Two years back when I went to Mumbai, few of my friends decided to meet at a café in Andheri. It was awesome meeting all after a very long time; had lot of fun and gossip. One of my friend introduced me to his colleague Rohan as he also came along. Rohan was quite entertaining with a good sense of humor. Rohan had very interesting job, so he was telling me about that. While I was listening to Rohan for a good time, he asked me what you do? I said I am an Independent Financial Advisor. Rohan said wow that’s interesting. Rohan said, Anup I am very bad at all these. He said though I never focused on savings, whatever I saved, that’s in my bank account. When Rohan asked for my help in this regard, I said certainly I will guide you but it requires lot of time to discuss. I said alright I will try to brief you about that. I told him it’s quite essential to save and that’s the very first step of investing.
He asked me what amount one should save, how much to invest, how to go about it, can you please walk me through all these? I said you will have to analyze your life goals, prioritize them and then work (invest) to meet them. Goals could be your child education, retirement planning to name a few. It is quite essential to include Equity to your investment basket as it would get you good returns over a long period of time. Rohan prompted as I don’t have that skill set to select right stocks. Correct, So you select Equity Mutual Fund which are well managed by professionals with years of experience. Rohan without thinking much- I only have some savings so far which I can invest now. In addition now I can manage to save more every month, but that would be small amount, please guide me how to go about. I said hey that’s not a worry, Infact investing every month is a good way to go about and to answer your question, yes even for a small amount. Let me brief you about SIP. In Mutual Fund you can invest in lumpsum or by way of Systematic Investment Plan (SIP). Through SIP one can invest every month or every week for that matter. One can select convenient date of SIP, so on every month the amount will get transfer from bank account on a particular date to desired fund. Hence SIP not only help you to save and invest but it gets you good return over a period of time. By that time even the coffee has come which we ordered, so while we SIPping the coffee, we were talking about SIP. 🙂
By the way that’s must be risky Rohan asked. In a way yes I said, it is volatile in nature. When you do SIP in Equity Fund, you tend to average out, hence you buying at lower as well as higher levels. Subsequently over a period of time you gets the benefits of investing. Let me elaborate; Equity market has always been volatile in short term and risk is actually not knowing in the nature of equity. Once you are there for long term, it has always been pays off. Since you have raised the issue; I would advise don’t come to Equity for less than five years. Moreover diversify your investments to other asset class like debt. How about the return Rohan asked, will I get 40% -50% kind of annualized return? I laughed, no not at all; your expectations shouldn’t be like that. For your understanding It should be FD + few percentage more for 10 / 20 years; while for short term your invested sum may go down as well. Precisely, for the moment I would say 10-12% should be ideal expectation from Equity fund for the longer period of time.
Let say you plan for a crore for your goal, there is no harm if you get much more, however if you get less then that might disturb your goals. So I told you to keep low expectation from Equity. Once you keep these in mind and plan for your goals, you can be successful investor. In the investment journey you would realize that compounding is the magical thing; popularly known as eighth wonder of the world. Wow that’s interesting but if it is so then why people sell in panic, infact many of them are not happy while investing; Rohan asked. That’s a valid point I said. See its utmost essential for an investor to keep his behavior well for its investment. When followed, you are very much in right track to meet your goals. In nutshell, Invest Right Way is my mantra for investors.
It was almost for half an hour we were talking and by that time few of my friend were getting annoyed on us. Only thing lastly I told to Rohan that Invest with the help of a Financial Advisor. I joined the cake ceremony for our re-union and had fun. I had to rush to station because my train to Raipur was on the same day from LTT.
Disclaimer: All financial Investments are subject to risk; please consult your advisor before investing.
About the Author
Anup Maheshwari is Founder & Financial Advisor at Money-Mantra. He has done his Masters in Business Administration (MBA- Finance) from Pune University. He believes in prosperity of his clients. One can reach him on anup@money-mantra.in /+91- 9165528922 or even follow him on Facebook.