Income Tax Handbook: Take Calculated Risks

Ques: Take calculated risks, because fixed return investments not good enough to beat inflation
Ans: No Pain No gain. Key points in risk management are:
- You should take risk depending on your profile to increase the return on your investment.
- Extra safety comes with hidden risk of not even beating the inflation. For example, fixed deposit interest after tax comes to 5-6% which is lesser than actual inflation.
- Equity investing in disciplined manner (SIP) is less risky and beats the inflation as well.
- To further reduce the risk you can entrust the responsibility to manage the risk to professionals/specialists (portfolio managers or financial planners). Before signing any agreement with them, fix the deliverables from both sides.
- While you entrust the risk management to professionals, basics of investment must be understood to control your finances.
- How much risk you can take while investing depends on number of factors such as age, dependents, annual income, working years balance, present assets etc.
- There are some tools available online on financial portal to calculate risk.
- Insurance covers the risk of loosing an asset therefore one must get insured what he/she have.