, that's why you
saw the Bs auctions, you have all these
auctions, right, where things things
such as these, antiques, all these things are put on sale
and people buy it. With that being said,
thank you so much. I'll catch you in
the next lecture, which is going to be
the last lecture.
17. Asset Allocation Strategy: Hey, everyone. Welcome to the last lecture in this course. And today, I'm
going to talk about asset allocation strategy. The first thing you
have to understand is for growth, you need equity. You need investments in the stocks market, private
equity investments, or you might want to
invest in mutual funds, index funds, or fixed
deposits, et cetera. The fixed deposit mutual funds and other such index funds and other such investment
opportunities grow slower in general. Stock market investments depend
on how good the company, the stocks that you've
picked are doing. They may grow faster. But like I said, you
need equity for growth. You need debt for stability, debt as in bonds and
debentures for stability. In the sense, in the long
run, if you have bonds, they will give you
stable profit. They will give you
a stable return on investment
because like I said, you know, once you get a bond, you're promised a
certain amount or a certain interest on your investment on the
payment you've made, and you should get or
rather it is advisable in general to get gold for protection or any sort of
commodities for protection. And after that, you can focus on alternate
investments, et cetera, right. So first thing is
first things first, the first important thing is to have an emergency
fund in place. The second important thing
is to have insurance. And the third important
thing is to be consistent and be
smart about this, not in terms of going
for quick profits, but going for something
that gives you a stable return on investment
over a long period of time. And that allows you to hedge against inflation and
build your future. Risk free, or even if
some risk is involved, depending on what
you're investing in. Well, as long as
you're consistent, you will end up on top. Thank you so much.
I'll catch you in the final lecture or
rather the conclusion. Thank you.
18. Outro: Congratulations on completing personal finance for real life. You now have a structured
understanding of how money actually works
from emergency funds to investing from credit
management to insurance and from individual asset classes to overall allocation strategy. More importantly, you understand the reasoning behind
each decision. Financial security is not but through intelligence
alone, it is built through structure discipline and consistent decision
making over time. Before you conclude, make sure you complete
the course project. It is designed to help you apply everything
you have learned by constructing your own
basic financial framework. Application turns knowledge into clarity and clarity
builds confidence. Please remember this course is strictly for
educational purposes. It does not provide personalized or generalized financial advice. Your financial
decisions should always consider your unique goals, risk tolerance, and professional
guidance when required. I am Ricky Lahiri, and I look forward to seeing how you apply these principles in your own
real life financial journey. Stay disciplined, stay
rational, stay strategic.
Ricky Lahiri, Content Creator, Writer and Marketing Researcher
