The Secret New Year Resolution 2020

Often we hear middle aged parents having a conversation regarding investments and future planning. With multiple options available today, one needs to thoroughly study and find out the best suitable option to invest hard earned money. Increasing cost of living has made everyone aware of saving for the future and utilizing the money as and when needed.

For instance, an elderly gentleman was conversing with his friend the other day, stating that he recently paid INR 20 lakh for a two-year course in IIM-Ahmedabad for his son. To which, his astonished friend replied that this, according to him, has probably increased by 400 per cent, in comparison to what B schools charged in 2007. But this leaves us with a thought about the situation in the future. Think! What would be the scenario in 2025? Are the investments we are doing good enough to stand strong?

        Two strong aspects are involved with the term money.One being the way it is spent and the other saving. While spending is easy, the later one needs to be planned carefully. While this may sound easy, it is important that we consider this in real life, and hence one has to be reminded to be disciplined. For the unaware, an approach which can impart discipline and steady habit of investment is SIP (Systematic investment plan).

Over the years, SIP has been gaining popularity among Indian mutual fund investors. They say “Mutual funds sahi hai” and this absolutely stands true as they are easily the best way to enter the world of investments for long term.

Below are some key points one needs to keep in mind before investing:

  1. In SIP, one can invest a fixed amount in mutual fund system at regular interval, i.e. once a month (similar to recurring deposit in bank) or once a quarter, instead of making a cumulative large sum.
  2. There are different types of mutual funds which yield annual return on investment of on an average 12-15% which is certainly better than bank FDs, NSCs, PPF etc in which interest generated per annum is maximum 6-7%.

 

But one would think if these kinds of returns are good enough to beat the inflation rate. The answer which is NO. In fact, an investment expert would say that more the returns, the merrier. One also needs something more for money to multiply, and the best way to consider then is the stock market investment. Undoubtedly investing in good stocks has proven the best way to fetch good returns, and one needs to understand that combining the concept of SIP with equity investment proves to be beneficial. The idea is to identify a good stock, decide the fixed amount and day every month and simply buy those equity at market price available that time.

For instance, here is the return an investor received by investing in Bajaj Finance from Oct 2018 to Sept 2019 with SIP of 10000 on last day of every month.

 

BAJAJ FINANCE – SIP AMOUNT 10000 PM

MONTH AND YEAR MARKET PRICE NO.OF SHARES AMOUNT INVESTED TOTAL PROFIT
Oct-18 2383 4 9532 6652
Nov-18 2538 3 7614 4524
Dec-18 2645 3 7935 4203
Jan-19 2575 3 7725 4413
Feb-19 2649 3 7947 4191
Mar-19 3025 3 9075 3063
Apr-19 3096 3 9288 2850
May-19 3467 2 6934 1158
Jun-19 3681 2 7362 730
Jul-19 3252 3 9756 2382
Aug-19 3333 3 9999 2139
Sep-19 4046 2 8092 0

 

AMOUNT INVESTED 101259
PROFIT AMOUNT 36305
ANNUAL ROI 36%

 

Similarly, stocks like Bata, with the same formula, have yielded 35 per cent returns in a year over the same period. One may also choose stocks like Titan, Reliance, HDFC bank and others to make their investment successful.

Here are some key points you should consider before taking the step.

  1. Identify a good stock which has to be up trending and outperforming NIFTY, which simply means selecting the stock which have risen more than NIFTY in same period. One can take an expert opinion for this or learn technical analysis to do it on your own.
  2. Decide the amount to be invested every month. One can give standing instruction to the broker on predefined day each month to buy the equity.
  3. Continue the process with long term horizon. One can predefine number of shares to be bought every month instead of fixed amount as well.

Apart from the lucrative return on investment, the other benefits of such SIP include portfolio building for long term, added income through stock dividends and owning the liquid asset as there is no lock in period unlike mutual fund. Monitoring this SIP investment is also easy process. With knowledge of technical analysis, one can even buy same equity at cheaper price every month by timing the bottom which can improve Return on investment even more. Having so many advantages alongside, SIP in equity is the way to go.

As the year 2019 is about to bid a goodbye and the new year, 2020 is just around the corner, one should make the resolution for a financial betterment. Furthermore, starting an SIP is a simple and effective New Year resolution that one should not worry about breaking. Ensure to invest smart and get systematic!

Heres wishing everyone a Happy new SIP year!

3 Comments

  1. Chetan N Jadhav says:

    Pratiksha mam, Very descriptive blog on MF v/s Stock market ROI. It’s really intresting. I would like to join growth module session. If I get returns more than MF, I would prefer to invest more in stock market..

    Nov 09, 2019 Reply
  2. Tanmay says:

    Very nicely articulated and made simple to understand even for a novice

    Nov 10, 2019 Reply
  3. activate nbc says:

    Appreciating the time and effort you put into your website and thorough information you present. It’s amazing to come across a site every now and then that is not the similar old re-written material. Excellent read! We’ve bookmarked your site

    Dec 04, 2019 Reply

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