Most of the new mutual fund investros are faced with the same question.. and they never seem to get enough right answers.
The question on how to earn more looms large on our minds.
The following gives you substantial information to make the right decision and win in the LIFE.
The question on how to earn more looms large on our minds.
The following gives you substantial information to make the right decision and win in the LIFE.
| Years | For 25 Years | Asset Class | Product |
| 8.00% | 45,74,197 | Fixed Income | NSC, other fixed inc.Inst |
| 15.00% | 1,37,82,804 | Equities | MF Equity Schemes |
*On monthly investment of Rs 5000/-
| Details | Mr.Wise | Mr.Rice | Exp. Returns |
|
Mr. Wise is wealthier | |||||
| Present Age | 20 Years | 40 Years | ||||||||
| Retirement Age | 60 Years | 60 Years | 8.00% | 1.62 Crores | 0.57 Crores | 2.83 Times | ||||
| Savings per Month | Rs.5000/- | Rs. 10,000/- | 12.00% | 4.90 Crores | 0.92 Crores | 5.32 Times | ||||
| Saving Years | 40 Years | 20 Years | 15.00% | 11.52 Crores | 1.33 Crores | 8.68 Times | ||||
| Comparative | Past Highs | Present | Lock in Period |
| Sensex | - | 15.00* | None |
| PPF (variable yearly) | 12.00% | 8.00% | 15 Years |
| NSC (fixed) | 13.40% | 8.41% | 6 Years |
| Kisan Vikas Patra | 13.40% | 8.41% | 8 Years 7 Months |
| Bank Deposits | 10-12% | 4.50-6.00% | 1 to 6 Years |
| Sensex over past 25 years has given about 18.17% Comp. Ann. Returns** | |||
| *Expected return over similar long term investing horizons ** From 1979 to December 2004 | |||
| Monthly Expense | Try to Save | Expected Returns | At Retirement | |
| Household | Rs. 5,000/- | Rs. 500/- | 8.00% | 28.35 lacs |
| Foodings | Rs. 1,500/- | Rs. 500/- | 12.00% | 61.62 lacs |
| Travelling | Rs. 2,000/- | Rs. 500/- | 15.00% | 1.13 Crores |
| Entertainment | Rs. 1,500/- | Rs. 500/- | 20.00% | 3.14 Crores |
| Total Savings... (monthly investment) | Rs. 2,000/- | Present Age 30 yrs. Retirement 60 yrs | ||
| Month | Amt Invested | Rising Market | Falling Market | Volatile Market | |||
| (Rs.) | NAV | Units Alloted | NAV | Units Alloted | NAV | Units Alloted | |
| 1 | 1,000 | 10 | 100 | 10 | 100 | 10 | 100 |
| 2 | 1000 | 12 | 83.33 | 8 | 125 | 12 | 83.33 |
| 3 | 1000 | 14 | 71.43 | 6 | 166.67 | 8 | 125 |
| 4 | 1,000 | 16 | 62.5 | 4 | 250 | 10 | 100 |
| Total | 4,000 | 52 | 317.6 | 28 | 641.67 | 40 | 408.33 |
| Average Purcahse NAV | 13.00 | 7.00 | 10.00 | ||||
| Average Cost Per Unit | 12.61 | 6.23 | 9.80 | ||||
| Rate | Time to Double | Asset class |
| 5.00% | 14.21 yrs | Bank Deposts, Debt Funds, Etc. |
| 8.00% | 9.01 yrs | MF MIPs, NSC, PPF, KVP, etc. real Estate in some cases. |
| 12.00% | 6.12 yrs | Conservative exp. return in MF Equity Schemes |
| 15.00% | 4.96 yrs | Moderate exp. Return in MF Equity Schemes |
| 20.00% | 3.80 yrs | Aggressive expecations from MF equity schemes, Direct Equities |
- Compunding Power - Use the compounding effect to the max. Get the asset allocation and the time work for you. You need to invest for a sufficient duration in the right asset and in the right proportion of your invetments in totality.
- Early Starter - Have great edge over all others just bystarting to save early ...it is the time that matters not the amount of savings!! Altleast start small when you are not ready for big investments once you gain the confidence you can be a agressive investor...
- Invest in Right Assets - Most people have every think right except the most important thing - the right asset class for investing. For long term investing - equities offer the highest returns, even after taking the tax benefits of other avenues into consideration. As seen above even a couple of % returns difference over a long term can make a lot of difference, compounded to your wealth. But one thing is very important - 'Score more or atleast equal runs' as the 'reqd. run rate', i.e inflation.
- Never say No - Many people believe that they are saving the best they can and have nothing more. The fact is if you make small efforts you can still make substantial additions to your savings and networth. There is always an oppurtunity to take a chance... just be more carefull at the markets.
- Invest Systematically - Possibly the best way to invest - especially for small investors, in equity MF schemes is through SIPs. You get the twin benefits of Rupee Cost Averaging and Automatic Timimg, meaning that the average purchase cost of units will be less and you will be purchasing less units at higher prices and more units at higher prices. In short, it is an ideal way to invest. Invest in a normal way whether it's the rising market, faling market or volatile market.
- Money Doubler - Check the time taken by your investment to double. it will give you fair amount of idea about how your investments are performing. You can put surplus amounts at regular intervals to double, choosing the assets suited to your needs and risk tolerance. by doing this frequently you would enjoy a healhty cash flow and accumulate wealth over time.
Even bulk investments should ideally be avoided for long investment horizons. Break down your investments and invest more regularly is the mantra.
|
Monthly Investment(SIP) of Rs. 5000/- starting december month of |
Monthly Invesment of Rs. 60,000/- Each December month of** |
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| Starting Year | 1994 | 1997 | 1999 | 1994 | 1997 | 1999 | ||
| Total INvestement Rs. | 605,000 | 425,000 | 305,000 | 605,000 | 425,000 | 305,000 | ||
| Total Instalments No. | 121 | 85 | 61 | 10 | 7 | 5 | ||
| CAGR Returns % | ||||||||
| Franlin India Blue Chip Fund Gr | 30.46 | 35.60 | 36.77 | 20.50 | 25.87 | 29.11 | ||
| Franklin India Prima Chip Fund Gr | 34.12 | 46.11 | 55.16 | 32.77 | 45.28 | 48.97 | ||
| SBI Magnum Muliplier Plus 93 | 14.45 | 20.30 | 28.54 | 9.33 | 13.69 | 17.87 | ||
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Investment Mantras: Just remember and practice the following techniques called Invesmtnet Mantras whily you are investing.
- Mantra 1: Pay no heed to what the market does in the short term. Have the right mind set and stay put for long term goals.
- Mantra 2: Diversify your investments taking into consideration your needs and risk tolerance. Consider small buys along with the big investments.
- Mantra 3: plan and check your investement progress, the returns, the number of units in hand at every set goal time. This will hlep you stay on track.
- Mantra 4: Know which products you can invest and more importantly the ones that you can't. Choose your invesmtent products and investing horizons wisley considering your profile.
- Mantra5: Always have a strong definsive invesetment plan to counter the contingecies. In other words, keep some cash away for emergencies.
- Mantra 6: Even Bulk investments... go at a slower pace.
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email us at customerservice@sanghiconsultancy.com, sanghiconsultancy@gmail.com for a free and hassle free advice.
email us at customerservice@sanghiconsultancy.com, sanghiconsultancy@gmail.com for a free and hassle free advice.