Made Or Lost Money in Mutual Funds !!!....

And they say, "We lost money in Mutual Fund" 

This article is dedicated to all those people who complain about losing money in Mutual Funds.  Article will also turn out to be useful for those who are skeptical about investing in Mutual Funds.

Many a time people say that investing in Mutual Fund  is too risky & they lost huge amount of money. This is what they must have done:

# Invested a lump sum amount

# Invested for a very short duration (Less than 5 years) or must have withdrawn the money when the market was falling.

# Invested in a theme like infra etc.

Now let’s have a look at what actually happened over the past fifteen years.

The table shows how investing Rs.1,000 per month systematically (SIP) over a period of time grew to a large corpus.

ICICI TOP 100 Fund

Year	Tenure	Amount Invested	Present Value	Rate %
2013-14	1	12000	16674	55.19
2012-14	2	24000	34917	34.06
2011-14	3	36000	54994	26.23
2010-14	4	48000	74706	20.65
2009-14	5	60000	99600	19.01
2008-14	6	72000	130839	18.68
2007-14	7	84000	154781	16.34
2006-14	8	96000	185670	15.38
2005-14	9	108000	233236	15.88
2004-14	10	120000	304269	17.14
2003-14	11	132000	402685	18.51
2002-14	12	144000	540921	19.92
2001-14	13	156000	688258	20.42
2000-14	14	168000	803079	19.84
1999-14	15	180000	941493	19.44

# ICICI Large cap is just taken for illustration purpose. You can choose the fund according to your risk appetite.

Note:

# Investment Tenure: 1^st April of each year to 1^st March 2014

# Value as on 9^th June 2014

# Fixed amount is invested per month (SIP)

A person who had invested Rs. 1,000 per month in ICICI TOP 100 fund systematically from 1^st April 1999 to 1st March 2014 (15 years), accumulated Rs.9,41,493 as on 9^th June 2014.

Mutual Funds Vs Bank/Post office Recurring Deposit

If the same Rs.1,000 was invested per month in some Post office or bank recurring deposit for 15 years, amount accumulated would be Rs.4,20,000 (Considering a flat 10% rate over the past 15 years). Clearly a huge difference of Rs.5,21,493.

Note: Interest accumulated is tax free in Mutual Funds whereas it’s taxable in Recurring deposit.

Things to be kept in mind before investing in Mutual Funds:

# Set a goal 1^st and then invest. Goal can be you retirement, child higher education etc.

# Invest a small amount but invest systematically & regularly. Do not track the market. Eventually the market will come up

# Invest in a combination of large caps & mid cap funds

Remember, it’s not about timing in the market. It’s all about how much time you invest in the market.

*Returns from mid cap are much higher than large cap during the past few years. One should choose the funds according to the risk appetite.

Disclaimer: "Omiga Wealth Solutionz" is into distribution of Mutual Funds"

Is it possible to Building a fortune-Rs.100 crores!

  Building a fortune-Rs.100 crores!

You all have goals and you’re investing towards the same.

Other than your goals like retirement, child’s higher education etc.; have a goal of creating huge wealth in next 20 years.

We’ve seen through various examples how many funds have multiplied wealth by 40 times to 100 times during last 20 years.

We believe that equity funds would be able to provide 18% returns over next 2 decades; this means your wealth can multiply by 27 times in next 20 years.

At 18% annualised returns, every Rs.10,000 you invest per month, would be worth more than Rs.2 crores after 20 years.

Those of you who are investing for 5 years or more, regularly through SIPs, have already started experiencing the power of compounding and equity.

Those of you who have accumulated Rs.1 crore so far and doing a SIP of Rs.1 lakh per month (through equity funds), can expect to be worth around Rs.60 crores in next 20 years. That is USD 10 million in 20 years. You would be in top 1% of not only India’s population but the world population itself.

If you’ve Rs.50 lakhs invested in equity MF so far and is doing a SIP of Rs.50,000 per month, the value after 20 years would be Rs. 30 crores. With USD 5 million, you would also be in the cream of world population, top 1%.

The above numbers are arrived with the assumption of 18% annualised returns.

Someone who has Rs.2 crores in equity funds asked me how much he needs to save every month to achieve Rs.100 crore in 20 years; assuming 18% annualised returns. Roughly the amount works out to Rs.1.23 lakhs per month.

He asked how much that Rs.100 crore is worth today? Assuming a long term inflation rate of 6%, it is worth Rs.31 crores today. This means what you can buy with Rs.31 crores today; you can buy the same with Rs.100 crores 20 years down the line.

He was stunned by the power of equity, power of time and power of compounding. He has started investing Rs.1.5 lakhs every month.

As India moves from a low income per capita to a middle income per capita country, as we move from a $2 trillion to $20 trillion economy, over next 2 decades, with nominal GDP (real GDP + inflation) growth rate of around 15%, 18% annualized returns from stock market (equity funds) look very much possible.

As you are aware, stock market growth happens in spurts with a high degree of volatility. In bear markets, even a diversified equity fund falling by 40% or so is not uncommon.

You’re reaping rewards now for sitting tight in one bear market. Even in a secular growth country like India, we’ll go through couple of bull and bear cycles in next 2 decades. If you can sustain the temperament and the patience you’ve developed in last few years for next 2 decades, huge fortune is all yours.

The most difficult part of investing is staying the course for long run without worrying what is happening in the markets. If you can develop the right temperament to stay the course for long; you can build a great fortune from the markets- be it Rs.30 crores or Rs.60 crores or even Rs.100 crores.

Our family has achieved financial independence by following what we are repeatedly sharing with you. By teaching you, I learn and my conviction becomes stronger. I’m absolutely convinced that if one can master his behaviour, huge fortune can be made through markets over long run. Time and discipline is the key.

Our key focus and main job is to ensure that you invest regularly over long run and stay the course without break. Everything else is secondary. The daily sms, blogs or tweets are all aimed towards this purpose. As Munger says, repetition is the heart of instruction and we would repeat tirelessly for both your and our benefit.

Have a big goal, invest towards it regularly, give long time for compounding, stay the course and build a big fortune.

BEST INVESTMENT STRATEGY-One kick 10,000 times

          One kick 10,000 times

“I fear not the man who has practiced 10,000 kicks once, but I fear the man who has practiced one kick 10,000 times.” -Bruce Lee

This quote talks about power of practice, perseverance and repetition.

It is said that 10,000 hours of practice makes one an expert in a particular field. Practicing one kick 10,000 times makes one a master, an opponent to be feared by even by the likes of Bruce Lee.

By doing one thing, 120 times or 240 times, you also become a successful investor. That one thing is SIP. SIP over 10 (120 times) or 20 years (240 times) brings investment success.

Studies have found that only 5% of investors do better than an index fund. For remaining 95%, it is a losing game. Since actively managed funds (the kind of funds you are investing) do well in India, by investing regularly in them for long term, you beat most other investors including professionals.

We’ve mentioned about Dalbar studies which quantifies how investors earn significantly lesser than investment returns. 95% may fall into the category of investors who earn significantly lesser than investment returns. Only 5% may make it.

Those 5% are the ones who practice one kick, 10,000 times; who follow one habit of SIP regularly without fail, 240 times.

There is no need to learn 10,000 different things like analysing macro economics, geo political factors, technical analysis, quant theories etc. 

Practise just one thing, only one thing, do SIP regularly without breaking even one instalment for next 20 years. This one thing would make you successful and respected by the Bruce Lees of the investment world.

One kick, 10000 times = Successful martial artist

One method(SIP),20 years=Successful investor

All the best.

Become rich, achieve financial freedom & fulfill your dreams...

Work hard, party harder but before saving a little(15-20%) of your earning

Being in your 20s, for some, means “Work Hard, Party Hard”. For the vast majority of young urban professionals who have just started their careers, it is actually a lot more of working hard rather than partying hard.

Salaries tend to be limited at this age. Saving is difficult considering the many distractions provided by life in a big city. For the limited saving that the young have access to, deciding the best place to invest that money can be a challenging question.

“Do I go for higher risk equity or lower risk debt/FD type instruments?” Questions such as these are common. Take for instance, my friend Navin who after completing his graduation landed a job with a prestigious MNC. 

As a financial advisor, I need to consider the reality of Navin’s financial situation more than what product to consider. Navin is making enough to take care of his expenses and saves Rs. 5000 to Rs. 8000 each month. 

Other than what he saves each month, he doesn’t have any bulk savings. This lack of any significant financial backing means that building a short term corpus should be his top priority. 

This short term corpus can’t be exposed to high volatility/high risk investments like equity.

This leaves either Fixed Deposits or Short term Debt Funds as the best option for Navin. Debt funds are an arguably useful investment avenue for young professionals just starting with their careers. 

Here are five reasons that explain why.

# 1.  Amateurish investment pattern – Navin was new to his job and as such had a limited income. He, nevertheless, wants to own the new iPhone 6 and buy a laptop. His savings were limited and he was not sure of the regularity of his investments.

The debt fund serves as a good avenue for starting off his amateur investments to learn about his income, the related expenditure, and the corresponding saving pattern.

#2. Easy liquidity – The prime area where debt mutual funds score is their inherent liquidity. One can withdraw from the fund anytime, therefore it is an investment avenue which can be used as per the investor’s withdrawal wishes. Someone such as Navin could save for his higher education (he was keen on a MBA degree), plan his wedding or even invest the lump sum elsewhere.

#3. Growth – Though a savings account also provides liquidity, the rate of interest is low (4% per annum). The debt mutual fund, besides providing liquidity, would also provide a low risk return of around 8%.

If held for more than 3 years this investment also becomes tax efficient as indexation can be applied to the investment. This will be important as in three years the increase in salary also increases potential tax liability. This feature makes it a better alternative than fixed deposits.

#4. Emergency Fund – Having a fund ready for unforeseen purposes is a wise idea. The young lean towards spending rather than investing. As such, creating a separate emergency fund becomes a difficult endeavor. The debt fund would serve as a saving corpus which can come in handy in times of a crisis.

If you are a 20 something individual, you must be raring to go to great heights in your life and build a strong financial portfolio but you would need to start somewhere relatively safe, and a debt fund is your answer.

Why & How much you should save for retirement?

I get many queries on how much to have as retirement corpus and what can be the withdrawal rate every year.

I come across instances where people are losing jobs in their mid forties and this is the question in top of their minds.

Let us say you are 50 years of age and need Rs.1 lakh every month for your expenses.

Having worked for 25 years, let us assume (hope!), you’ve repaid home loan and has made enough provision for your kids higher education and marriage. You also have sufficient medical cover and an emergency fund equivalent to 2 years of expenses.

The retirement corpus you aim for need to provide you an income of Rs.12 lakh per annum. What would be the corpus? I would suggest you need at least Rs.2 crores. Having a life expectancy of 80 years, for both you and your spouse, this corpus can be deployed in balanced funds (equity oriented hybrid funds, 65% in equity and 35% in debt). I assume balanced funds are capable of providing 12% returns over next one decade.

If we keep the withdrawal rate at 6%, you would get Rs.1 lakh per month. Why I’m keeping the withdrawal rate at 6%. The inflation is around 6%. So you get a real return of only 6%. If you withdraw more than the real rate, then your capital would start eroding. As capital erodes, your purchasing power would go down. This would affect your quality of living. So you should only withdraw the real rate of return. This would ensure that if both of you or one of you happen to live till 90 or more, still you’ve comfortable money.

If withdrawals include part of capital, at some point you may run out if it, especially if you live long. Not only that many want to leave some assets for the subsequent generations as well. Also it is difficult to even assume what return we would get beyond 10 years. There can be some major emergencies as well. Keeping all these in mind, it is never wise to withdraw part of capital. You should withdraw only real returns.

This also means that if you go for fixed deposits (other than for emergency fund and near term goals), your real returns would almost be zero. So to preserve your purchasing power, you cannot make any withdrawals! This is an impossible situation.So some amount of risk taking is essential unless you’ve tens of crores. Balanced funds are a better option as we are looking at the retirement life which can even be longer than our career span.

If we apply this strict yardstick, most of us are not ready to retire. So please try to develop your knowledge and skills and be employable till you achieve the goals. Early retirement is not easy. It may be possible if you drastically cut down your life style. Since most of us do not prefer this, the only way is to keep developing skills which can be monetised and thereby enhancing the means.

Early retirement is not easy. I’ll let you know when you’re ready.

What comes to your mind as soon as you hear the word “RETIREMENT”? Is it holidays, a bungalow, chasing your dreams, relaxing, playing with grandchildren, etc.?

Does the picture of a very old man walking with a stick come to your mind along with the picture of rising medical bills and worried children? After toiling and sweating for years, everyone wants his or her retirement days to be relaxed and enjoyable. Sadly though, almost 13% of Indians feel that they can never retire and need to continue earning till the last day of their lives. This however, can be avoided with just a little bit of planning. All you have to do is look ahead and plan your retirement. Investing your money wisely and early are the key components to ensure a happy and stress-free retired life.

What is Retirement?

Retirement does not mean you need to stop all your daily activities and expect to be spoon-fed. It is that time when you are at the peak of your performance and have chosen a date when you will stop worrying about being ‘Employed’. You may choose an alternate profession post-Retirement as well. Cricketers retire well before 40, but does that mean they stop working or living? They just ‘Retire’ from Cricket! They may continue to work as a commentator, comedian oreven choose to open his own Business! But for a service or businessperson, ‘Retirement’ means that he stops earning the maximum chunk of his money and accepts a certain way of life.

Thus, Retirement is a Mindset! It is a stage when you stop expecting yourself to out-perform your own expectations!

What is Retirement Planning?

Financial Planning for the period when you might not be actively involved in earning money for your living is called Retirement Planning.

There are some very Basic Steps for Retirement Planning:

Mindset towards retirement

Everyone has to retire someday and so it makes sense to start saving. A recent Max Life –Nielsen Survey found that while 72% of Indians already started investing for retirement, only 37% felt that they’ll have a sufficient retirement fund. This is a worrying fact and the only way to escape an insufficient fund is to start saving early. Most people make the mistake of starting to save only at the age of 45 or 50. Avoid this mistake and begin early.Start your retirement fund while in your twenties or thirties. This will give you ample time to save and build a healthy retirement fund.

The importance of retirement planning

Since people start their families at a later age nowadays. Financial responsibilities, such as paying for a child’s education and marriage, continue well into the retirement years. It was seen that 50% of the people residing in western India needed to complete such duties after they retired. Therefore, planning for retirement is of utmost importance. According to the survey, 20% of Indians say they won't stay with their children after retirement. This makes the situation ever trickier and financially more challenging. Now since health deteriorates with age, you need to have a contingency fund for your health post-retirement. Keeping all this is mind, retirement planning becomes very important.

Ways to plan your retirement

First and foremost, you need to consult a professional for this. 32% of Indians do not speak to professionals and therefore, end up taking incorrect decisions even in today’s progressive world. 

Therefore, if you really want to be wise with your money, Seek Professional Help.

One needs to have a properly planned Asset Allocation for his entire portfolio before investing so that his investments are in sync with his risk appetite and time horizon.

There are some good investment tools such as retirement insurance plans and government savings schemes such as the NPS (National Pension Scheme). The survey said that a majority of the people (79%) depended on insurance policies as a retirement investment tool. There are some very good retirement plans such as LIC’s Jeevan Nidhi, ICICI PRU Easy Retirement, SBI Life’s Saral Pension Plan and Empower Pension Plan from Birla Sun Life Insurance.

Each Plan should have a Product Mix for the Ideal Combination. You should preferably have a couple of products such as:

• Long Term Mutual Funds, whether in Debt, MIP or Equity would depend upon your risk appetite.
• Pension Plan could be either a Government Provided Facility in NPS or Self Provided such as LIC’s Jeevan Nidhi, ICICI PRU Easy Retirement, SBI Life’s Saral Pension Plan and Empower Pension Plan from Birla Sun Life Insurance.
• Real Estate Investment is a good Retirement Asset, which increases with time but has high liquidity concerns.
• Bank Fixed Deposits, Post Office MIS and other Debt Instruments for short term exigencies and regular inflow of money in a steady manner, which is not involved with the volatility of the market but taxation aspect needs to be considered before investing.

How to start?  The key is : Get started today

65% of the people in India feel that they have not started saving early enough and feel they’ll have an insufficient retirement corpus. Do not make a similar mistake and start saving today. If you start early, you can put in small amounts into the fund without taxing your finances too much and still have a very healthy fund when you turn 60. Speak to your financial advisor or your insurance agent and learn about the best available savings tools. Save today and smile tomorrow!

#Demonitisation-No Pain No Gain

I received a document prepared by #Franklin Templeton India on #demonetisation. I found the same useful.

I’ve given the key points below. Please read the complete report for more details and better understanding.

1)Overall, we believe that the #demonetisation exercise should help to accelerate financialisation of the Indian economy over medium to long term.

2) This measure needs to be seen in the context of other far reaching measures effected by the current government, including GST, Aadhar, Jan Dhan Yojana and Unified Payment Interface (UPI). All these measures put together should help in shifting significant portions of the informal economy (estimated at 40% of GDP) into formal economy.

3) This could in turn improve productivity by reducing frictional inefficiencies and improve the government’s tax revenues led by significantly better financial trails over medium to long term. These measures would give more flexibility for the government to manage fiscal deficit, as also potentially enable to shift to lower interest rates in India.

4) However, the demonetisation measure is likely to be negative for growth in the very near term until the level of cash in circulation reverts to normalcy. A sudden withdrawal of Rs.14 lakhs crore (9% of GDP) represents substantial monetary tightening, which could result in deflationary forces due to lower aggregate demand.

5) We believe that there exists a scope of 50 bps policy rate cut by the RBI from current levels over next one year, which may be undertaken in order to offset the deflationary impact.

6) Meanwhile, the flow of substantial cash holdings into bank deposits will mean that banking system will be flush with liquidity and CASA (Current Account and Savings Account) balances are expected to improve. As credit demand is likely to be muted for next couple of quarters, there would be very limited opportunities for banks to lend these deposits. The possibility of this money being channelised towards government securities may lead to a bond rally.

7) We expect aggressive rate cuts by banks, thus helping RBI in achieving better monetary transmission. The lower interest rates, along with a return to normalcy for cash in circulation should set the stage for a stronger recovery in aggregate demand in financial year 2017-18.

I wrote my last piece on the very next day of demonetisation. Now I’ve a better understanding of how benefit would accrue to government.

It is unlikely that the entire Rs.14 lakhs crore that was in circulation would come back to banks. Black money would be a sizeable part of this. The estimates range from Rs.1.5 lakh crore to Rs.5 lakh crore. There are some who argue that entire money would somehow find its way to banks. Even if that happens, the (earlier) untaxed part of that money would result in huge tax revenues for government.

For now, let us assume Rs.3 lakh crore does not come into bank accounts. That is the black money destroyed in this demonetisation drive. Government by necessary legislative changes can ensure that is no longer in the books of RBI as liability. As assets of RBI remain the same and liability is reduced, this excess Rs.3 lakh crore can be transferred to reserve. From reserves, RBI can eventually transfer the same to its P&L (Profit & Loss account) as income and then pay the same to government as dividend. Either government is going to tax and penalise heavily the unaccounted money coming to the system or it is going to get a hefty dividend from RBI or most likely a combination of both.

Thus black money is transferred from the hands of corrupt individuals to government of India.