Ask Us: highest return is best?

This is due to the fact that return has different components and their values depend on a number of other factors too.

Written by Adhil Shetty | Published: July 30, 2012 3:15:28 am

Is a financial instrument that gives the highest return the best one?

—Jasbinder Singh,Mumbai

No,not necessarily. This is due to the fact that return has different components and their values depend on a number of other factors too. In the basic sense,there are two components to returns,namely current income and capital appreciation. Current income is the regular cash flow that we get from the investment. These include interest from a bank deposit,dividend from a company or mutual fund,rent from a house or commercial building. This cash coming to us can be regular and a known quantity like a bank deposit and rent. In case of dividends the quantum of incoming cash and time when it will be paid out is not always known in advance. Current income may be more important to some people than others. A regular known income is more needed for a pensioner than a fresher.

What is group buying? Is it true that I can get a better deal by opting for a group purchase of a home?

—Ajit Kumar,Delhi

Here is how group buying works. Potential home buyers connect with one another through a common platform,usually provided by a third party or a group buying company,and form a group. The said company then goes to the builder with a couple of orders and negotiates for possible discounts. The builder,sensing a good opportunity to sell a number of his properties,agrees to the discount. Typically,there is negotiation on discount but the discount is higher than what is offered in individual cases.

Are zero down payment loans possible?

—Vasudha Sharma,Pune

‘Zero-down payment’ loans are not necessarily helpful. Banks might offer you a ‘zero -down-payment’ loan based on a very good credit history. Typically,zero-down-payment loans are offered for smaller homes and are hard-to-get and hard-to-qualify. Moreover,‘zero down payments’ mean that you are borrowing more,making your monthly installments higher and defaulting on even a single payment might initiate foreclosure proceedings against you.

Moreover a down payment and the ability to save a substantial amount of money is a big confidence booster that gives you the self assurance of managing and sustaining a long term loan.

—The expert is CEO,Bankbazaar.com; For your personal finance queries please email at expressmoney@expressindia.com

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