Rachana Ranade. Blog

Who would have imagined that something as basic as an average can do wonders when extended to the stock market? A concept which we learned in our school days could not only help us identify trends but also take positions and build an overall perspective about the market. Intriguing, isn’t it? So, without any further due, let’s explore everything about averages and how to use it practically.

What are Moving Averages?
Before we move on to moving averages, let me refresh your memory about what are averages. An average is simply a representative figure, calculated by taking a sum of all data points and then dividing the sum by the number of data points. For instance, you know that on average you take 30 mins to reach your office. How did you come upon this number? You simply calculated an average based on the time you took to reach your office in the past. That’s all!

Now let’s come to the Moving average. Talking about the stock market, every day we see a different closing price of the stocks. So, how do we get to know the average market price of a stock and its general trend? This is where the moving averages come into the picture. The Moving average calculations consider the most recent number of data points (closing price of an asset). For example, for 5 days moving average, it will be continuously recalculated by taking the closing price of the recent 5 trading days. So, after every trading session, that day’s closing price would be included, resulting in the exclusion of the oldest closing price from the previous day’s data. This way the data points keep moving ahead every day and hence the name Moving Averages or Simple Moving Averages (SMA).

What is Exponential Moving Average?

EMA is a type of moving average. We can say that it is an extension of SMA. So, what’s different about EMA? The recalculation remains the same. Additionally, weights are given to the prices. The recent data will be assigned more weight compared to the older data. This makes sense because more importance is given to the price which is already discounted based on recent news, events, etc. Hence, EMA tends to react quickly and give early signals than SMA. For all these reasons, EMA is widely used by technical analysts.

How to use Moving Averages?
MA is a lagging indicator as it reacts to the daily closing prices. It is trend friendly and can help us identify trend reversals. As we all know- Trend is our friend, it is widely used by traders because of its simplicity. When the stock price moves above the MA line from below, a bull run can be expected. Therefore, you may explore buying opportunities in such cases. In an uptrend, MA acts as a support level. As long as the price stays above MA the uptrend tends to continue. When a stock price moves below the MA line from above, a bear run can be expected. In such cases, one may explore shorting/exit opportunities. In a downtrend, MA acts as a resistance level. The stock is said to be in the downtrend as long as the price stays below MA. MA won’t work when the price movement is sideways. You can observe the same on the chart of Tata Coffee shared below.

But simply applying a MA on the chart and taking positions based on it is not enough. Hence, we have something known as crossover strategies where a short-term moving average (also known as fast EMA) and a long-term moving average (also known as slow EMA) are combined to give us an overall picture of a stock. So, let’s have a look at 2 crossover strategies, which uses 50-days and 200-days EMA.

a. Golden Cross
A golden cross is ideally a sign of an upcoming bull market. It is formed when a short-term moving average (50 DEMA) crosses the long-term moving average (200 DEMA) from below. This crossover can help us identify trend reversal from bearish to bullish. If this crossover is backed by strong volumes and bullish signals from other indicators it indicates strength in bullishness. This is when you may explore buying opportunities. Once this crossover takes place, the 200 DEMA will act as an important support level.

This can be observed on Tata Coffee’s daily chart below. A golden cross happened on 26th June 2016 (highlighted) with high volume. After that, the stock continued to move in an uptrend and took support around 200 DEMA multiple times.

b. Death cross
A death cross is ideally a sign of an upcoming bear market. It is formed when a short-term moving average (50 DEMA) crosses the long-term moving average (200 DEMA) from above. This crossover can help us identify trend reversal from bullish to bearish. If this crossover is backed by strong volumes and bearish signals from other indicators, it indicates strength in bearishness. This is when you may explore shorting/exit opportunities. Once this crossover takes place, the 200 DEMA will act as an important resistance level.

This can be observed on Tata Coffee’s daily chart below. A death cross happened on 7th March 2018 (highlighted). After that, the bullish trend was reversed. The stock took resistance around 200 DEMA multiple times.

Bottomline
The important point to remember is that MA works when a stock is trending either on the upside or downside. Hence, you need to take a look at the general trend of the stock before making a trade decision. Avoid using MA in the sideways trend. Another important doubt which my students often ask me is what length should be used while using MA. People use 5 days, 10 days, 25 days or even 200 days. There’s no hard and fast rule about it. It completely depends on your investment horizon. Apart from this, make sure to check other parameters like candlestick patterns, volume, RSI, etc. to get a confident view. If you would love to understand the calculations that go behind MA and how to use these other significant indicators, make sure to check out my course on Technical Analysis. Until next time!

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What are moving averages?

Before investing in any asset, one question that pops up in your mind is what is the markets’ view on this stock/asset. Will the bulls remain strong or will the bears take over soon? This is an important point to analyze before entering into a stock. Indicators like moving averages can tell us about the trend in an asset but it does not tell us how strongly the trend will continue or not. For that, we have an indicator called RSI. To put it simply, RSI tells us about the strength in the price movement of an asset. Sounds interesting right? Want to know more about this indicator? Pull up your socks and let’s get started!

What is RSI (Relative Strength Index)?
Before we jump on to understanding RSI, we must learn about oscillators. I know oscillators sound complex but don’t worry, that’s what I am here for. An oscillator is a tool that moves in a range. It has a trend indicator that fluctuates within that range (imagine something like a pendulum). This trend indicator moves in response to the recent price movement of an asset. RSI is the most popular oscillator used by technical analysts.

It was introduced by J. Welles Wilder Jr. in 1978. RSI is a leading indicator that measures the intensity/strength in the price movement during a particular look-back period. Generally, 14 days look-back period is used for calculating RSI. The value of RSI moves between 0 to 100.

RSI = 100 – [100 / (1 + RS)],
Where Relative strength (RS) = Average Gain / Average loss over the look-back period.

As RSI is readily calculated for us on charting platforms, we won’t be focusing on the calculation part. Rather, we would be learning about its application in today’s blog.

What does it tell you?

RSI tends to pick up when the average gain is greater than the average loss for a look-back period i.e. an asset has relatively moved up more number of times in the last 14 days than it has fallen. The opposite holds when the average loss is greater than the average gain i.e. an asset has relatively moved down more number of times in the last 14 days than it has moved up.

How to use it?
In a strong uptrend, the RSI value tends to stay above 30 and frequently crosses 70. In a strong downtrend, the RSI value tends to stay below 70 and frequently crosses 30. Through this, investors can interpret the strength in the trend for an asset. Ideally, buying opportunities can be explored when RSI is in the oversold zone and a reversal of the prior downtrend/down move is observed. Similarly, shorting opportunities can be explored, when RSI is in the overbought zone and a reversal of the prior uptrend/up move is observed. Using RSI along with other indicators like moving averages, MACD, pivot points, etc. can help you gain a more confident view.

How to analyse RSI along with price movement?
For that, we need to understand another term called Divergence. A divergence is when the price of an asset moves in the opposite direction of a technical indicator. Even divergences can be used to take positions. We already know that the price can either move up or down. Hence, we have 2 kinds of divergences- Bullish and Bearish divergence. Confused? No worries! Let’s understand divergences one by one with an example.

a. Bullish Divergence
A bullish divergence is observed when the price of an asset makes a lower low and RSI makes a higher low. This means that bullishness is strengthening and the prior downtrend/down move might reverse. If this divergence is observed when the RSI is in the oversold zone then a strong up move is possible. Hence, buying opportunities can be explored in such cases with confirmations from other patterns and indicators. You can observe this on the PVR chart below. A bullish divergence was observed on 18th May 2020, when the stock price made lower lows but RSI made higher lows, after which the stock moved upward.

b.Bearish Divergence
A bearish divergence is observed when the price of an asset makes a higher high and RSI makes a lower high. This means that bearishness is strengthening and the prior uptrend/up move might reverse. If it is observed when the RSI is in the overbought zone then a strong down move is possible. Hence, shorting opportunities can be explored in such cases with confirmations from other patterns and indicators. You may observe this on the chart of PVR. A bearish divergence was observed on 21st Jan 2021, when the stock made a higher high but RSI made a lower high after which the stock moved downward.

RSI is an oscillator that indicates whether a stock is overbought or oversold based on the magnitude of price movement. It can work best in a trending asset when combined with other indicators like MACD, Pivot, BB, etc. Technical analysts around the world use different RSI levels as per their strategy. You can also increase or decrease the look-back period for the same. If you decrease it then RSI will react faster and reach the overbought/oversold zone frequently. If it is increased then the opposite holds. After reading this blog if you felt like “Ye Dil mange more” then I have one more RSI strategy for you which I have discussed in my extensive yet simplified course on Technical Analysis. I am sure you would love it so don’t forget to check out the link. Until next time!

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What is Relative Strength Index?

It’s a bright sunny day. You are traveling from Bangalore to Pune by road. You have reached midway somewhere near Hubli when you stop for some rest and refreshment. What is the first thing that comes to your mind? Chai… That cup of tea freshens you up and you are ready to move north. Similar is the case in technical analysis. A cup and handle pattern is a chart pattern that takes the shape of a cup with a handle. It is a trend continuation chart pattern. The stock price is moving north. In between it takes a break, it forms a pattern that resembles a cup with a handle. After that break, the stock again starts heading towards north. The Cup with Handle formation was popularized by William J. O’Neil in his book “How to make money in stocks?”.

What is a Cup with Handle chart pattern?
As the name suggests a cup with a handle chart pattern is a pattern of price movement on the trading chart that looks similar to a cup with a handle. A “U” shaped price movement forms the cup section and a short price pullback from the edge of the cup forms the handle. The pattern shows the movement of the stock in the past and helps us predict the stock's movement in the future. However, this pattern takes time to form. The formation may be as short as seven weeks or as long as 65 weeks or more. A cup and handle pattern provides a logical entry point, a stop-loss level, and a profit target.

How to identify a cup and handle pattern?
The pattern can be formed in any timeframe. However, it is advisable to focus on the daily timeframe. Being a continuation pattern, there has to be a prior trend and the same needs to be understood first.
Identifying the bullish cup and handle pattern: - There must be an established uptrend for the bullish cup and handle pattern to form. However, the trend should not be a mature one as it would reduce its chances to continue. The cup is formed by a normal fall in prices that gradually reverses forming a “U” shape. It should have a bowl or rounding bottom and not a sharp “V” shaped bottom. A rounding bottom ensures that there is a consolidation with valid support at the bottom of the “U”. The pattern could have equal highs on both sides of the cup, but this is not a necessity. The depth of the cup is another lookout point. The cup should not be too deep.
The fall in security price that forms on the right side after the formation of the cup is the “handle”. It is a short pullback that slopes downward. This can be taken as a small consolidation before the big breakout. While the cup can extend from 7 to 65 weeks, the handle may take about 1 to 4 weeks to form. Let us try to understand this with the help of the following example -

A visible cup and handle pattern followed by a breakout can be seen in the above example of Kolte Patil Developers stock. The black line shows a small uptrend in the stock. The stock has reached Rs.277 from Rs.206. A normal fall in prices to Rs.132 and gradual reversal to Rs.277.3 breaking the previous high leads to the formation of the cup. There is a steady decline till the bottom and steady incline back to the previous high leading to a “U” shape cup and not a “V” shape cup. The security has created two highs near Rs.277 at the start and end of the cup, which is a typical characteristic of the cup. We can see that at the end of the cup, the security has faced a minor correction before giving a breakout at Rs.280. This minor correction is called “The Handle”. The breakout at Rs.280 is also giving a buy signal.
An important point needs to be noted. Volume data can be very helpful in both patterns. Volume should decrease during the formation of the pattern and there should be an increase when breakout/breakdown happens after the formation of the handle.

What can be an ideal entry, price target, and stop-loss?
The price which breaks out of the upper trend line is an ideal entry price (Rs.466 in our example). Security can be purchased at the close of the breakout candlestick. There are two target prices for this pattern. The first target is an estimated distance equivalent to the depth of the handle. The second target is equivalent to the depth of the cup, starting from the point of breakout. If after buying at the breakout, the price drops, instead of rising, a stop-loss order is needed. The stop-loss should be at a level that is below the lowest point of the handle.

Limitations of the Cup and Handle Pattern.
Every coin has two sides. Similarly, the cup with handle pattern also has certain limitations. The main disadvantage is the time taken to form a clear pattern. A fully developed pattern may take one to six months to form or even more. This might delay the investment decisions. The depth of the cup is another issue. In some cases, a shallower cup can give a strong bull run and, in some cases, a deep cup can be a false signal. In certain exceptional circumstances, Cups forming without handles also limit the utility of this theory. Like other technical patterns, the cup and handle pattern can be unreliable in illiquid markets.

Bottomline
The cup and handle pattern when formed in a nicely rising bull market, tests an old high and encounters selling pressure because of profit booking. The price gradually declines and consolidates over time because the selling pressure is not high. New buyers and old buyers see the reduction as an opportunity to take a long position in the market, leading to a gradual increase and retesting the high from where the pullback initially started. The more the consolidation, the bigger the breakout. It is advisable to use the cup and handle chart pattern with other technical indicators for the best decisions.
If you would love to understand the calculations that go behind Cup and Handle and how to use other significant indicators, make sure to check out my course on Technical Analysis. Until next time!

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Cup and Handle Chart Pattern

Rakesh Jhunjhunwala the veteran Indian investor also known as the Big Bull of India recently lost his life on the 14^th of August 2022.

Rakesh Jhunjhunwala was the crown jewel of the Indian Stock market who believed in the Indian growth story and was so optimistic about the Indian Capital markets and was always bullish on the Indian stock markets.

As we all know Rakesh Jhunjhunwala started his investing career way back in 1985 with a mere amount of Rs.5,000 with his own investment philosophy which backed every investment he made in the markets but what separated him from the crowd was the size of his bets whenever his conviction was high which led him to invest a large chunk of money in his best stocks which are Titan, Lupin and Crisil back in 2002-03. In an interview, Ramesh Damani pointed out that Jhunjhunwala’s investments logged a whooping CAGR of 54% over the last 35 years.

In an interview, Rakesh Jhunjhunwala said “If a girl is pretty then the suitor will come” which means if the company is good the investors are going to come and invest. He further mentioned that he likes to invest in stocks that are not popular because you get a good company at a cheaper price.

Let us understand what are the top 5 lessons which we can learn from his investing career

1. Be ready to grab an opportunity - He firmly believed that the volatile nature of markets is what creates opportunities

2. Invest in a business that is Hard to replace – Investing in such businesses will give you a competitive advantage.

3. Success requires obsession – He used to say that people become shy of investing in stocks after booking losses. His advice for investors was to prepare themselves for the market and continue investing with a thumb rule of 'buy, hold and forget.' He used to advise investors to hold a stock as long as they can.

4. Never time the market - Stock markets are always right and no one can time the market. He was of the opinion that one should enter or exit on the basis of market timing instead of timing the market on its own.

5. Be Bold - He believed that “whatever you can do or dream you can, begin it. Boldness has genius, power, and magic in it." So, one should take stock market shopping like any other shopping. As you try to buy goods at the cheapest possible rates, you should do the same while buying stocks as well.

When he was asked in an interview about his worst investment, Mr. Jhunjhunwala said that his worst investment was in his own health. Shankar Sharma one of his close friends said that “with Rakesh, you need to have a strong liver to match up to his capabilities both in terms of thinking and drinking as well” So irrespective of the net worth that Mr.Jhunjhunwala had health is something where he got a pullback in life because of his habits.

Finally, India will remember him as the biggest bull, and his investment rules or philosophies cannot be written down in a book as the man himself along with his ideas were unique.

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The Best and Worst Investments of Mr. Rakesh Jhunjhunwala

The FIFA World Cup is starting tomorrow. Similar to Cricket, football is a ride of emotions for millions of fans across the country. Remember the 2011 Cricket World Cup? It was Sachin’s last World Cup and everyone wanted him to retire with one in his bag of achievements. Similar is the case with Lionel Messi this year. He has already confirmed that it will be his last try to get the Golden Cup, and we all want to see him hold one. Football has given us some very emotional moments. Remember how Russian Prez’s umbrella attracted more lenses than the trophy in the 2018 Finals, for once no one was annoyed that a non-deserving team won when Germany lifted the cup in 2014, and of course, you either need to be dead or not born to not know Shakira’s Waka Waka that took over the universe in 2010, it still does.

Today, we will understand three investment lessons that this phenomenal game can teach us. Let us begin

1) Choosing a team:

You may have observed that the team the manager chooses prior to every game attracts a lot of interest. Before revealing his starting lineup, the manager assesses the strengths and weaknesses of both his own squad and the opposition. Similar circumstances apply to stock picking. Research is necessary before selecting the best stocks.

The type of players chosen by a football manager is another analogy. If the manager decides to pitch a squad made up entirely of defenders or strikers, he would get himself into trouble. What would a game look like with eleven strikers? The team's composition would be incredibly unbalanced. They may score a hat trick, but they will also give up a lot of goals. Likewise with choosing stocks, choosing only stocks in the same industry or that are similar is not a good strategy. To reduce risk, you must diversify your holdings.

2) Profile of the players:

Players vary from one another, just like stocks do. The energy of the fresh blood, the serenity of the seasoned, and the undisclosed magic of the great players must all be in perfect proportions in order for the team to succeed. Different needs are served by each player. Take Lionel Messi or Cristiano Ronaldo as an example, whichever team they play for they are the ones chosen first by the manager. That's a result of the legends' extraordinary consistency throughout the years. For an investor, they resemble the stocks of reputable businesses that have historically produced significant returns.

Managers love the next-generation players. We are talking about the Mbappes, Kluiverts, and Scholes of the world. The rookies have something to prove, are simple to manage, and have skill reserves that can only be discovered if they are selected for the squad. However, not all young people make a splash. Playing a young gun definitely has its drawbacks. Here, managers take a calculated risk, something like investing in stocks of an unproven small-cap firm. Either these stocks turn out to be multi-baggers or they disappear without a trace. Therefore, a wise bet can be made by researching the company's business plan.

If you gave it any thought, you'd see that stable large-caps have a lot in common with defenders, unstable mid-caps have a lot in common with midfielders, and promising small-caps have a lot in common with forwards.

3) Game plan:

The strategies used on a football pitch also apply to the stock market. The manager chooses a starting lineup for his team based on the team's capabilities and the opposition's strengths. The most common football lineups have been 4-4-2, 4-3-3, and 3-5-2.

Balanced Strategy: 4-4-2 lineup is used when a manager wants to ensure that his side plays creatively while still avoiding taking any unnecessary risks. This is accomplished by keeping the ratio of defenders, midfielders, and strikers in check. The following strategy can be used by an investor to balance his portfolio for the best outcomes: He can invest 20% in small-cap stocks, 40% in mid-cap stocks, and 40% in large-cap stocks.

Aggressive strategy: When the manager decides it is time to put all of his efforts into scoring goals, he deploys a 4-3-3 aggressive lineup that consists of three strikers, three midfielders, and four defenders. The manager needs to choose players with excellent offensive talent in order for this method to succeed.

Defensive strategy: The manager occasionally wants to be conservative and avoid giving up goals. This is where he uses the 3-5-2 formation. To support the three midfielders and two tenacious strikers up front, he deploys three central defenders and two fullbacks. This is comparable to a person who prefers to take small risks and is content with steady profits. Such investors choose portfolios that are heavily weighted in defensive large-cap stocks, with the balance held in mid-cap stocks that are performing well.

Hah! I somehow see finance in everything that I see around me. But, enough learning for today, now let us drench ourselves in the wild energy and emotions that this World Cup has in its purse for us. Until then Tsamina mina, eh, eh Waka waka, eh, eh…

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Investment lessons from the football field

A few years ago, we would visit nearby stores to purchase items like clothing, books, gadgets, and other necessities. However, shopping has become more convenient since the rise of online marketplaces like Flipkart and Amazon as we can now access thousands of products at the touch of a button—and at great prices, too! The Buy Now Pay Later (BNPL) programs, which let us order items online and pay for them later in flexible payments, improve our online shopping experience. But is this facility a blessing or a curse? Let's find out in this blog.

With a short-term credit product called "Buy Now Pay Later," we can make upfront purchases that can be paid for over the course of four or six payments. In essence, we are taking out a short-term loan and we will need to pay it back in a lump sum or through EMIs. The majority of the time, we use these loans for online shopping.

Paytm Post-paid, Amazon Post-paid, Flipkart Post-paid, Zest Money, Simpl, PayPal, Lazy Pay, and Mobi Kwik Post-paid are the entities providing this facility in India.

We can purchase items with the help of BNPL plans without having to pay for them right away. But we should proceed with caution and only purchase items that we can genuinely afford to pay for; otherwise, we run the risk of purchasing something we didn't really want but ended up doing so because it wouldn't immediately strain our budget. In addition, interest will be added to the amount that was defaulted if we delay or neglect to pay an instalment.

Although BNPL schemes offer flexibility in selecting payback terms and instalment amounts at no additional cost, our credit scores are negatively impacted by late payments. But in all the fuss about BNPL hurting credit scores, the opportunity it affords new borrowers to establish strong credit histories is being disregarded. We can build solid traditional credit ratings by making on-time repayments and using credit responsibly. To do this, we must improve our knowledge of personal finance. With this goal in mind, I am developing "Mastering Money Management," a brand-new course on personal finance. Details will shortly be released on my website www.rachanaranade.com.

Moving on BNPL schemes have their own advantages and disadvantages. Advantages include quick and simple approval of interest-free loans, minimal documentation, low processing fees, customized repayment schedules, and safe and transparent online transactions. Disadvantages include impulsive spending, interest and fees for late payments, and the possibility of a lower credit score.

There is no such thing as a free lunch when it comes to money. The price of our purchases must be paid in any case. Therefore, the choice to buy now and pay now or buy now and pay later is entirely up to us, i.e., the consumer.

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Is BNPL a boon or bane?

Establishing financial goals is a crucial first step toward obtaining success and stability in your finances. But a lot of people have trouble figuring out what their financial goals should be and how to achieve them. We'll go through several actions you can take to make sure your financial goals are practical, achievable, and significant in this blog.

1. Determine how you are currently doing financially - Examining your present financial condition is the first step in defining financial goals. This entails figuring out your net worth, figuring out how much money you make, and figuring out how much money you spend. You can use this information to assess your financial situation and make goals since it will assist you to do so.

2. Define your short-term and long-term goals - It's time to define your financial goals after you've evaluated your existing financial status. Start by establishing both short- and long-term objectives. Paying off debt, setting up an emergency fund, or saving for a down payment on a home are some examples of short-term objectives. Long-term objectives can include supporting your children's education, retiring comfortably, or purchasing a home.

3. Be specific and measurable in your goals - It's important to make your financial goals specific and measurable. For example, rather than setting a vague goal of "saving more money," set a specific goal of saving a certain amount each month or increasing your savings rate by a certain percentage. This will make it easier to track your progress and stay motivated.

4. Establish a schedule for accomplishing your goals - Choosing a schedule for reaching your financial goals is a crucial component of goal-setting. Think about your short- and long-term objectives, and decide when you want to accomplish each one. You can use this to prioritize your goals and build a strategy for accomplishing them.

5. Make a plan of action - It's time to make an action plan when you've established your financial goals and the timeframe for reaching them. This should include concrete actions you can take, like raising your income, cutting your costs, or making stock market investments, to reach each goal. Make a timeline for finishing each goal and break it down into smaller, manageable tasks.

6. Consistently assess and modify your goals - Finally, when your circumstances change, it's critical to periodically assess and modify your financial goals. If your income or expenses change, you might need to revise your schedule, modify your goals, or set new ones after you've reached your previous ones.

In summary, establishing financial goals is a crucial first step toward financial success. You can develop a road map to financial stability and success by analyzing your present financial condition, identifying clear and measurable goals, establishing a schedule, making an action plan, and routinely reviewing and updating your goals. Always keep in mind that setting financial goals requires time and work, but they are ultimately worthwhile.

In addition to this, I have also made a detailed video on “How to set SMART Goals?”

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How to set financial goals?

Starting a family is a wonderful time, everyone is happy, excited, and a little nervous but it can also be a stressful one. If you are a parent, parents-to-be, or planning a family in the future – one of the most important things to consider is how much it is going to cost. You cannot put a price tag on having a child; it is a priceless experience that adds immense joy and meaning to life. However, smart parents are those who are prepared for the journey emotionally, physically, and most importantly, financially.

One of the most important things you can do to reduce stress is to establish sound financial habits early on. Here are ten financial tips to keep in mind when starting a family:

1. Create a budget

A budget is the foundation of good financial management. It helps you understand your income, expenses, and how much money you can allocate toward different categories. Create a budget including your income sources, expenses, and savings goals.

a. Save for emergencies
Having an emergency fund can provide peace of mind and financial security. Aim to save at least six months of living expenses in an emergency fund.

b. Consider childcare expenses
Child care can be a significant expense for families. A study by Aditya Birla Capital suggested that the cost of nine months of parental care and delivery might go up to Rs. 2,00,000/- and the two-year cost of raising an infant (0 to 2 years) can go up to Rs. 5,00,000/-. Consider the cost of child care when creating your budget, and start planning for it as early as possible to enjoy the best time of your life.

c. Don't overspend on baby items
Babies need a lot of stuff, but you don't have to spend a fortune on it. Consider buying gently used items or borrowing from friends and family to save money.

d. Plan for education expenses
Planning for your child's education expenses early can help you avoid financial stress later on. There is no need to explain how expensive the education system is. According to a survey by NDTV, in most schools in Tier-I and Tier-II cities, the annual tuition fee might range from ₹ 60,000 to ₹ 1.5 lakhs.

2. Get a life insurance
Life insurance is important if you have dependents who rely on your income. It can provide financial support for your family in case something unexpected happens. If you already have insurance then review your insurance coverage regularly to ensure that it meets your family's needs. Consider getting a term life insurance policy if you don't already have one.

3. Plan for retirement

It's never too early to start saving for retirement. There are numerous government schemes as well as private plans to help you accumulate your retirement fund. Consider setting up a retirement investment as early as possible and contribute regularly to it.

4. Make a will

Creating a will is an important step in protecting your family's financial future. It ensures that your assets are distributed according to your wishes and can help avoid legal complications.

5. Communicate with your partner

Effective communication with your partner is essential for good financial management. Set financial goals together, create a budget, and regularly review your finances to ensure you're on track.

Starting a family is an exciting and challenging time, but by following these financial tips, you can establish good habits that will help you achieve your financial goals and provide security for your family's future. This will help you enjoy the happy moments in your life stress-free. So, stay aware and start investing, until next time!

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5 Financial Tips when you start a family

Company Background:

Reliance Retail Limited founded in 2006 is a subsidiary of Reliance Industries Limited.
The fastest-growing retailer in the world.
India’s largest cash and carry chain with 52 stores and more than 4 million registered B2B and B2C customers
India’s largest consumer electronics retail chain with 8,249 stores
India’s largest fashion destination with 777 stores of Reliance Trends

Business Segments:

As per above infographic Reliance Retail is majorly in the 5 segments:

1) Grocery

2) Connectivity

3) Fashion & Lifestyle

4) Consumer Electronics

5) Petro Retail

The relation between contribution and market growth of the business segments:

To analyze and estimate the future growth of the entity one should focus on major segments of the business of the entity. Not just segmentation, but how much individual segments are contributing to the entire revenue of the entity and the future prospects of those segments can be considered.

Along with economic conditions, one of the factors to be considered is the growth of the segment in the market and whether the contribution of the segments is in line with the expected growth of respective segments.

For Example – In case of Reliance Retail, Grocery segment of the entity contributes 21% of the total revenue of the entity and the market growth rate of the segment is around 48%, Connectivity segment is contributing around 34% of the total revenue and the segment is growing at 28%.

If one considers these facts for all the segments and relates to the current economic situations, the expected growth of the segments – strength and opportunities of the business can be estimated to a certain extent.

Due to the COVID-19 situation, the savings of the general public has gone down to a certain extent as well as other financial stress has affected which can have a good impact in short term over the fashion and lifestyle segment of the entity.

Conclusion:

Understanding of business segments and its relation with the economic conditions is one of the most important things for consideration while investment decision.

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Reliance Retail Segments Review

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Company Background:

Business Segments:

The relation between contribution and market growth of the business segments:

Conclusion:

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