Let us look at some case studies to drive home some very important lessons in financial planning.
Looking for the best investment choice?
Solomon is in search of the right investment opportunity to finance his goals. Holding bank deposits may be a safe idea, but the returns may not be the highest; investing in equity may get a higher return, but with higher risk; and investing in PPF is safe, but it can be locked-in for too long.
Solomon should know that different investment avenues offer different combinations of risk, return, liquidity and time horizon. There is nothing that is best for all times and all purposes. A better approach is diversification. This means having a combination of various investment options and balancing the benefits and risk.
DIFFERENT INVESTMENT CHOICES SERVE DIFFERENT NEEDS.
TO DIVERSIFY IS TO COMBINE THEM SENSIBLY.