How to plan your child education now and stay stress free- A must read for all !

Hi All,

Today I am going to discuss something very important which is actually a financial planning we all must plan well in advance.

Well, there are different ways to invest but we prefer investing in equity market through mutual funds as they can give us great returns as compared to bank FD's and other insurance schemes. 

You may go through my previous blog on how investments in equity mutual funds can give you better returns.

Link is below

https://investology1.blogspot.com/2018/10/where-to-invest-bank-fixed-deposits.html

One more reason why we prefer equity mutual funds is this that child education is a long term goal and investments in equity mutual funds are known for stellar returns.

Now, it is really easy to choose any mutual fund and start the SIP ( monthly amount ) today and can plan for your child education.

But take care of below points while selecting the right mutual fund for you.

• .All mutual funds have two plans-Direct & Regular.
• Always go for Direct plan in mutual fund as direct plan does not involve any intermediary and all your money gets invested 
• Direct plans also have low expense ratio than Regular plans , hence you pay less for them and invested value gets increased.
• Preferably, go for large cap funds as they are less prone to risks.
• Stay away from hybrid plans as they charge you more .
• You may also start a SIP in NIFTY funds which have the lowest expense ratio . Since it has lowest commission involved, hence none of the mutual fund distributor sells it.

Now, once all these parameters are decided, the next job is to decide on the amount you need to invest, i.e. SIP amount and for how how many years you need to continue with SIP.

So, preferably you may check your child age and check in how many years he or she would be required funds for his/her higher education.

SIP amount you may decide basis your income criteria and how much you are willing to contribute every month.

You may check online there are several calculators which will tell you about the amount you can save and the future value of your saved amount every month.

Let me give you an example.

Suppose your child is just born and imagine you need funds till the time he or she will turn 25. This means that you have 25 years or 25*12 months to do savings. Suppose you are investing 5000 per month and we are planning at 15 % annual return .

You will be surprised to know the amount will be 1.6 crore. Yes, this is true and this is the power of compounding.

So, it makes sense to start the savings and investment as soon as possible and relax. But there is a word of caution. Stay invested and do not exit when markets are down as in a longer run, you will be always benefitted.

If you still need any assistance on planning your child's future education or any further issue regarding investments, you may send me a mail for a personal discussion at hina.gupta19@gmail.com

Thanks

What is Consumption theme and why every mutual fund talks about Consumption? How it is beneficial to us ?

Hi,

A very warm welcome to you all.

We often read in newspapers and magazine that consumption is increasing and how this increase can help in growing our economy.

We have seen lots of mutual funds coming around and they call themselves consumption funds.

Reliance, SBI, ICICI, BNP Paribas almost all the mutual funds are going on consumption theme.

Lets try to understand what exactly consumption is ??

As the name suggests, consumption means consuming, i.e. whatever we are using right from the time we wake up till we fall asleep.

E.g. We use FMCG products ( soaps, biscuits etc.), we use mobile phones, laptops, cars, Dish TV's etc. , so you can just imaging the number of things we use daily which are integral to our lives and we can not go without them.
So, ultimately we are consuming them for sustainability.

But why almost every mutual fund is selling consumption fund ?

The reason is simple as our consumption has been increased from our previous generations and the trend will continue.
It is often said that Next Generation will always Lead a Better Life ?

So , practically this statement means that the present generation will consume more than the previous generation and the upcoming generation will consume more than the present generation.

We take a very simple example to understand this.

Mobile Phones. A revolution which has changed lives of billions across the globe. If we go back into the history , we would see there were landlines which would not even be there in each and every household. Time changed and we saw people moving to mobile phones and landline became obsolete.
There was a time when we had only one mobile phone at our house but now a- days each one of us in our family, even our maids, drivers own mobile phones.

What does it means ?
A transition and increase in consumption of a  landline which was barely available and now a mobile phone , a simple version which is accessible to all family members.
Imagine one landline for 10 people to 10 mobile phones or more for 10 people.

Same goes with laptops, TV's, cars and so many things we eat, we consume etc. So, understanding this fact implies that whenever consumption increases, it also increases growth in economy as all the earnings coming from these companies will add up in the earning of companies in India. Thereby, lifting sensex and nifty.

What to do when Stock Market , NIfty & Sensex are down ? Don't panic and check here.

Hi,

Welcoming you all!

Today I am going to write down on something very important . What to do with your money when stock market is down?
This is a question which panics us all as  our hard core money is at stake and it is very disheartening to see that money has lost its value comparing to the original investment.

Well, first of all, I would like to convey there is no need to panic as this is nothing but the volatility in the market which causes stock market to go up and down. Volatility ( i.e. ups and downs ) is the part of the stock market and people who are investing for a longer period of time need not worry at all.

We all know stock markets never rise in a straight line. There are fluctuations but the end result is always growth.

Sensex got started in 1987 at a base point of 100 and sensex is trading with an all time high of 38000 in August 2018. So, you can imagine the growth here, the money has been grown by 380 times since the sensex has started ( approx 30 years) amid all those crisis, downfalls. Same goes true with nifty as well. So, do not worry at all.

Shall we take out money when market is down ?

Again, this is a question which often comes in the mind of investors , mutual fund investors when markets are down. Well, I would like to share that you need to stay in the market for a longer time and this downfall will disappear. It does not makes sense to book loss when you know the returns will be superior if you stay in the market during this down phase and does not take out the money.

Now, what shall we do when markets are down ?

So, you should invest more and more when you get this opportunity. The reason is simple as stocks are available at a cheaper option and at a discount this time.

For mutual fund investors, which are investing through SIP, can increase their SIP amount or can make some lump sum payment to mutual fund.. This will get them more units as NAV is always lower when markets are down. So, ideally, with same amount of money, you can purchase more units in the down trend as compared to uptrend in the market.

So, when market goes up, you will be surprised to see your money growing and compounding and giving you stellar returns.



So, volatility, fluctuations, ups and downs in the market are your friends. And as a safer rule, always invest that amount of money in stock market, which you dont need for next five years. 

So, when markets are down, please invest more rather than taking your money out to reap superior benefits in the future and sty with the market as in longer run, it is always growth of your money which you will see.

Hope, I was able to understand this issue.

Comments, suggestions and feedbacks are welcomed at hina.gupta19@gmail.com

Types of Mutual Fund and Which Mutual Fund to invest -Details are here!

Hi All,

Welcoming you all.

Today, we will talk about types of mutual funds so that you may choose according to your need.

Basis brokerage or commission, mutual funds can be divided into two types:

• Direct Plan
• Regular Plan

Direct Plans as name suggests is direct, i.e. this plan can be taken directly by visiting mutual fund site or visiting their office, Hence, there is no intermediary, distributor or reseller involved and all your amount you pay goes towards your investment.

Regular plan is the opposite where any distributor, reseller or broker involved and a part of your investment goes in its commission.

So, it make sense to go for Direct Plan to save money and grow your investment more.

Basis type of investments, mutual funds are divided into two parts- Equity & Debt

Equity Mutual Funds

As the name suggests, equity funds invest in stocks of different companies. And again, they can be divided into large cap, mid cap and small cap.

Large cap mutual funds invest in top companies of India basis their market capitalization ( i.e. number of outstanding shares * price per share). These companies are top companies of India and hence, the risk is lowest in large cap companies.

Mid cap companies are smaller than large cap companies basis their market capitalization ( i.e. number of outstanding shares * price per share)  and small cap companies are smaller than mid cap companies.

Different mutual funds invest in different types as per the companies criteria explained above. So, if you are looking for decent returns with lowest risk large cap companies are best and you can choose for mutual funds which are investing in large cap companies.

Basis your risk appetite, you can invest is small cap mutual funds and mid cap mutual funds as well. Ideally, for a longer horizon of time they also provide good returns but the risk factor increases as the size of the company decreases.

This is for the obvious reasons as businesses which are there for more than 40, 50 years or more are more stable as compared to companies which are not that old. But it never means that small cap or mid cap funds are bad.

You may check their returns and go for them as well for a longer horizon of time.

Debt Mutual Funds

Rather than investing in stocks, debt funds invest in government securities, commercial papers , bonds etc. The return on debt funds are generally, lesser than equity funds as explained above but they are risky as compared to equity mutual funds as explained above. 

They are good for short term investments with a horizon of at least three years as they can give your returns more than traditional FD's or insurances.  

Hybrid Funds

As the name suggests, they are the combination of debt funds and equity funds and are generally, give your return more than debt fund and less than equity fund.  They are ideal for savings which are intermediate between short term goals and long term goals.

But for a longer horizon of time, risk does not matter much and it makes sense to invest in equity funds.

Please feel free for any doubt and you may post your queries, suggestion, feedback at hina.gupta19@gmail.com

Thanks

What are NIFTY & SENSEX and how they can grow your WEALTH-Find out here!

Well, again a very welcome to all.

We have discussed a lot about the importance of financial planning in our lives and we can be assured of our financial freedom by investing in stocks or equity markets.

Today, we will discuss about NIFTY & SENSEX which makes India equity or stock market.

Broadly, Indian stock market has two exchanges -NSE and BSE both have their head offices at Mumbai. By exchange, we mean a platform and a marketplace where equity shares are traded ( i.e. bought or sold). For example, if we need to buy a packet of sugar, we will go to a retail shop or a supermarket.

Similarly, the markets where stocks are bought or sold ars called exchanges. So, here, anyone having a DMAT account can  sell and buy stocks.

NSE stands for National Stock Exchange

BSE stands for Bombay Stock Exchange

Now, NIFTY is a group of top 50 companies of India and benchmark index of NSE. Similarly, SENSEX is a group of top 30 companies of India and benchmark index of BSE.

WHY NIFTY IS A GREAT IDEA FOR INVESTMENT ?

Since NIFTY & SENSEX represents top companies of India, it really makes sense to invest directly in them because historically, NIFTY has been rising as our economy is growing. We all know that India is growing and we all have experienced growth in terms of increasing mobile handsets, growing number of companies in the online spaces selling millions of products etc. 

So, this is quite evident we are living a life in an age which is better than our predecessors in terms of the number of things we are using right now and this is all happening, because number of companies growing and their are making profits in the market.

This clearly indicates that top companies must be growing at faster pace which are a part of NIFTY's 50 companies. So, whenever companies grow, NIFTY grows which will always happen as we all work in our offices and contribute to growth of our economy.

Hence, investing in NIFTY for a longer horizon of time can help in achieving stellar returns more than traditional investments like FD's or insurance. 

Even, great Investor of the century Mr. warren Buffet has also quoted, that investment in Index Fund( Nifty Fund) can get you returns better than any other investments for a longer horizon of time.

So, friends, gear up and invest in Indian Economy and secure your important life goals.

RISK in NIFTY 

For a longer horizon of time, there is no risk at all. We always prefer to invest in nifty for very important life goals like child's education, retirement planning etc. as the graph of nifty is always on rise since its very beginning . Hence, investing in NIFTY for a longer horizon of time can give stellar returns i.e. approximately 15 % CAGR annually.

Don't worry on downs as this is a part of equity and don't be panic as in a long run, NIFTY has always been growing despite of 2008 recession, and other events etc.

HOW TO INVEST IN NIFTY INDEX FUND ?

Its a s simple as making an online account. Search for any mutual fund which invests in NIFTY and create your online account. Once it is done, there will be a direct deduction from your bank account which we generally called, SIP ( Systematic Investment Plan) and let your money stay there for a longer time to grow and compound and give you stellar results.

Now, several questions like below will be pouring in your mind like

• I am 30 and plan for my child's education. So what amount I shall pay today every month for his education?
• I am 35 today and want to plan my retirement. So, how much shall I pay every month today to plan my life afterwards ?
• And so on...

If you want to know about the monthly amount you need to invest for a corpus ( money) to build up, you may post a comment or directly send it to hina.gupta19@gmail.com

Thanks

Where to Invest-Bank Fixed Deposits, Insurance, Mutual Funds? Find out here

Hi All,

A very warm welcome to all !

As we always aim to derive maximum ROI from our investments, we often make decisions without knowing any further impact of the same.

We have seen our past generations or even us  investing in Bank Fixed Deposits to earn interest and increase our wealth. Let me tell you there is no investment which is bad. It is just like we need to find out which investment can get us good returns in the present global and economic scenario.

Let me make it very simple. We compare the returns on the investment by checking ROI which a particular investment is providing us as compared to the other options over a certain period of time.

So, now it becomes very simple to understand that any investment which has a higher return is better.

But there are two things which run in same directions- Return & Risk.

Bank Fixed Deposits have a lowest risk and lowest return. ( Considering 10 % tax deduction on the earned interest). This seems good for people who do not want to take any risk but then there is a flip side. We all know about inflation, i.e. the rate at which things become costlier each and every year.
A bottle of coke does not cost as much as it was 10 years back or 5 years back. The same goes true with any things around you. Look at anything and you would see the price is more now as compared to some 5 years ago or more years ago.

Why So ?

The reason is inflation which is not bad as this is a part of economy but here is the catch.
Suppose the inflation is 6 % and my money is also growing at 6 % ( excluding taxes) , then I have depreciated my wealth, which means, that the rate of increase in the cost  of everything which I use is same as the rate at which my money is growing. So, I have not made any gain but I have made a loss of 6%( inflation)- 6 % ( ROI on FD's etc.)=0% or even negative if I also consider 10 % tax.

So, what we can do ?. Its simple go for investments where return is more than 6 % inflation. In India, 6 % is the maximum range of inflation set by RBI , hence, go for any investment where you are getting more than 6 %.

Now, how to find such an investment ??

Its again very simple, go for investment in NIFTY ( an indicator of our economy). You all must have seen that our economy has been growing and we are growing at par to China which is a good sign for India as an economy. Also, it is not risky at all if investments is made for a longer horizon, i.e. more than 5 years at least and a minimum of 15 % CAGR ( Compounded Annual Growth Rate) can be achieved.

I will write my next  article on investments in nifty soon. Also, going for any large cap mutual fund with lowest expense ratio can also yield attractive return with lesser risks as compared to small cap and mid cap funds.


Don't panic with the ups and downs as the end result will be positive for a longer horizon of time. You may check nifty performance online and you would see the graph going upwards and will continue.

Then, we move to traditional life insurance that continues for a longer period of time. Well, there is nothing wrong in taking insurance but we should understand this by now, that any investment which gives us more than 6 % is good. So, always check with your insurance agents about the exact returns. Generally, they share some 11 % to 19 % but the same is not true.

Always ask them about IRR ( Internal rate of return ) on the policy. If they give you in writing that IRR which is the right return for insurance policies is more than 6 % after excluding commission of the agent, then you may go for the insurance policy.

But then, this is not true as per the present scenarios as the actual return ( IRR) on insurance policy is not that much which no insurance agent talks about.

So, take a piece of time and do check all these thing before making investments and make your money work for you while you are relaxing by choosing the right investments.

Comments, questions, suggestions and feedbacks are most welcomed at hina.gupta19@gmail.com

Thanks!!!

What are Mutual Funds, Why to invest in mutual Funds & How to invest in Mutual Funds ?

  Well, we all must have read about at least have heard about Mutual Funds.
Today, I will try to explain in a very simple way for anyone from any age group to understand this.



Why should we invest in mutual funds ?

In my previous article, I have explained how crucial is to invest to enjoy life and get financial freedom.
Link for previous article -https://investology1.blogspot.com/2018/10/how-to-do-financial-planning-to-become.html
 So, for all those people who want to invest in equity or stock market, can go through mutual funds.
As the name suggests, mutual means together and fund means money. So, mutual funds are basically a pool of money where investors  i.e. anyone, you or I or whoever want to invest can put their money in the fund.
Historically, it has been proved that the return derived from mutual funds markets for a longer time period has been more than bank FD's Insurance etc. But, why so ?We all have seen India is growing. When I say this, I mean that the number of companies have increase, average income per person has increased.

We are consuming more than our previous generations and the trend will continue upwards. We are using more mobile phones, computers, cars, electronic items etc. as used by our fathers and grandfathers.  And the generations who will come up next will be consuming or using more products than what we are using now.

So, this clearly signifies the our companies are growing to fulfill the increasing demand for each and every item. And this growth signifies and translates in the growth of equity or stock market.
So, more we grow, more we spend, more will be the growth of stock market and mutual funds are the companies which invest in stock markets directly.

Who manages mutual funds?

Mutual funds are managed by highly professional people called Fund Managers who use this money to invest in stock market. Now, why we need them ? We all know for a longer time period, the returns on stock markets are higher as compared to other investments.
But one needs qualifications to invest in stock market and the fund managers are those people who understands stock market really well and invest your money in right stocks at right time to achieve those stellar returns.
We can also invest directly in stock market but we lack all those technicalities required to excel in stock market . Also, mutual fund managers track the stock market closely and this is a full time job for them.
We all are engaged and busy in our work to earn so we can not devote time and learn skills to excel in stock markets and this actually needs years of experience and this is not an overnight job.
Hence, it makes sense to invest in mutual funds and continue doing what we know best.

Mutual Fund Charges.

Now, as I explained above, a dedicated fund manager is managing your funds. But, what do fund managers get in return ? Every mutual fund has an expense ratio usually ranging in 0.15 to 2 % or beyond which includes fund manager fees and other administrative expenses. So, while going for mutual funds, select the mutual fund with lower expense ratio in the same category.

How to invest in mutual Funds?

This is really easy. We only need a PAN Card and there is no requirement of a DMAT account for investing in mutual fund. You name any bank, all of them have their mutual fund houses and you can go with any one .
You can easily sign up on the website of mutual fund you have choses and do it in on your own or your can send an online request for the executive to collect documents from your location.

You can also approach your bank , mutual fund house office and speak with them.

Once you have selected any mutual fund, there is an ECS you can put from your bank account and every month amounts get debited from your account , which is your monthly investment. We call this amount SIP ( Systematic Investment Plan) which is debited from your account . Also, there is an option to pay one time payment as well if someone has received money from some source.

 I will explain in my next article on the types of mutual funds so that you can plan your investments accordingly.
Till then, comments are most welcomed and please let me know if you get any issues in understanding anything explained above.

Thanks
hin.gupta19@gmail.com