Media reports keep on harping about market volatility. This makes prospective investors scared about entering the markets. They shun stocks as they fear that they may end up losing their money. As a result they lose out on golden opportunity to make money in the stocks.

But every investor must realize that volatility is an inherent part of stock markets. Instead of shunning volatility, it is very important to make volatility your friend. Here is how.

Focus on your long term goal: It is very easy to be affected by the daily market movements. It can make you sell your holding or stop your investments. However this is going to affect your goal achievement. Instead if you keep your eyes on your long-term goal, you will get better returns. Remember “Your time in the market is more important than timing the market” is the key to successful investing. Just take care to review your portfolio periodically.

Overcome your fears: It is easy to get scared when the market crashes. But remember what goes up comes down and vice versa. Markets work in cycles and while your stocks may lose value in the short-term, they will recover their lost ground over a period of time. Also when the market crashes, find out if the crash is due to change in fundamentals or due to some event that is not related to your stocks’ fundamentals.

Diversification: The secret to protecting your investments is diversification. Spread your investments amongst stocks of different sectors, capitalizations as well as amongst asset classes like bank deposits, gilts, gold, real estate and stocks.

Invest in quality stocks: Stocks with strong fundamentals tend to recover faster than those with weak fundamentals. So it is better to invest in such stocks with a long-term perspective ( at least 4-5 years). In fact you can look at any market crash as an opportunity to buy such stocks at cheap prices.

In short, don’t let market volatility scare you. It is the nature of the stocks to be volatile. Use it smartly to benefit from it by using the tips mentioned above.

In today’s world, everyone needs additional source of income to meet rising costs. While your salary will pay majority of your expenses, having additional income does help.

Now you must be wondering how to earn extra income. Well, then here are some good tips to earn additional income

• Interest: Do you have an FD with a company or bank? Or you may be holding a recurring deposit with bank or post office.  Then you can opt for receipt of interest, which you can use as extra income.
• Dividends: If you hold shares or mutual fund units and have opted for dividend option, this can be your source of income.
• Rent: Renting out your home or car can fetch you rent, which can be a source of additional income.
• Residual income: Are you an insurance agent or in networking marketing? The commissions you earn will become your residual income. Even if you are not working, you can continue to get income.
• Selling on ebay: Ebay lets people sell items and earn revenue. This can be done either as a part-time or full-time business.
• Part-time work: Do you love preparing food items or handicrafts? If so, you can sell them and earn a good income. You can also take tuitions as a source of your part-time income.

Besides this, any lottery winnings, inheritance, etc will also contribute to your monthly income.

Recently ULIPs were in the news when SEBI had directed 14 insurance companies not to issue any new ULIPs. SEBI contended that despite being an insurance product, ULIP had a high proportion of investment and thus should be regulated by SEBI. However in reality IRDA regulates the insurance products including ULIPs.

The case went to the court and the government had to step in and hand over the jurisdiction of ULIPs to IRDA. But in this war, it is ultimately you the customer has lost. Wondering why? Here is why.

This is because mutual funds and ULIPs do not have level playing field. While mutual funds are not allowed o pay upfront commission to its agents, ULIP agents can pay commission as high as 40% to its agents. As a result, many financial advisors tend to push ULIPs on their unsuspecting clients. Now remember, this commission comes from your investment.

The drawback of ULIP is that you need to keep your investment for at least 10 years to recover this upfront commission. This despite what many insurance agents tell you that you can keep on investing only for 3 years. Also the insurance cover is very low than what you would get for half the investment had you opted for term plan.

Moreover returns from ULIPs are not guaranteed as it is a market-linked product. Thus looking at drawbacks of ULIPs it is advisable to stay away from ULIPs. But with IRDA winning the battle against SEBI, it is the customer who has lost.

Manish was advised by his mutual fund advisor to invest in a mutual fund that had just announced a dividend of 10%. Accordingly, Manish invested in the fund only to find that the value of the fund had decreased. Manish was shocked with this development as he considered the dividend from the mutual fund same as that of the dividend from the stock.

Manish is not alone. There are many such gullible investors who are taken for a ride by unscrupulous financial advisors. Also sheer ignorance makes people think dividends from mutual funds are the same as the dividends from stocks. But this is not true. Here are the differences between both of them.

When a company declares a dividend, it does so from its income. But when a mutual fund declares a dividend, it does so from the capital appreciation of its NAV. Now the money with the mutual fund is your money as the fund’s job is to collect money from multiple investors and invest in different companies on your behalf. When the share prices of the underlying companies go up, it will push up the NAV of the find, which the fund will then give as a dividend.

The share price of the company is decided by the market and not by the dividend. But in case of a mutual fund, the NAV of the fund decreases by the value of the dividend declared. E.g if the NAV of the fund is Rs. 20 and the fund declares a dividend of Rs 4, the NAV of the fund after the dividend would be Rs. 16.

Also unlike shares, opting for dividend will help in growth of your investment. Hence if you are looking to save for any long-term goal like retirement or children’s education, go for the growth option. So next time your mutual fund broker advises you to invest in a mutual fund just because it is giving a dividend, ignore it.

The stock market crashed and media is filled with photos of worried investors looking up at the stock ticker. There are reports of investors committing suicide in wake of the crash. All this makes new investors wary about the stock market and shun it entirely. But this is not advisable as stocks have been shown to beat inflation and give the highest returns.

Now the question that arises is how to benefit from stocks without losing money. Answer -  diversification.

Diversification means dividing your total investment corpus across various assets – stocks, bonds, gold and real estate, based on your risk appetite. Now if one of the assets crashes you still have other assets to fall back on. This will prevent your returns from eroding.

This was evident during the recent market crash when the returns from gold exceeded those from the stocks.

However diversification can also mean choosing stocks from across various sectors and market caps. Those who had invested their money stocks of IT and pharma companies did not see a massive erosion in their portfolio as compared to those who had invested in real estate and infrastructure companies.

In summary, there are two things that are important to keep in mind while planning your investments -

However remember no asset is risk-free. Every asset has its own risk. You need to take it into account while diversifying.

Looking for a loan with low rate of interest? Then opt for gold loan offered by banks against the gold jewelry. The bank uses your jewelry as collateral and will lend you money against it.

Why gold loan?

The interest rates charged on this loan are at least 5-8% cheaper than the personal loan. Also unlike a personal loan, a gold loan does not have any elaborate documentation so the loan processing time is shorter. Also you can avail of this loan even if your credit record is poor. You just have to show your income proof to avail of the loan.

Why avoid gold loan?

If you are taking a loan from a cooperative lender, then you must be a member of the bank. Also some smaller banks may not return your ornaments, so you stand to lose your jewelry. If you have taken a loan from a particular branch and defaulted on it, then the branch may not return your ornaments. So in this case, it is advisable to approach another branch of the same bank or another bank altogether.

Also the tenure of the gold loan will vary from bank to bank. In case of HDFC Bank, the tenure is annual while it is monthly in case of Mannapuram Finance. The benefit of of monthly tenure is that you can get higher amount with every rise in gold prices.