A ctivity factor for sound investing. Safety can be ensured by Owning securities in both government and private sectors like National Savings Certificate (NSCs), Public Provident Fund (PPF), Kisan Vikas Patra (KVPs), fixed deposits in banks Investing in companies in different geographical zones Owning shares and bonds in different companies Studying the market reputation of the issues of the securities Varying the kind of securities purchased – agricultural land, real estate, stocks, bonds, fixed deposits, etc. Understanding prevailing phase of business cycle (ii) Reasonable rate of return: In general, the higher the rate of return on an investment, the greater the risk, i.e., safety of principal and rate of return are inversely related. To some people, particularly those depending upon investments as their major source of income, regularity of income is more important than a higher but fluctuating return.
This is determined by the selection of securities. Therefore, before investing money one should compare the rate of interest and the associated risk under various schemes and options. (iii) Liquidity: It is the ability to convert the securities into cash without sacrificing value. The more liquid an investment is, the higher is its price, or in other words, the lower the return to the investor.
Hence income and liquidity must be balanced. (iv) Recognition of effect of world conditions: Changes in business trends will affect both the amount of protection needed, the ease of providing it and the methods chosen to provide it. Considering the long time business trends, a family must recognise the effect of their savings on the entire economy. Their willingness or unwillingness to invest in business enterprises at various stages in the cycle may well have an effect in reducing the extremeness of the cycle.
(v) Easy accessibility and convenience: While choosing an investment option for family funds, one must consider the knowledge required for its success. A family may choose an investment which might result in loss simply because they did not foresee the problems involved in the management of security or property acquired. (vi) Investing in needed commodities: The date on which an