Beta- Analyzing mutual funds

Guru Prasad -
 The risk of any investment made always depends on the volatility in the following investment. If we can have a factor that could tell us about the volatility of a investment and help us judge our risk and corelate it with our capability to take risk, how would that be? Well Beta factor is one such factor that could help us know the sensitivity of our stock or portfolio fund that we have chosen to invest. Beta ratio:- Understanding Beta:-  Beta is a metric used in fundamental analysis to determine the volatility of a stock with comparison to the overall market that has a fixed beta ratio of 1 always. Stocks or funds that are ranked with a beta ratio above 1 generally tend to fluctuate more and hence give access to more risk but yielding higher returns too at the same time if gone in favour. While the risk is slightly less in the funds with beta ratio below 1 they give less but yet stable return on investments generally. Hence, the beta factor can be said as a risk- reward factor, helpi
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Financial literacy in India

Guru Prasad -

"If you buy things you do not need, soon you will have to sell things you need."

Hey guys. I hope you all must have heard this well known quote by Warren Buffet. 

College graduates often spend 16 years gaining skills that help them command higher salary; yet little or no time is spent helping them save invest and grow their money. In a growing and developing nation like India where economy always remains the cause of concern, Do you all know that the financial literacy in India is just 24%, which is the least among it's well competing peers. You don't believe me! Well let me take you through a complete detailed study of the financial literacy in India.



What financial literacy means?

Financial Literacy is the ability to understand basic financial concepts and the possession of knowledge and skills required to make informed and effective financial planning, decisions using the available financial resources. It is about knowing how to generate, spend, invest and save money. It is the ability to manage your finances well by making the optimum use of the available financial products and resources to give you maximum benefit.

Global study:-

Financial Literacy has become one of the topmost priorities for most nations today as understanding basic financial concepts allows people to manage their wealth in a more organized way which in turn helps in the economic growth of the nation. It is proved that people with appropriate financial education and knowledge make better financial planning and makes the most of the available financial resources for maximum benefit. In the United States of America, financial literacy was initiated way back in 1908 by the American Credit Union Movement. In 1957, financial education was made mandatory by the state of Nevada and then other states followed. Australia also provides financial literacy education through customized programs. Singapore and Indonesia are among few of the Asian countries who have started this initiative and have taken the first step towards Financial Literacy.


Looking at the above graph it must be clearly visible that how, while the financial literacy of Canada, UK and USA lie at 68%, 67% and 63% respectively and while the financial literacy of all well developed countries ranges at least above 37% the financial literacy in the major emerging economies lies between 24% in India to 42% in South Africa. While the average economy of developed countries found to be 55% the developing economies show a average of 28% financial literacy. India
reports it's financial literacy well below the moving average of the emerging economies.


                 Source:-  https://gflec.org/initiatives/sp-global-finlit-survey/ 

Financial literacy in India:-

In India, Financial Literacy has still not become a priority like other developed nations. Lack of basic financial knowledge results in poor investments and financial decisions. That’s why most people invest in short-term plans and physical assets to accomplish their personal goals which give lesser benefits and does not help in the economic development of the country. 

The financial literacy rate in India has been consistently poor as compared to the rest of the world. While the world suffers from a pandemic which has left the economics of even the superpowers shattered, it is indeed high time for a developing country like India to realize the importance of financial literacy, since poor financial literacy rate can prove to be a major setback to India’s ambition of becoming an economic superpower in the coming years. While the World predicts a huge boom in the Indian economy post covid, the financial literacy in India could prove to be a major road block to the Indian economy and also become a cause of concern. 

Well do you know, a study also has been said to have disclosed the fact that almost 50% of the people in USA invest their money into stocks or other places where the market could keeps moving up and down and yet most had significant gains because of their literacy of financial knowledge while only 8% of the people invested their money into such markets. Most Indians also tend to fail in recognizing the right investment when comparing with inflation of the country and hence usually stay in the traditional myth of investing their money usually, only in gold, property or tend to keep their money in the bank rather than investing it in sources which could give even better returns. People also tend to keep themselves quite emotionally attached to their investments over selling them at the right time.

Financial literacy in young blood:-

An item-wise analysis offers valuable insights about the extent of their financial knowledge. While about 78% of the students are able to understand and give correct answer to the question on simple interest, only about 45% give correct response to the question on compound interest. The lack of understanding about compound interest, which universally underlies the evaluation of investment opportunities or debt products, does not seem to reflect a very high level of financial numeracy among the surveyed students.

Well the above one was just among the young teens. It is also understood that the rural population will take a little time to come to terms with the process of internet payments and banking, but the people who are being mentioned here are the youth of India. The youth which is educated, technology savvy and smarter than the previous generations. The same youth is considered illiterate when it comes to handling finances while they are growing up. In many cases, it has been noticed that these young people receive wrong financial advises from their relatives resulting in potential losses.

After reading some of the alarming articles we also decided to do a survey among the youths by ourselves, and we tried to find out how many in our youth between 16-24 were aware of how the taxation in India worked and how many were confident of being able calculate the income tax by their own. And now look at the below graph to know what we found.


Research by Sarthak Mathur


Only 21.42% were confident that they knew how to calculate the tax. While 42.87% were not quite sure 35.71% agreed that they didn't even know how to calculate the tax. When we conducted another study to find how many were actually happy with their state of financial literacy among these, showed the following results.


Credits to Sarthak Mathur for research

Only 17.85% people seemed to be satisfied with their state of financial literacy. While 25% seemed doubtful, 57.15% agreed that they were not satisfied with their state of financial literacy.

Bodyline:-

Hence, by now you must have understood the importance of financial literacy. Especially for the youth, it is high time to realize the importance of financial literacy and improve our financial knowledge.The government should also take initiatives to make financial education compulsory in schools and colleges. The government should run campaigns to educate people about the importance of financial literacy in everyone’s life.

Below is the link to learn the calculation of income tax in India. Since many might not be aware I request every one to visit the below link.


https://www.etmoney.com/blog/how-to-calculate-your-income-tax-in-5-steps/












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