FINANCIAL PLANNING PROCESS

The correct investment strategy and sound financial advice will determine how you live today
and in the future. There are six stages to develop a financial plan and to carry out personal
money management. From beginning to end, a certified financial planner professional guides
you through the financial planning process - keeping in view your current financial situation
and economic background.

1) Identify your Financial Situation

The first stage of the financial planning process constitutes assessment on what is happening
in your life right now and how you can change your financial situation. The key areas to
reflect are:

Household budgeting –This is an important area as after calculating the monthly costs spent
at home, you’d be able to figure out how much you are left with to save or invest.

Family commitments and Living Expenses – Are you single or married? Do you have
children? What are their living and lifestyle expenses?

Tax Standing and Strategies – How do you manage taxes? Are you living or working
abroad?

Current investments or saving reserves – How much savings or debts you have right now?

Other Financial obligations – These may involve some miscellaneous costs you might be
planning ahead for future such as:

• A wedding or property purchase

• Emergency funds to cover for household catastrophes
• Family Funds reserve in case something happens with your job or you
• Is your retirement just around the corner?

This step serves as a foundation for developing your plan and gives you a good reference
point to achieve your short as well as long term financial goals.

2) Determine Financial Goals

Experts say when you have identified your goals; you’re most likely to achieve them.
Highlighting the financial goals serves as an important aspect of financial planning.
Subjected to what phase in life you have reached, these goals could be:

• Get married and initiate a family

• Purchase or pay off a property
• Ensure your children get a good education
• Make your reserves and investments tax proficient
• Get retirement with enough income on hands to enjoy life ahead

The sole purpose of this step is to differentiate your needs from your wants. Apart from
these, the goals or objectives may range from spending your entire income into developing a
long lasting investment program for future financial security. However, you must select
which goals you need to pursue.

3) Identify Alternatives for Investment

After a thorough understanding of your financial needs has been taken and all the appropriate
financial goals have been cemented down, next thing is the investment alternatives or specific
recommendations from your financial planner.

By taking a good look at your short, medium and long term goals, an integrated investment
strategy would be developed based on your set requirements. Furthermore the objectives
would be looked upon again and it will be analyzed how far you are down the road to
achieving your short and long term financial goals. Taking in account your timeframe, cash
flow, risk tolerance, current insurance coverage, tax strategies and investment goals, a range
of ideas and financial planning alternatives would be presented in order to determine which
one suits you the best. This will help you produce more actual and satisfying decisions.

4) Evaluate Alternatives

The proposed recommendations are then further assessed. This is your chance to discuss the
alternatives face-to-face and take necessary actions bearing in mind your current situation,
financial standings and personal interests. If you have any concerns regarding your financial
planner’s recommendations, those can be altered and revised. Alternatives can be closed
down based on the decisions you make. For instance:

The idea to carry on your education attests you cannot do a full time job. Decision making
thus stands as an ongoing process which works side by side with your personal and financial
situation so lost opportunities as a result of your decision making should always be kept in
mind while analyzing the alternatives.

Risk Evaluation

While evaluating the options you might end up having uncertain ideas. For instance, choosing
your career over studies involves risk. How can you ensure if it’s rewarding in your future?
Other financial decisions involve a comparatively low degree of risk such as saving your
money in a savings account or purchasing some object of great value with it. The option of
losing that object is low in such scenarios.
Thus while making financial decisions; finding out risks and evaluating them is tricky. You
need to collect data based on your experience and the experiences of others as well. Decision-
making process will require you to frequently update your knowledge politically,
economically and socially so you can make informed decisions.

5) Put Together a Financial Plan and Implement

Once you are content with the recommendations and feel good to proceed, the
implementation of the plan would be carried out. This step of financial planning process can
be considered as an action plan where you will pick ways to achieve your short, immediate or
long term goals. Often taken as the toughest step for some people, but makes a huge
difference in the long run!
The key thing to consider here is to carry it out as early as you can. The longer it’s left
unattended, the longer it will take you to grow your wealth – ultimately a great shortfall in
your savings when you retire.

6) Review, Re-evaluate and Monitor The Plan

Financial planning is an on-going and dynamic process and it’s unlikely that your financial
condition will remain same throughout your life. You need to assess your financial decisions
periodically as changed personal, economic and social factors will require you to alter your
decisions to fit into your new situation.

As you progress through the different phases of your life, you financial needs will be
reflected and financial process will serve as a tool to let you adjust to these changes.
Monitoring your plans will help you prioritize your decisions and make necessary
adjustments that will bring your financial needs and goals in line with your current life
situation.

Types of Investors
While we often hear stories about intrepid individuals funding startups using the
bootstrapping strategy and investing their own wealth and earnings, that strategy is
sometimes unrealistic or downright impossible. More often, fledgling startups must seek
investors to help foot the bill for their projects. Five common investor types for startups
include:

• Banks
• Angel investors
• Peer-to-peer lenders
• Venture capitalists
• Personal investors

Typically, funds from these types of investors are used to introduce a new product, expand
operations, or upgrade equipment and supplies. However, each situation is different, so
companies should take legal precautions before reaching out to any investor.
Banks as Investors
Some small businesses seek bank loans to help with startup costs. Because of the 2007
mortgage crisis, it is now more challenging to qualify for a bank loan. It helps to have
personal experience in the industry or a good mentor who is well-versed in the industry.
Companies may have to provide collateral, such as a home equity loan, and as much startup
cash as possible.
The bank typically requires a comprehensive business plan that includes:

• A complete, detailed description of the business

• A description of the business's core products and/or services
• Financial projections
• Management projections
• Plans for goal implementation

You'll also have to prove that you are financially responsible. For best results, start with a
bank where you have an existing business relationship. You should also research loans
guaranteed by the Small Business Administration (SBA). This agency guarantees loans for
partners that include banks and other types of traditional and nontraditional lenders. Because
these loans are guaranteed, it may be easier for new businesses to qualify. SBA
loan programs include:

• 7(a) loan program

• Microloan program
• 504 loan program

The 7(a) loan program is designed for businesses working with a small and/or rural lender,
implementing measures to control pollution, or impacted by NAFTA.
Microloans can consist of as much as $50,000 for working capital, to purchase supplies or
inventory, to furnish a location, or to purchase equipment or machinery. Debts you've already
accrued, and real estate that has already been purchased are not funded by microloans.
Administered by Certified Development Companies, the 504 loan program helps startups
enlarge operations or bring them up to modern standards through purchases of buildings or
land, improvements to buildings or land, construction or modernization of facilities,
renovation of existing facilities, machinery purchases, and debt refinancing. According to the
SBA, these loans are 40 percent funded through the SBA and 50 percent by the lender,
requiring a down payment of 10 percent.

Angel Investors
An estimated 268,100 active "angel" investors in the United States invest an estimated $20
Billion into 60,000 companies a year. The average investment of this kind totals $74,955.
Angel investors are usually wealthy entrepreneurs who want to leverage their wealth by
investing in projects they are passionate about, especially startups that may have difficulty
accessing more traditional forms of financing. Many angel investors are successful
entrepreneurs themselves, as well as corporate leaders and business professionals.
This investment is typically in the form of either a loan or a stock purchase. Sometimes, they
also mentor or advise the business in which they are investing. For example, some angel
investors specialize in a specific type of company, such as new technologies.
In some cases, these "angels" make a high-risk investment in hopes of receiving a large return
if the company is bought out by a larger corporation or is publicly traded on the stock market.
This type of angel investor is usually most active when the economy is strong or stable.
If you have been approached by or are considering approaching an angel investor, ask the
following questions:

• Do you expect control in return for your investment? If so, how much?
• What is your motivation?
• What is your experience in the industry?
• Does our startup meet your requirements?

The terms of a loan from an angel investor are detailed in a promissory note. With angel
groups, angel investors can pool their capital to make larger investments. The Angel
Resource Institute database listed 385 groups of this kind in the U.S. in 2012.

Peer-to-Peer Lending
With peer-to-peer lending, startups and entrepreneurs can create online profiles for their
projects on websites like Prosper and Lending Club to be considered by investors. These
services strive to match small-business owners with entrepreneurs while cutting out the
middleman.
The SBA recommends that startups interested in peer-to-peer lending develop a business plan
and company story that shares their progress and key achievements, as well as results of
market research, industry analysis, and financial forecasting. You should also be prepared to
share how much you've already invested yourself. The goal is to show potential lenders that
your business has what it takes to earn money and be successful
Potential peer-to-peer loan investors will have access to your credit history. In some cases,
lenders will ask you to take steps to raise your credit score before receiving loan approval.
Once you've been approved, you'll negotiate an interest rate for the investment with the
lender, who is often a private individual. It's important to understand the terms of the loan
and avoid falling behind on payments. Doing so can increase the fees you're charged and
make you ineligible for future loans of this kind.
Companies should also familiarize themselves with state regulations about peer-to-peer
lending.

Venture Capitalists
The United States is currently home to 465 active venture capital firms that together invested
$22 billion in 2012. The average investment in each company is $2.6 million, larger than that
of any other investment type. Venture capitalists typically invest in only 1 out of 100 deals
they see, compared to about 1 in 10 for angel investors. They also conduct substantial due
diligence, a process that takes up to five months for each investment.
Venture capitalists invest millions in a company by securing a share in the company known
as equity capital. The investment is predicated on the idea that the equity capital will increase
in value over time and they'll receive a return on their initial investment. This type of investor
typically works with companies who have a solid business plan and have already displayed
some measure of success. You'll need to show a solid business plan and high-profit return.
Venture capitalists rarely invest in startups perceived as risky.
Business owners should know that when investing with a venture capitalist, they are giving
up partial ownership in the company. Some venture capitalists will want a say in management
decisions. You'll also likely pay a higher ROI to this investor than the cost of interest on a
traditional business loan.
When working with a venture capitalist, consider establishing a
detailed partnership agreement that indicates the rights and expectations for each party. While
venture capitalists sometimes act in a mentorship role, they are usually more active in
operations. When seeking venture capital opportunities, it's best to be referred by a mutual
acquaintance. For example, you can ask existing investors to share your business with their
networks to open even larger opportunities for funding.

Personal Investors
While you might not have considered approaching friends and family to invest in your
startup, this is not an uncommon approach. In fact, personal investors represent a bigger piece
of the pie than any other type of funding source, investing over $66 billion annually with an
average personal investment of $23,000 per project. This approach is best suited for funds to
get a new company off the ground. However, loyalty and affinity for the business opens
personal investors up to potential long-term investments.
According to CNN Money, personal investments should be governed by a contract just like
any other type of investment. This may prevent the risk inherent in mixing business with
family. Make sure your familial relationships are strong enough to be separate from the
business relationship; for example, you could damage your loved one's finances as well as
your own if the endeavor is less successful than projected. Sign a promissory note spelling
out the terms of the loan as well as a separate agreement if a partnership is on the table.

INVESTMENT IN GOLD

Gold Investment Option 1 – Physical Bars and Coins

Individuals who choose to make a gold investment through physical bars and coins can be
comfortable that they have full legal title to the gold they have bought.
They also have the advantage that, via this form of gold investment, they will be able to trade
their gold around the clock, provided of course they are buying and selling with a reputable,
accredited bullion dealer.

Over the long-run, a gold investment in bars and coins can also be the cheapest, as storage
costs are either free (if stored at home), or very cheap, if the physical metal is stored in a
private vault.

Unquestionably, buying physical bars and coins is the safest form of gold investment as it
eliminates third party risk, which you will still have if you buy gold in securitised form for
example. There is also no question that your investment will match the gold price, as that is
exactly what you’ve bought, whereas other options, like a gold ETF, are meant to track the
gold price but don’t always do so perfectly.
Gold Investment Option 2 – Gold ETFs
For some individuals, using a gold ETF makes more sense for their gold investment. The
primary advantage of this form of gold investment is that it is really easy, as any investor
with a brokerage account can buy a gold ETF in much the same way they buy and sell shares
in their favourite listed companies.

There are however some disadvantages to this form of gold investment, the most obvious of
which is that you don’t actually own gold when buying a gold ETF.

Instead, you own a security, and the security is in theory backed by physical gold, owned by a
third party on your behalf.

For some people making a gold investment, this added risk is no major worry for them, but
for more risk conscious investors, it is an insurmountable problem.
Ownership is not the only potential drawback to this type of gold investment, with the
investors in a gold ETF limited to trading their gold in the hours that their local stock market
is open, rather than the round the clock physical bullion market.

A final drawback to this type of gold investment is the long-term costs. Most gold ETFs
charge a percentage funds-under-management (FUM) fee, which can range from 0.40% to
0.50%
If you put $100,000 into a gold ETF, in year 1 your fee will be $400. But if the gold price
doubles over 5-10 years, then you’re fee will also double, as it is linked to the value of the
gold.
This is of course different to gold investment option 1 (physical bars and coins) which can be
stored either free, or at a fixed dollar cost in a vault.

Gold Investment Option 3 – Gold Mining Shares

Arguably the most risky form of gold investment is to buy shares in gold mining companies,
or companies exploring for gold.

The reason that this is the riskiest is that the companies may never actually find gold (in the
case of gold explorers) or build a profitable mine.

Even the companies that are producing gold can see output fall, or costs rise, both of which
can play havoc with their margins, and cause extreme volatility in the price of their shares.

In short, you aren’t really making a gold investment per se when you buy shares in a gold
mining company. Instead you are buying an ownership stake in a company that is in the
business of finding gold and selling it to the market at a profit (hopefully).

Note this is not to say that investing in gold mining companies can’t be a great gold
investment (they can), but the point is that they are far riskier than an investment in physical
gold, or a gold ETF.
Advantages of Gold Investment
This history of gold investment dates back to as earlier as 500 BC, when it was used for
bartering and trading. Since then, Gold has been valued highly for its properties and
eventually the root of the invention of all the currencies. Even today, its value has spiked.
Therefore, looking at the Gold Investment benefits today is of great significance over other
options.

1. Gold has a long-term Store of Value

Gold’s value has increased over centuries and has withstood the shifting time regardless of
the downfalls or insurgence of governments. Gold is often praised for its long-term value. So
if you’re planning for your retirement or want to leave something your children and
grandchildren can have, you can invest in gold bars, coins, or bonds.

2. High in demand
One of the advantages of investing in Gold is the precious metal is always high in demand.
However, do heed to the fact that gold mining can be done for as long as there is enough
Gold available on earth. In addition, the currency rate constantly fluctuates depending on the
market. Being volatile, the fluctuation in currency rarely affects the value of Gold. This
means you can sell owned gold bonds or stocks for cash anytime you want.

The growing trends from emerging economies such as Indian China are most likely to invest
in Gold as the nations are thriving. Their demand for Gold is also expected to rise as they
become wealthy.

3. Ease of access is one of the major advantages of gold investment

Being a physical and tangible commodity, gold is much easier to purchase than stocks,
shares, or bonds. You can also opt for different options, such as gold coins, bullion, gold
paper, or even mutual funds.

Also, you can prefer any trusted and tested Gold investment company as your Gold
Investment Guide. Alongside many Gold Investments benefits, tax savings is a
mentionable one. You don’t have to pay more than 28% on income tax on collections held for
more than a year.

4. High Liquidity
Gold has grown to become a popular investment option for people planning to retire. Given
the advantages over other commodities, it’s now easier to buy or sell at Gold investment
companies.

Not only gold is easy to convert into cash, but the gold investment return is also unaffected.
It’s in demand, which means, Gold has become a high-liquidity investment that gives you the
freedom to use the invested money in case of emergencies.
5. Inflation Hedge
Gold’s value, if considered for the long-term, goes inversely with respect to inflation. This
means that the price of gold either remains unaffected or goes up even when the currency’s
purchasing power depreciates.

You can put your investment in different types of gold investment such as Physical
Gold (numismatic coins or bullions), Gold Paper (Funds, Bonds, Contracts for Differences)
or Stocks (Gold mining shares) .

Disadvantages of Gold Investment

With every asset be it comes certain setoff risks. If you are planning your retirement by
investing in precious metals, consider some disadvantages of Gold Investment.

1. Liquidity
Gold investment is a game of patience; gold is a suitable investment option for long-term but
beware that it’s a viable option for storing your funds for a short-term. Also, when you
purchase physical gold from a dealer or Gold investment company, they have their cut in it.

This means, you have to pay a little extra than its actual market value. The same happens if
you intend to sell it. Liquidity is one of the biggest disadvantages of gild investment when
your goal is to keep it for shorter period. You may not be able to profit due to agent’s or
dealer’s commission.

2. Huge Capital is one of the concerning disadvantages of Gold investment

Gold, a precious metal, has a high value for which you would have to reconsider investing
your lifetime earnings. You may even have to sell other assets to buy enough gold to support
your loved ones in the future.

Other assets can bring higher yields monthly, semi-annually, or annually with a small
investment. However, gold is still a mammoth deal as compared to Mutual Funds, bonds, and
stocks.

3. Gold Investment Returns may not be higher

Gold investment benefits may be noteworthy for long-term use. With that said, this
commodity may not give a return monthly or annually like real estate, stock exchange, or
certificates of deposits do. You can only gain profit by reselling the gold in your possession.
It’s clear that if you want to grow your wealth, gold investment isn’t the right deal to crack.

4. Gold Investment Needs Security and Insurance

Gold coins or bars are not like other assets you can keep in your desk drawers or record-shelf.
This precious metal has to be kept in specialized and highly secure storage. One of the
challenging disadvantages of gold investment is maintaining a high level of security to
guard it.

Even if you opt for services from a gold investment company or banks, they may charge you
for providing security. This protection and maintenance fee may take you by surprise if
calculated as a whole for long-term storage.

5. It is difficult to transact when you have invested in gold

There are three other main problems you need to plan for; finding a genuine buyer,
confirming that you are a genuine seller, and proving that you genuinely own the metal. One
of the significant challenges you may face while reselling gold is proving that your own is
genuine.

If you are ready to invest in gold, be prepared for paperwork to make the reselling process
hassle-free. If you are not prepared for that, you may have more problems rather than gold
investment benefits.

Conclusion on Gold Investment Pros and Cons

Gold has shown its worth staying valuable amid depression and inflation. Not only in ancient
times but even today, this metal has retained its value. If you are looking to invest in it with a
long-term store of value, it’s something your next generations would remember you for.
Whatever your goal is, considering Gold Investment Pros and Cons is of utmost
importance, especially when you put every penny on the line.

INVESTMENT OF SILVER

Pros and Cons of Investing in Silver

October 7, 2021 By Shreya Berry

Investing in real metals such as silver, like anything else, has advantages and disadvantages.
However, in general, silver is a lucrative long-term investment. Precious metal prices are
currently increasing, which enhances investors’ desire to purchase these commodities. In
order for them to make a profit in the future. Investors are asking where they may acquire
these rare metals to keep them safe during tough times.

Investing in silver, like everything else in the market, has advantages and disadvantages, and
what appeals to one investor may not be suitable for another. When the price of silver rises,
so does investor interest in the silver market, with many thinking whether now is the time to
acquire real silver and include it in their investment portfolio.

While silver may be volatile, it is also seen as a safety net, comparable to its sister metal
gold – as safe-haven investments, they can shield investors during times of uncertainty. With
tensions rising, they may be a smart option for individuals seeking to protect their money in
these trying times. With these considerations in mind, let us examine the benefits and
drawbacks of purchasing or investing in silver.

Pros of Investing in Silver

Investing in silver has not one but many benefits. Listed below are a few of them:

1. Silver provides protection

When there is political and economic instability, legal tender usually takes a back seat to
assets such as gold and silver. While both silver and gold bullion may be attractive to
investors, the white metal is often ignored in favor of gold investors, despite the fact that it
serves the same purpose.

2. It is physical money

While currency, stocks, bonds, and other financial instruments are recognized sources of
wealth, they are basically still virtual promissory notes. As a result, they are all susceptible to
devaluation as a result of activities such as printing money. Silver metal, on the other hand, is
a finite tangible asset. That is, although physical silver is susceptible to market swings like
other commodities, it is unlikely to collapse entirely due to its intrinsic and actual worth.

3. It is less costly than gold

When compared to gold and silver metal, the white metal is nonetheless less expensive and
therefore more affordable to purchase, but it is also more flexible in terms of spending. That
is since silver coins are less valuable than gold, they are simpler to break if you wish to use
them as money. Just like breaking a $100 note at the store may be difficult, dividing up a
chunk of gold can be difficult. As a consequence, silver metal is more useful and adaptable
than actual gold.

4. Silver outperforms gold in terms of returns

Because silver metal is worth about 1/86th the cost of gold, it is cheaper and stands to earn a
considerably larger percentage gain as silver prices rise. In fact, in previous bull markets,
silver has beaten gold. For example, it increased 448 percent from 2008 to 2011, whereas
gold increased just 166 percent over the same time period. Keeping these figures in mind, an
investor may use silver metal in their portfolio to hedge their bets.

5. History is on silver’s side

Silver and gold have been acknowledged for their worth throughout most of mankind’s
history, and thus there is an assumption that they will survive while fiat currencies may go
away. Individuals who invest in real silver, whether via silver bars, pure silver, coins, or other
methods, have peace of mind knowing its value has and will continue to rise.

6. Silver provides anonymity

Whether you cherish your anonymity or not, silver provides the same advantage as currency
in that it allows consumers to spend anonymously. Not all want each of their dealings to be
made public.

Cons of Investing in Silver

1. The Problem of Liquidity

When you purchase silver, it could be in the kind of bars, coins, or ounces. However, if you
make a transaction or wish to purchase anything, you will not be able to utilize it in its
current state. So, for this reason, you must first change it into your country’s currency, after
which you may use it for any purpose. OroPocket solves this problem for you! Utilize the
current worth of your silver – enjoy 100% liquidity.

2. Theft Risk

It is typical that the more valuables you have in your house, the more likely they may be
taken. As a result, possessing valuable metal necessitates protection against theft. If you store
silver in a bank deposit box or anywhere else, it may cost you in the form of a security
fee/charges. This isn’t so much of a con anymore as you now have the option of buying
digital silver.

3. Rate of Interest

One disadvantage of investing in silver is that it does not generate any interest rate. If you
have silver and want to make a decent profit, you should wait for the price to rise, which may
take some time.

About the Best Ways to Invest in Silver?

There are two primary methods to be exposed to silver: directly (by purchasing the metal
itself) and remotely (buying silver-related securities). Physical silver may be purchased by
investors in the form of digital assets, bullion, bars, or junk silver bags. These are the simplest
form of silver investments, although they do have storage issues and costs. Investing in
financial products that reflect silver is less appealing, but more practical. These are the finest
indirect alternatives for individual investors:
Digital silver is a new way of buying silver without possessing it in the physical form. It’s
like having a bank in your pocket. You can buy, spend or sell with a click of a button – day or
night. You can even start an auto-investment plan for silver.

Silver stocks are businesses that are engaged in the mining, processing, or reselling of silver.
Because “silver is often taken from or mined along with other metals such as copper,” there
are relatively few pure silver plays.

Mutual funds and exchange-traded funds (ETFs) that invest in silver portfolios. Some
people invest in actual silver, while others invest in silver businesses.

ETCs, or exchange-traded commodities, are publicly traded instruments that invest in

silver bullion, similar to mutual funds. They vary from that, however, in that they are debt
securities, with the underlying commodity – silver in this instance – serving as collateral.

Conclusion

After learning about all of the benefits and drawbacks of silver investing, the investor may
make an informed choice about whether or not to stockpile silver. For those looking to
benefit from white metal, timing is everything.

INVESTMENT IN DIAMOND

Pros and Cons of Investing in Diamonds

The demand for diamonds continues to grow not only because they are being used in
jewelry, but also due to the important part they play in the manufacture of various high-
precision medical and industrial tools. Indeed, putting your money in this precious gem can
give you very high returns. First, though, consider these pros and cons of diamond investing.

Pros of Investing in Diamonds

1. High Demand and Low Supply

Since 1949, diamond prices have, on the average, enjoyed large annual increases. This is
brought about by the fact that the demand for the stone continues to surge in international
markets, particularly in Asia, Russia and the Middle East. The natural and flawless varieties
are quite rare. As a result, such gems are very expensive when used to adorn priceless jewelry
for both men and women. The supply of small and low-grade varieties is also falling because
of the growing demand for diamond-tipped precision devices in various industries. In
addition, the market for colored diamond varieties has shown huge growth within the last
three decades.
2. Portability

If you invest in real estate or collectible cars, you cannot bring them with you all the time.
However, if you put money in high-quality diamond jewelry, you can wear the pieces
anytime and carry them with you when you travel. Loose stones are even easier to carry and
take along with you.

3. Independent Prices

Another good reason to invest in this gemstone is the fact that its price is not affected by
fluctuations in stock, oil and bond markets. In fact, the value of this precious stone will not
diminish even during economic downturns and other political or social troubles.

4. Easy to Store and Maintain

As a mineral, a diamond is strong and durable. So, it can definitely last for decades. Since the
stone is hard, storing and maintaining it is also uncomplicated. If you have a collection of
diamonds, just make sure that the gems do not rub or get into contact with one another.

Cons of Investing in Diamonds

1. Requires Huge Capital

Investing in these gemstones can be rewarding, but you will need big money to buy them, as
they can be extremely expensive. The natural, flawless and rare ones can easily fetch
hundreds of thousands of dollars on the market.

2. Easy to Steal or Lose

The portability of this gem is both an advantage and a disadvantage. Since a diamond can be
easily carried around, it can also be easily stolen, misplaced or lost.

3. Synthesized Stones

Now there are companies that specialize in manufacturing synthetic diamond varieties. It is
true that the differences between the artificial and natural stones are still very apparent, but
once the technology in diamond manufacturing is perfected, the market could be flooded with
high-quality imitation stones. This could pose a threat to the value of natural varieties.

4. Not Easy to Resell

If you invest in natural and flawless diamonds, you may find them hard to resell immediately
because of their high prices. In case of financial emergencies, you might be forced to sell
your investment at a significantly lower price to attract institutional buyers.
COLLECTABLE INVESTMENTS/ANTIQUES

Paintings, sculptures, drawings, engravings, photographs, jewellery, medallions, antiques and

artefacts are all types of collectables and personal use assets allowed in SMSF investments
subject to certain rules and restrictions, as defined by the ATO.

So too are coins and banknotes, if their market value exceeds their face value.

Other collectables and personal use assets include postage stamps or first-day covers, rare
folios, manuscripts or books, memorabilia, motor vehicles and motorcycles, recreational
boats, wine or spirits, and even some memberships of sporting or social clubs.

Potential benefits of investing in collectables

If you’re still interested in investing in collectables for your SMSF then you need to
consider some of the possible pros or cons.

Follow your passion

Do you secretly love rare books, but live in a CBD apartment with little space for your dream
library?

Investing in collectables could offer the opportunity to pursue a passion in retirement that you
haven’t been able to in your working life. Of course, it has to be worth the money your SMSF
spends on it now – and you should only buy a collectable via an SMSF if you expect a
reasonable profit on your investment.

This means it’s important to do your research before investing in any collectables, which
brings us to the next point.

Possible increase in value

Depending on what they are, collectables can be a valuable investment if they are something
that can reasonably be expected to appreciate in value.

There are no sure bets, but getting professional advice about what to invest in can be helpful.
For example, some early Star Wars memorabilia has increased in value since it was first
released. Some Lego sets are also considered a good investment.
Just remember, the rules mean you can’t make use of these items while they are part of your
SMSF investment portfolio.

And remember that not everything increases in value indefinitely. For example, the Beanie
Babies craze was all the rage in the late 1990s, when the cute toys rapidly became a hot
commodity. But many of those who held onto their collection, hoping their value would
continue to soar, eventually lost out as the end of the craze saw most of the toys crash in
value (although a few apparently held their value).

Diversification
It helps to not have all your eggs in one basket, such as investing solely in property or cash.
Collectables can provide some measure of diversity, if chosen wisely and purchased as part
of a balanced investment strategy.

Potential disadvantages of investing in collectables

Now you’re aware of some of the potential pros of investing in collectables, you need to
consider the possible cons.

It’s a long-term investment

Collectables in most categories can take a matter of years to increase in market value, and
they do not provide any form of income until you sell them. Think of collectables as more of
a long-term investment choice.

You can’t keep your collection for personal use

As mentioned earlier, the tax rules mean that as an SMSF investor, you cannot keep a
collection for personal use. So if you’re someone who loves vintage cars, for instance, using
your SMSF to invest in a collection could be challenging. It would mean you could never
drive or work on the cars in the collection.

Complex tax rules

You need to make sure you keep up-to-date with, and comply with the ATO’s complex rules
around ownership, storage and insurance of the collectables your SMSF owns. If you don’t,
you could face substantial fines and other penalties.
INVESTMENT IN LAND AND BUILDING

Real estate investment can be good and bad, depending on the market condition and your
financial strategy. Whether you invest in land or house, it can generate regular income and
can be effective in building wealth. But at the same time, buying properties requires huge
capital investment and ongoing maintenance costs, which might be expensive to afford if you
fail to attract a tenant for the land or house. Moreover, unlike other assets, a real estate
property cannot be sold in real-time and it might take, up to 1 year to grab a decent deal.
Considering all these factors it’s important to understand the advantages and disadvantages of
property investment. Take a look.
Benefits of property investment
1) Consistent income
When maintained and advertised properly, your property investment can offer tremendous
opportunities for income generation. If you invest in property in Jaipur or any other “A”
grade city, such as Ahmedabad, Surat, Pune, Kanpur, chances are high that you will cover the
cost of capital investment within ten years by renting. As these cities are stretching their
population widely, there is a huge demand for rental properties. Apart from this, land
investment in small and big cities can also create many opportunities for income generation.
A vacant piece of land can either be leased out or might be turned into an event centre, park
or stable, which are other avenues of income generation.
2) Great inflation hedge
Unlike other types of investments like stocks, bonds, and shares, real estate investment can
beat inflation. No matter, whatever be the economic scenario within the country, the cost of
land or independent house is never going to depreciate. And, on average, the cost of a real
estate property doubles its value every ten years. Moreover, unlike stocks and bonds, property
prices do not keep on fluctuating.
3) Tax advantages
When you purchase a house as a first-time home buyer in India, you are bound to get tax
deductions under section 80 C. Apart from that, tax deductions are also applicable in case of
rehabilitation of historical buildings and certain other real estate properties.
Drawbacks of real estate investment
1) Lack of liquidity
Real estate properties come under fixed assets, which means you cannot think about selling it
within a specific time. This nature is quite disadvantageous for those who might require a
huge amount of cash on an urgent basis. Moreover, selling a property hastily is never a good
decision as it takes time to understand the market, estimate an appropriate price, and attract a
suitable dealer.
2) Difficult management
If someone has invested in many properties, located in different places, their management can
be difficult. Whether it’s a land or a house, it requires timely maintenance. Moreover, other
areas that require constant effort and time are the maintenance of cash memos, accounts,
filing income tax returns, advertising the property before prospective sellers/tenants, etc.

Conclusion:– Investment in real estate properties might have some positive and negative
effects. But overall, it’s great as a long-term investment option. Regular rental income is one
of the benefits of real estate investment. Besides this, it helps in saving on tax and beats the
effect of inflation. But it’s not good for those who might need to resell it sooner.