Non-financial and Financial assets - What is Net worth?
By
B. Padmanaban
Net worth is the value of all the non-financial and financial
assets owned by an institutional unit or sector minus the value of all its
outstanding liabilities. Thus, net worth can refer to companies, individuals,
or governments.
The below pictures explain you what is Net worth is all about...
In a layman language, anything that can be converted into cash
is one's net worth.
Typically, individual net worth comprises of the following.
1. Real Estate (House
/ flat as well as Plots of Land)
2. Gold / Silver
3. Cash
4. PF and PPF Amount
5. Cash in the Bank
6. Fixed instruments
in bank, post office and NBFC.
7. Mutual Funds and Shares.
Across India if we measure the net worth of the individuals, the
highest percentage contributes none other than real estate investments, which
is highly liquid and it is purely depends on demand and supply. Yet, they
neither worried about this nor they felt they were overexposed to one
investment.
There is no regulator and largely influenced by the black money,
after demonetization this sector hits very badly. In the next few years hardly
one can see any growth or sustained growth is only possible!
Some of my clients in the recent past are asking me all my
investments are in mutual fund only, many feel that, am I taking a huge risk
because everywhere it is mentioned that one should not put everything in a
single investment whereas am investing everything in MF!
If you look at the typical Indian investor investment
distribution, hardly anything from mutual fund, so their mutual fund
contribution to their net worth is insignificance. The reason is, many
investors feel that financial asset is the only asset or its net worth.
Typical retail investor’s goals are long term in nature and they
have to build brick by brick through power of compounding only, so no need to
worry about it.
Basically mutual fund suit all the retail investor needs, it
gives highest form of liquidity, level playing field, no location specific, no
volume game and on top of it is controlled by the regulator.
 |
| Mr. B. Padmanaban, CFP |
Nobody is there to guide any other investments except mutual
funds as far as India is concerned. Here is somebody (Advisor) who can guide
the investor through all the volatile times and helps to realize investor goal
by projecting what is possible based on the investment vehicle potential, not
mere hope or taking undue advantage of demand and supply mismatch.
Unfortunately, we don’t like anything which is transparent in
nature. Nobody likes 1+1=2 which is reality.
Everyone likes 1+1 = !!! (Your imagination). This gives all the
hope and thrill is the reason for still everyone is playing on real estate!
For
more details
Mr.
B. Padmanaban
9884349173
No comments:
Post a Comment