Best Mutual Funds to Invest in 2019

Are you looking for Best Mutual Funds to Invest in India or top 10 Mutual Funds to invest in 2019 or Best ELSS Funds to invest in 2019 or Best Performing Mutual Funds for SIP..?

Then you are at the right place.. Read till the end, and all your questions will be answered

There are many blogs/ articles which will give you the list of Mutual Funds to invest in 2019 and you will observe that all such lists will be different. Also, the list published by the same website in the last year i.e. 2018 will also be much different than the list for 2019.

Whenever, you invest based on “top-rated funds”, look at the basis of such ratings. For example, an extract from Value Research website :

What is Value Research Fund Rating?

Value Research Fund Rating (Risk-adjusted Rating) is a convenient composite measure of both returns and risk. It is purely quantitative and there is no subjective component to the Fund Rating. The assessment does not reflect Value Research’s opinion of the future potential of any fund. It only gives a quick summary of how a fund has performed historically relative to its peers.

Have you noticed that when you invested based on such ratings either you did not get the desired results or you feel that your friend’s mutual fund portfolio is performing better than yours?

This is bound to happen as one didn’t have conviction or did not undergo proper research while investing and investment was done without any clear goal/ objective in mind. For example, investing for tax saving. If you have invested with the goal of tax saving, why are you worried about fund performance now? You already saved tax, isn’t it?

Do you want to come out of this vicious circle?

Ask yourself the following questions..

Why do you want to invest in Mutual Funds..?

What Return you are expecting..?

What is your Risk Appetite & Risk Profile..?

What other investments you are holding..?

How long you want to stay invested..?

Have you done proper Asset allocation (Debt, Equity)..?

Most of the Answers for above questions will be different for different individuals.

Your financial plan is like your fingerprints.

It is unique to you. Neither can you use someone else’s investment strategy nor can they use yours. What may be elixir for one could be poison for another. Hence, investing based on friends / colleagues advice will not give the desired results.

If you have read this blog so far, you have more interest in your finances than most people searching “Top 10 Mutual Funds” and you have taken one step closer to financial freedom.

There are around 2000 (Two Thousand) Mutual Fund Schemes in India (AMFI Report, Feb 2019)

Each mutual fund scheme is suitable to meet different needs. Each scheme has different :

– objective

– risk return metrics

– liquidity

– taxation and exit load structure

 

For example, let’s look at ELSS category, there are about 71 schemes in ELSS category. We have analysed all these funds and a few of them are given below:

Axis Long term Equity Large Cap Bias
Aditya Birla Sun life Tax releif’96 Multi Cap approach
Franklin India tax Large Cap Bias
Reliance tax saver Mid & Small Cap Bias
IDFC tax saver Mid & Small Cap Bias
SBI Magnum Tax gain* Large Cap Bias
Mirae tax saver** Large Cap bias

(Above schemes are for illustrative purposes only and not a recommendation)

*SBI Magnum Tax gain was Holding 9% cash as on Feb’2019 against the category average of 5%.

**Mirae tax saver was not rated by research websites before a few months as 3 years were not complete. Currently, it’s 5 star rated scheme.

Choosing Suitable scheme for investment and proper combination of schemes is very important as diversification in Mutual Funds is very different than diversification in stocks. Each mutual fund scheme invests in 30 to 50 stocks. So having more number of schemes may lead to overlapping or over diversification which affects returns negatively.

 

To conclude

  1. Don’t rely on random advice or google as they only know top 10 funds for investment and not what is suitable for you.

Focus not on the Best, focus on identifying what is most suitable for you.

Take help of reliable Financial Planner/Advisor or perform proper research (if you are DIY investor)

  1. Never judge an article by its heading 😉

We stopped publishing Mutual funds recommendation list long back as we believe that general recommendations will not help you to create serious wealth. Don’t play with your hard earned money.

We provide following services for a very nominal fees :

  • Customised Mutual Fund recommendations
  • Comprehensive Customised Financial Plan
  • One to one coaching for Do it Yourself – DIY investor

Click here or Contact us on nitesh@nimitwealthmanagement.com or +91 9702604090

 

CA Nitesh Buddhadev

Nimit Wealth Management

 

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The Mahabharata, Investments and Lord Krishna

The Mahabharata, needless to say, is one of the greatest epics. Though essentially a narrative of a war between the Kauravas and the Pandavas, it is known to offer valuable lessons on life, relationship and success – the good and the bad; the virtuous and the vile.

One of the excerpts of which I clearly remember from Mahabharata is of Draupadi being dragged into the court room by her hair. Draupadi due to no mistake of her own was embarrassed and insulted.

If we look at the situation closely, Shakuni wasn’t the only one to be blamed. To give it a different perspective, the Pandavas were lured.  They did not assess the risk of losing out. Even Dharamraj Yudhisthir could not see the fallacies in the scheme.

The same applies to Investments

Investors are lured by the high returns offered by Ponzi schemes. They are so lost in their dream wins that they do not assess the risks involved in such investments. Even the most risk averse investors get lured seeing quick and easy money making schemes.

When Ponzi schemes are exposed, millions of Rupees are lost of innocent investors. Ponzi schemes are blamed. But my friend, Ponzi schemes exist because people get lured by easy and quick returns. They do not do a background check. They risk everything for nothing.

Risk comes from not knowing what you are doing.

This applies to every financial decision taken by you or financial products bought by you without assessing the requirements, risk appetite, benefits of product, cost of product, opportunity cost, etc.

For example, Buying endowment Insurance policies, crypto-curencies, tip-based trading, tip-based investment in equity, investing in random / top rated mutual fund schemes, investing without Goals, etc.

the great battle of Mahabharata

The Kauravas had the Ruling King, greater Army and most of the greatest warriors on their side. They had Shakuni as their Advisor.

The Pandavas and their Army were comparitively less in strength. They had just returned from Exile. However, this time, they had Lord “Krishna” as their advisor.

Krishna not only helped them to see the truth but also guided them to the right path by overcoming their emotions. He did not participate in the battle but helped the Pandavas to Win. Krishna was NIMIT (a medium) to their Success. This is the true Role of an Advisor, isn’t it?

In your investment journey, you will take many decisions. Some of these may not be beneficial / in your interest. Even with lesser resources you can Win great battles, when you have Krishna by your side.

Happy Janmashtami!

CA Nitesh Buddhadev
CA Mitsu Buddhadev
Nimit Wealth Management

You may reach out to us at info@nimitwealthmanagement.com for any queries, suggestions or feedback.

Subscribe to the blog series by entering your email id. Add info@nimitwealthmanagement.com to your contact list to avoid our updates landing in your spams.

 

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Thoughtful Thursday #09 Who Moved My Cheese?

In this series of Thoughtful Thursday , we have covered Importance of Insurance, Inflation, Financial planning,  Goal based planning, Difference between Savings and Investments. We hope that you all are enjoying our blogs and have subscribed to it.

When I meet some of my clients and they are skeptical about investing in new products  / financial markets, a glimpse of the book Who moved my Cheese? flashes in front of me.

The story is about four characters, 2 mice (Sniff and Scurry) and 2 little people (Hem and Haw) who look for Cheese every day. One day, they find that their regular stash of cheese is gone! The mice and little people respond very differently.

There are mainly 4 lessons one needs to take away from story. These lessons apply to our Investments too..

Take away 1 : Change happens

Just like we have moved from Landline to Smart phone, from hand written letters to e-mails and so on.. Our Investments also need to change. In the earlier days, investments in Gold, Silver, Fixed deposits, PPF etc. were considered as the best investments. Today, these assets do not make good investments. Let’s see the returns from 4 assets classes for the past 39 years.

Take away 2 : Anticipate change

Those who Anticipate change are likely more successful than others. Similarly, in our financial journey we should always be in the quest for knowing new things and anticipating changes. Those who invested in Equity in the earlier years have gained much more than others. Click here to see the value of Rs 100 invested in the Share market in 1979.

Current Value of Rs 100 invested in 1979 is 38690 (Aug 30, 2018).

Take away 3 : Monitor change

Be alert and keep sniffing your cheese to know when its getting old. Which in our financial journey means that we should keep checking the market and discussing with experts in the field about new products, opportunities, etc. and keep abreast with changes happening in the industry and economy. One should not fill it, shut it and forget it.

Take away 4 : Adapt to change quickly

If you are not one of those who could anticipate change, you could at least be the one to adapt quickly. Currently, the mutual fund penetration in India is only 11% whereas for developed countries its way higher.

As seen in the table above, India has a long way to go in mutual fund market and the earlier you enter the market, the better it is.

Currently in India there are only 2 crores Mutual Fund Investors out of the total population of 134 crores.

As Warren Buffet rightly said.. “What the wise do in the beginning, fools do in the end”

It’s Never too Late to Start..

CA Nitesh Buddhadev
CA Mitsu Buddhadev
Nimit Wealth Management

You may reach out to us at info@nimitwealthmanagement.com for any queries, suggestions or feedback.

Subscribe to the blog series by entering your email id. Add info@nimitwealthmanagement.com to your contact list to avoid our updates landing in your spams.

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Mutual Fund Recommendation for FY 2018-19

“Change is the only constant thing in this world”

From “Mutual Funds are subject to market risk” to “Mutual Fund Sahi hai” there have been many changes in last few months.

Before we see the list of short listed mutual funds one can invest in this FY 2018-19, one should be aware of the changes which have taken place in last few months.

(Read till the end, you will not be disappointed :))

Changes due to ‘Categorisation and Rationalisation of Mutual Fund Schemes initiative’ of SEBI)

SEBI has specified 36 categories of mutual fund schemes in total. As per the new rules, the AMCs will not be allowed to offer two schemes under different names with identical investment mandates. One category of mutual fund will be permitted to sell only one mutual fund scheme. As a result of this mandate, the fund houses have now realigned their schemes and portfolios to classify them under the newly formed categories.

Changes in brief

Scheme name

Earlier, the mutual fund scheme names consisted of words like “opportunities”, “advantage” and “prudence” to make it look seemingly lucrative. However, the investor was unable to gauge the inherent risk while making an investment. After passing of the regulation, many scheme names have been changed in order to enhance existing disclosure.

Classification of Schemes

After the recategorization, SEBI has specified the entire universe of mutual funds to be classified under these 5 categories i.e. Equity, Debt, Hybrid, Solution oriented and others

Modification of scheme attributes

This includes the investment mandate, the benchmark and the investment strategy of each mutual fund scheme.

Changes in the Definitions

After implementation of the regulation, large-cap stocks would be the top 100 companies of the underlying benchmark in terms of full market capitalization. Mid-caps would be companies ranking from 101st to 250th and small-caps would be companies ranking from 251st onwards in terms of full market capitalization.

We note above, that almost everything has changed and the first thought is :

The past performance of many schemes are now irrelevant and so are the Mutual Fund Star ratings offered by various websites

Yes! You read it right, Star rating and Ranking for many schemes are now irrelevant as :

  1. To fall in line with SEBI mandate many schemes have been merged
  2. Fundamental Attributes have changed like some Midcap schemes are now Multicap and  some of the Multicaps are now in Focused categories.

Generally, Mutual Fund Star rating and ranking should not be the criteria to Select the fund.

Schemes Sub categories & its characteristics

Equity Mutual Fund Schemes

Sub Categories

Scheme Characteristics
Multi cap Min 65% in across Large, Mid & Small cap companies
Large cap Min 80% in Large cap companies
Large & Mid cap Min 35% in Large cap companies & Min 35% in Midcap companies
Mid cap Min 65% in Mid cap companies
Small cap Min 65% in Small cap companies
Dividend Yield Min 65% in Equities investing predominantly in Dividend yield stocks
Value Min 65% in Equities which should follow value strategy
Contra Min 65% in Equities which should follow contrarian strategy
Focused Min 65% in Equities (Maximum 30 stocks). Focus can be on large cap Multi cap, Midcap or Small cap
Sectoral Min 80% in stocks of a particular sector
Thematic Min 80% in stocks of a particular theme
ELSS (Tax Saving) Min 80% in Equity and Equity related instrument

 

Debt Mutual Fund Schemes

Sub Categories

Scheme Characteristics
Overnight Investment in overnight securities having maturity of 1 day
Liquid Maturity of up to 91 days only
Ultra Short Term Macaulay duration of the portfolio is between 3 months ‐ 6 months
Low Duration Macaulay duration of the portfolio is between 6 months‐ 12 months
Money Market Maturity of up to 1 year
Short Duration Macaulay duration of the portfolio is between 1 year – 3 years
Medium Duration Macaulay duration of the portfolio is between 3 years – 4 years
Medium to Long Duration Macaulay duration of the portfolio is between 4 years – 7 years
Long Duration Fund Macaulay duration of the portfolio is greater than 7 years
Dynamic Bond Investment across duration
Corporate Bond Min 80% in invested in Corporate Bonds
Credit Risk Min 65% in invested in Corporate Bonds below highest rated instruments
Banking & PSU Min 80% in invested in Debt instruments of banks, Public Sector Undertakings, Public Financial Institutions
GILT Min 80% in invested in Gsecs across maturity
Gilt Fund with 10 year constant duration Min 80% in invested in Gsecs such that the Macaulay duration of the portfolio is equal to 10 years
Floater Fund Min 65% in invested in Floating rate instruments

 

Hybrid Mutual Fund Schemes

Sub Categories

Scheme Characteristics
Conservative Hybrid 10 ‐ 25% in Equity related instruments & 75 to 90% in Debt instruments
Balance Hybrid 40 ‐ 60% in Equity related instruments & 40 to 60% in Debt instruments
Aggressive Hybrid 65 ‐ 80% in Equity related instruments & 20 to 35% in Debt instruments
Dynamic Asset Allocation/ Balanced Advantage Investment in equity/ debt that is managed dynamically
Multi Asset Allocation Min 10% investment in atleast 3 asset classes
Arbitrage Fund Min 65% in Equity related instruments which should follow Arbitrage strategy
Equity Savings Min 65% in Equity related instruments & Min 10% in Debt instruments

 

Solution Oriented Mutual Fund Schemes

Sub Categories

Scheme Characteristics
Retirement Fund Scheme having a lock‐in for at least 5 years or till retirement age whichever is earlier
Children’s Fund Scheme having a lock‐in for at least 5 years or till the child attains age of majority whichever is earlier

 

Other Mutual Fund Schemes

Sub Categories

 

Scheme Characteristics
Index Funds/ ETFs Min 95% in stocks of a particular Index
FoFs (Overseas/ Domestic) Min 95% in the underlying Fund

 

Do you still believe Selecting Mutual Fund schemes is simple? 😉

It’s not rocket science however, its not that easy to zero down on the specific scheme suitable to your requirements out of the thousands of Mutual Fund schemes available in the Market.

Have you come across any one who got super rich by Investing in some random 5 star or top ranking Mutual Funds or trading / investing in tip based Equity shares..??

Do you know what is Risk..?

“Risk comes from not knowing what you are doing”

You are investing your hard earned Money, please take informed investing decisions.

Coming to the subject of the Article…

Here is the list of…

Top performing Mutual Fund in India (It may stop performing anytime! Past performance does not Guarantee Future Performance)

Best Mutual Fund to invest in 2018 (There is nothing called Best in Personal Finance)

5 Star rated Mutual Mutual Fund  (Star Changes more frequent than you think, Don’t follow it blindly)

 

Shortlisted Mutual Funds to invest in FY 2018-19 by NIMIT Wealth Management 🙂 (July – Aug 2018)

(Well Researched. However, it may contain some Top rated, Best Mutual Funds or 5 star rated funds)

 

Equity – Large Cap

1) ABSL Focused Equity Fund  (Erstwhile ABSL Top 100 Fund)
2) Motilal Focused 25 fund       (Erstwhile Motilal most focused 25 fund)
3) SBI Bluechip Fund

 

Equity – Large & Mid Cap

1) DSPBR Equity Opportunities Fund        (Erstwhile DSPBR Opportunities)
2) Mirae asset Emerging Blue Chip Fund  (Earlier it was midcap scheme )

 

Equity – Multi Cap

1) ABSL Equity Fund
2) Franklin India Focused Equity   (Erstwhile Franklin India high growth co’s)
3) Kotak Standard Multicap Fund  (Erstwhile Kotak Select Focus Fund)
4) Motilal oswal Multicap 35 Fund (Erstwhile Motilal most focused multicap 35)
5) SBI Magnum Multicap Fund

 

Equity – Mid Cap

1) Franklin India Prima Fund
2) HDFC Midcap Opportunities Fund
3) L&T Midcap Fund

 

Equity – Small Cap

1) ABSL Small Cap Fund (Erstwhile ABSL Small & midcap Fund)
2) Franklin India smaller companies fund
3) Reliance small cap fund
4) SBI Small cap Fund

 

Equity – Value Oriented

1) ABSL pure value fund
2) HDFC Capital Builder value fund
3) L&T India Value Fund
4) Tata Equity PE Fund

 

Equity – ELSS (Tax Saving)

1) ABSL Tax relief’96 Fund
2) Axis Long term Equity Fund
3) DSPBR Tax Saver Fund
4) Franklin India Tax Shield
5) L&T Tax Advantage Fund
6) Reliance Tax Saver Fund

 

Hybrid – Aggressive (Equity Oriented)

1) ABSL Equity Hybrid ’95 Fund (Erstwhile ABSL Balanced ’95 Fund)
2) DSPBR Equity & Bond Fund (Erstwhile DSPBR Balanced)
3) HDFC Hybrid Equity Fund (Erstwhile HDFC premier multicap & HDFC Balanced)
3) L&T Hybrid Equity Fund (Erstwhile L & T India prudence fund)
4) Reliance Equity Hybrid Fund (Erstwhile Reliance Regular Savings Balanced)

 

Hybrid – Equity Savings

1) ABSL Equity Savings
2) HDFC Equity Savings Fund
3) L&T Equity Savings Fund

 

Hybrid – Dynamic Asset Allocation/ Balanced Advantage

1) ABSL Balanced Advantage Fund
2) ICICI Balanced Advantage Fund

 

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PLEASE READ THIS :
  • Asset Allocation is a MUST.
  • Above is just a list of Shortlisted Funds based on our internal research.
  • Selecting scheme of Mutual Fund is only half job done. How much amount to Invest in which Scheme is very crucial.
  • Investment decisions depend upon your Goals, Investment horizon, Risk profile, Existing Investments and various other factors.
  • Investing is a Serious Business, Don’t do it randomly.
  • Review periodically & Rebalance as and when required.
  • Have a reasonable expectation of Returns on your portfolio. Over Expectations hurt!
  • When you invest in Equity, give it time to perform atleast that much as you give your Gold and Real Estate. 🙂
  • If required, Take help of Financial Advisor to achive your Financial Goals (Even Virat Kohli and Lionel Messi have coaches to guide them)

 

CA Nitesh Buddhadev

CA Mitsu Buddhadev

Nimit Wealth Management

You may reach out to us at info@nimitwealthmanagement.com for any queries, suggestions or feedback.

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Thoughtful Thursday #08 – The Ant or the Grasshopper..? Choice is yours..!

We all have heard the famous story of the Ant and Grasshopper in our childhood days. However, its got a new twist this time. Read along to find out..

The story goes as…

Once upon a time, a Grasshopper was hopping, chirping and singing to its heart’s content in a field in hot summer’s day. There was an Ant staying nearby the Grasshopper’s nest. They were good friends. It was springtime and the Grasshopper was having a lot of fun playing, singing, and dancing in the sun. But the Ant was hard working. It was collecting food grains and storing them in its house for the winter.
The Grasshopper did not understand why the Ant was doing so much hard work and keeping for winter. He asked, “Hey,’ Ant! Why don’t you come outside and play with me?” The Ant replied, “I cannot. I am storing food for the winter when there won’t be anything to eat!” The Grasshopper only laughed at the Ant and said, “Why are you worrying now? There is plenty of food!” and continued to play, while the Ant worked hard.
When winter came, the Grasshopper did not find a single grain of food to eat. It began to starve and feel very weak. The Grasshopper saw how the hardworking Ant had plenty of food to eat and realized its foolishness.
The Story could have further continued as…
The Ant saved some food for the short term (i.e. the approaching winter) and also out of the savings she planted some seeds and nurtured them into plants..
Fast forward 10 years…
The Ant and the Grasshopper were now both little older. They could no longer work as hard as they used to do earlier. The Ant looked out of the window and saw the many trees laden with fruits from where she could source food during her retirement days. While the Grashopper still wondered how he would manage his requirements. It saw how the Ant had plenty of food to eat from the trees sown earlier and realized its foolishness.

The Story in Today’s Personal Finance world is not any different..

We see more Grasshoppers and few Smart Ants. We live in the world which believes ‘Zindgi na milegi Dobara’. We believe that savings can wait, Retirement is too far to think and so on. While we may enjoy like the Grasshopper, we must not ignore the Smart Ant. We should not ignore the bitter truth that a time will come when we wont be able work so hard.
The difference between Saving and Investing is not understood by many. This is because we are not taught the concept of Investment from the very beginning. We are only taught about Saving.
In this updated story, the Ant not only ‘Saved’ i.e. it kept its capital in a safe place for the near future but also ‘Invested’ its savings (by planting the seeds and nurturing it) and let the capital (plants) grow.
So while we all ‘Save’ our Hard Earned Money.. Smart people ‘Invest’ their Hard Earned Money.

Savings vs Investment

BASIS FOR COMPARISON SAVINGS INVESTMENT
Meaning Savings represents that part of the person’s income which is not used for consumption. Investment refers to the process of investing funds in financial/ capital assets, with a view to generate returns.
Purpose Savings are made to fulfill short term or urgent requirements. Investment is made to provide returns and help in capital formation.
Risk Low High
Inflation Adjusted Returns Less or Negative Comparatively Higher
Suitable Tenure Short Term (1 to 3 yrs) Long Term (3 yrs or more)
If we don’t Invest our Capital, Inflation will eat up some of it. To know more about how Inflation affects us read Inflation the Hidden Enemy.
Simply, Investments should at the minimum generate a return higher than the inflation.
The below Equation explains that in the beginning of our career we work for money and ‘Save’ for short term and ‘Invest’ for long term. Over time, as we grow older our Investment Income should increase and become equal to our occupational income so as we near our retirement our dependence on occupational income is done away with.

 

Simply put, if you are the believer of ‘Zindigi na Milegi Dobara’, your bank balance is like ‘Kal Ho Na Ho’ and if you don’t want be ‘Devdas’ its time to take a pause and Invest Like a ‘Bahubali’ and be a ‘Hero’ so that will help you in days of ‘Kabhi Khushi Kabhi Gam’ and if you require more help regarding the same ‘Main hoon na‘.. 🙂

CA Nitesh Buddhadev
CA Mitsu Buddhadev
Nimit Wealth Management

You may reach out to us at info@nimitwealthmanagement.com for any queries, suggestions or feedback.

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A tale of Father’s Advice to Fly High..!

This Fathers Day, I would like to share one of the vivid memories I have of me and my father together. I belong to Gujarat, and one of the most important festivals is Sankrant.

As I was watching my father flying a kite, I said, “Pappa aa manjho patang ne unchi udwa nathi detho”

“Dad, Because of the string the kite is not able to go any further higher”

Hearing this, my father smiled and broke the string. The kite went higher after breaking of the thread and then shortly after that it came flying down to the ground. A bunch of kids came fleeting to catch hold of the kite. Amongst all the pitter patter of kids, my father told me to sit down and said “Beta aa manjo j che je patang ne udwa de che”

“Son, it is because of this String that the kite is able to fly”

He further continued,

“Son, in life we reach a certain level of prosperity and then we feel that there are certain things in our life that are not letting us grow any further like Home, Family, Friendship etc. We feel we want to be free from those strings which we believe are stopping us from going higher. But, remember son. Going higher is easier than staying at the higher level. And friends, family and culture etc are the things that will help us stay stable at the high heights that we have achieved. If we try to break away from those strings our condition will be similar to the kite.”

Today when I am grown up, I believe that this is the best piece of advice I have got in my Life. It equally applies to my profession.

We have life goals (responsibilities) and due to which we have financial goals. In our financial journey, we sometimes feel that some one else is flying higher than us, achieving more than us and we always try to look at others kites than ours..

We all want a maximum return on investments say 20 to 30%. We all invest in Equity for outstanding returns. While the story of Equity seems rosy, we should not forget the Risk involved. When I as a financial advisor ask clients to diversify the portfolio among various asset classes, they fear that the returns of the portfolio will average out to be lesser compared an only equity portfolio. But, as seen above, Going higher is easier than staying at the higher level. 

The strings (perceived as restrictions) of asset allocation will help us to achieve our life goals. Our ultimate aim is not only get a higher corpus but to achieve our financial goals with assurance and safety.

If we break these strings, then we may achieve higher results, higher corpus than expected but it may not be consistent and sometimes, the corpus may wash out completely, and a few of our goals may not be achieved at all. Do we want our loved ones to suffer because we were greedy for a higher Corpus? NEVER!

So, friends, all strings attached, Fly High.

Happy Fathers Day..!

 

CA Nitesh Buddhadev

CA Mitsu Buddhadev

Nimit Wealth Management

You may reach out to us at info@nimitwealthmanagement.com for any queries, suggestions or feedback.

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Pear Tree & Equity Investments – If you give up when it’s winter…

I am investing in equity mutual funds since last 1 year and my returns are negative, may be my mutual fund schemes are not doing good, may be I should go for other top performing scheme or dump the existing schemes or may be equity market as a whole is so risky let me stop investment…

Many investors have these thoughts. If you are one of those who have similar kind of questions or doubts, go ahead and read this blog.

Let me start with a beautiful story as Life’s best lessons are learnt through stories.

There was a man who had four sons. He wanted his sons to learn to not judge things too quickly. So he sent them each on a quest, in turn, to go and look at a Pear tree that was a great distance away.

 

The first son went in the winter, the second in the spring, the third in summer, and the youngest son in the fall. When they had all gone and come back, he called them together to describe what they had seen.

The first son said that the tree was bent and twisted. The second son said it was covered with green buds and full of promise. The third son said it was laden with blossoms that smelled sweet and looked beautiful. The last son disagreed with all of them and said it was ripe and drooping with fruit, full of life and fulfilment.

The man then explained to his sons that they were all right, because they had each seen but one season in the tree’s life. He told them that they cannot judge a tree, or a person, by only one season, and that the essence of who they are can only be measured at the end when all the seasons are up.

 

Similar is the story of Equity Market

Lets assume that there are 4 persons A, B, C, D who have invested in Equity Market at different times.

Now, you decide to invest in Equity Market and speak to these people.

Person A – Equity market is very risky. Your capital may wash out, You should invest only in FD, PPF, etc.

Person B – Equity Market is hyped, the returns are almost same as any other investment instruments.

Person C – Equity Market is very much promising and will give very good returns in the next few months

Person D – Equity is the best asset class one can invest in and it will always outperform all other assets classes.

Now, you would naturally be confused as to which person’s advice to follow. Let me make it simpler. Just like in the story above, all of them are right, because they have each seen but one season in the duration of equity market (assume – sensex for simplicity).

If we look at the Sensex Rolling Returns for last 39 years, it has its own cycle of winter, spring, summer and fall but not necessarily in the same order as the natural seasons.

Your Equity Share or Mutual Fund may not be performing well if you have just started investment a year back as sensex is hovering around 32000 to 36000 since last one year and likely to be in this range due to few state elections due this year and general elections due next year.

So like a Pear tree, Equity Market has to pass through different seasons to give you the desired fruits.

One should not judge that Equity is very risky or its the best just by looking at one season (cycle of returns).

Its always recommended to Invest according to your goals and diversify your investment to different asset class and review & re-balance portfolio periodically.

Read more about importance of investing based on your goals here Are you KYG (Know Your Goal) Compliant..?

Lets see the Sensex Rolling Returns for 5 years period.

 

We note that the Green flags have increased considerably compared to the previous table. Also, at certain periods the red flags turn into yellow / orange.

While there may be many other factors, Patience is the most important fertiliser for getting better fruits from the Equity Market.

Its important to understand that:

  1. Equity markets / Equity Mutual Fund are volatile.
  2. Equity markets / Equity Mutual Fund in the long run may give better returns than other asset classes.
  3. Equity markets / Equity Mutual Fund suitable for long term goals.

So be it a Pear tree, Equity Investment or Life always remember

If you give up when it’s winter, you will miss the promise of your spring, the beauty of your summer, fulfillment of your fall.

Don’t judge a life by one difficult season. Persevere through the difficult patches and better times are sure to come sometime.

 

CA Nitesh Buddhadev

CA Mitsu Buddhadev

NIMIT Wealth Management

You may reach out to us at info@nimitwealthmanagement.com for any queries, suggestions or feedback.

Subscribe to the blog series by entering your email id below. Add info@nimitwealthmanagement.com to your contact list to avoid our updates landing in your spams.

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Thoughtful Thursday #07 – When you INVEST, you are buying a day that you don’t have to work..

“Today,  I woke up relaxed, had steaming-hot home made breakfast, read the newspaper and went through my day’s schedule. No rushing up, no boarding crowded trains, not running after auto rickshaws to drop me to office. My day was planned full of things I love doing. So as I headed up for my shower and I noticed my hair had turned grey..” And then MY ALARM RANG..

Was this A dream? Yes, A Dream to Retire, A Dream to work on things I love, A Dream to Not work for Money..

This Dream can be true. If we Plan for it. Yes, you can live your dream life, follow your passion, work at your start up, do social work, anything you dream of..

One of the most Important and Ignored Financial Goals is RETIREMENT. Retirement doesn’t only mean sitting at home doing nothing. It means, having enough money to do things you love and live your life comfortably. Some may want to Retire Early, while Some may want to Never Retire. But everyone wants Financial Freedom.

It is worry some that people do not give the deserving Importance to Retirement Planning.

Retirement Planning 

Wondering about Planning your Retirement. Follow these Five simple steps below :

1. WHEN YOU INVEST, YOU ARE BUYING YOURSELF A DAY THAT YOU DON’T HAVE TO WORK

Youth in their late twenties believe that its too early to think about Retirement.  But friends, its better to Start Early. Lets see in the example below, the Benefits of Starting Early. Assuming that the Target is Rs 1 crore and Rate of Return is 10%, the following are sums are required to be saved by individuals ageing 25, 30, 35, 40 and 45 years.

Don’t you think even an auto driver or office boy can afford to invest Rs 2,610 per month? But they Fail to Plan due to lack of Financial Literacy.

START INVESTING FOR YOUR RETIREMENT THE DAY YOU START EARNING 

2. NEVER BREAK YOUR RETIREMENT CORPUS FOR ANY REASON

Generally, people don’t earmark investments for RETIREMENT Corpus. As a result they end up spending their RETIREMENT corpus whenever the need arises say, to pump in money for purchase of house, child’s higher education, etc. But please REMEMBER – you can get education loan, home loan, other personal loan but you will not get A SINGLE PENNY for RETIREMENT..!

3. DETERMINE YOUR RETIREMENT CORPUS DILIGENTLY

Determination of Retirement Corpus is one of the most important steps which requires utmost care and attention.

(Taxation, Lifestyle Inflation, increase in Healthcare costs post retirement and other factors are ignored for sake of simplicity)

4. STAY INVESTED

Some people are highly enthusiastic at the beginning but stop investing half way or withdraw the amount too soon. The Investment Journey is a roller coaster ride. Enjoy the ups and downs, do not panic in downfall and do not get excited in at a high point. Stay invested till you reach your Destination / Goal.

In the above example, invest consistently Rs 19,335 per month from Age 30 to Age 60 or invest lumpsum Rs 22,36,962 and stay invested.

(Assumed Pre Retirement return 10%, Post Retirement Return 6%, inflation 6%. Taxation, Lifestyle Inflation, increase in Healthcare costs post retirement and other factors are ignored for sake of simplicity)

5. ITS PERSONAL FINANCE, PERSONALISE IT..!

Some people get duped by the Pension Plans provided by a few market players.

Don’t go for ready made plans, it will hardly beat inflation.

Customise your own Retirement Plan by planning the systematic withdrawals required each month and make sufficient investments in your earning years.

You may reach out to us for a customised Retirement Planning at info@nimitwealthmanagement.com

CA Nitesh Buddhadev

CA Mitsu Buddhadev

NIMIT Wealth Management

You may reach out to us at info@nimitwealthmanagement.com for any queries, suggestions or feedback.

Subscribe to the blog series by entering your email id below. Add info@nimitwealthmanagement.com to your contact list to avoid our updates landing in your spams.

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Thoughtful Thursday #06 – Are you KYG (Know Your Goal) Compliant..?

As you all are aware, without KYC you cannot start your investment. I wish it was equally mandatory to have KYG (Know Your Goals) !

As we believe,  “People Don’t plan to fail but They Fail to plan..”

Everyone has their own list of Goals such as vacations, child’s education, child’s marriage, a bigger house, a holiday home, a dream car, a peaceful retirement, etc. All of these Goals, have a financial implication. To accomplish these, we either take a loan or make an investment or a combination of both.

Generally, following are the Goals as per human life cycle.

Definition of SMART Goals

Lets make it more Simple. Ask yourself following 4 questions for SMART Goal setting.

We will see one example of setting a SMART Goal.

Say, Mr. Kapoor has a daughter aged 3 years. One of the Goals he is considering in the Financial Plan is Child’s Education.

Goal Details Post Graduation
Fund Required at Today’s Cost  Rs 15,00,000
Child’s Age will be 21 years
Goal Year 2036
Inflation
(Education Inflation is considered @10% based on data available)
10%
Future Value (Corpus Required in 2036)  Rs 83,50,000

YES! You read it right, Rs 15,00,000 Today will cost you approx Rs 83,50,000 in 2036.

So, if the Goals are not appropriately set we may have to use our Retirement Corpus or other investments for this Goal and I am sure no one will allow their child’s education to suffer because of lack of funds. But what we will compromise here as our Retirement Corpus will also impact us in Future. So take caution in setting Financial Goals.

The SMART Goal here in the example is : Mr. Kapoor requires Rs 83,50,000 in 2036 for his daughter’s  Post Graduation. Now, Mr. Kapoor has 3 choices to achieve this Goal:

Particulars % in CAGR*
7% 10% 12%
Monthly Investment Required                  19,400               13,900                  11,000
OR
Invest Lumpsum             23,95,000             14,11,000               9,94,000

*Compunded Annual Growth Rate

This is one of the many Goals Mr. Kapoor will consider as a part of his Financial Plan.

Guys, Please Remember, its Personal Finance, always personalise it. Define your own Goals and get a customised Financial Plan for yourself. What may be applicable to one person may not be applicable to another.

We will help you to set your Financial Goals and Develop a customised Financial Plan for yourself. For more details contact us at info@nimitwealthmanagement.com

CA Nitesh Buddhadev

CA Mitsu Buddhadev

NIMIT Wealth Management

You may reach out to us at info@nimitwealthmanagement.com for any queries, suggestions or feedback.

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Thoughtful Thursday #05 – People Don’t plan to Fail but They Fail to plan..

Sometimes life’s best lessons are learned through stories, so let me start today’s blog by a small story..

A foreman, who was given the charge of a gang of extremely lazy labourers, asked them to dig ten feet holes near a large steel mill. The lazy workers were further agitated when they were told to dig the holes here and there. As time went by, they kept digging, and finally they dug up nine holes.

 

The labourers could not understand why they were being made to dig so many holes near the factory. They also grew desperate, tired, and extremely agitated. They decided to stop right there and not to work anymore. As they were about to retire, the foreman told them something which made them spring back to action forgetting all their agitation and tiredness.

 

The foreman told them that he was actually looking for a broken pipe which supplied water to the quarters where these workmen resided. The labourers sprang back to work at once.

 

What is the implication of this story?

 

To work without definite goal is not just uninspiring, but also difficult. On the other hand, when a man knows the purpose of what he is doing, he is able to focus better, be more sincere, creative and diligent in what he is doing.

 

Lets now, modify this story,

The Labourers – Our hard earned money,

Foreman – We, the investors 

We have investible surplus of Rs  10,00,000 and we decide to invest in 15-20 stocks / mutual fund schemes. We start investing and tracking the returns. Everyday, on our way to office we observe the price of stock / NAV of mutual fund schemes.

Mostly, many of us can’t stomach the short term volatility and become desperate, tired, and extremely agitated and so we decide to stop i.e. withdraw the investment and decide not to invest in Equity anymore or we start trying to time the market.

BUT

Whenever we feel like this, we must ask ourselves 2 simple questions:

1. What is the Purpose/Goal of this investment?

2. Where will I invest this money by withdrawing it?

We realise that this amount of Rs 10,00,000 we do not need now. We saved it for buying our dream car after 5 years.

Now, we look at the long term returns of the stocks/ mutual funds schemes and forgetting all the tiredness and agitation, we continue with the investment and do not track the schemes daily and are at peace as we need the money only after 5 years.

“Going half way and then thinking of the destination is not a good idea. Its always better to have clear idea about the destination before starting  the Journey.” 

Conclusion:

To invest without definite goal is not just uninspiring, but also difficult. When one invests with a Goal in mind he is able to to focus better, be more sincere and regular in investing.

Always remember that,

” People Don’t plan to fail but They Fail to plan..”

In upcoming Thoughtful Thursday series, we will discuss more about how to set financial goals and relevant considerations for the same. Stay Tuned..

CA Nitesh Buddhadev

CA Mitsu Buddhadev

Nimit Wealth Management

You may reach out to us at info@nimitwealthmanagement.com for any queries, suggestions or feedback.

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