I have created a small and simple presentation for newbies regarding Life and Health Insurance . It will help new people to understand the importance of Insurance .
View more presentations from manish.pucsd.
Author: Jagoinvestor
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Search within You ..
I was watching a seminar video on my laptop today which was a trading seminar conducted in US, the speaker was an American.
In the middle of the seminar he presented a small story which was from Hindu Mythology which made me feel good, I am putting it here word by word after finding it from net (so that I don’t have to type all myself).
There was once a time when all human beings were gods, but they so abused their divinity that Brahma, the chief god, decided to take it away from them and hide it where it could never be found.
Where to hide their divinity was the question.So Brahma called a council of the gods to help him decide. “Let’s bury it deep in the earth,” said the gods. But Brahma answered, “No, that will not do because humans will dig into the earth and find it.”
Then the gods said, “Let’s sink it in the deepest ocean.” But Brahma said, “No, not there, for they will learn to dive into the ocean and will find it.” Then the gods said, “Let’s take it to the top of the highest mountain and hide it there.” But once again Brahma replied, “No, that will not do either, because they will eventually climb every mountain and once again take up their divinity.”
Then the gods gave up and said, “We do not know where to hide it, because it seems that there is no place on earth or in the sea that human beings will not eventually reach.”
Brahma thought for a long time and then said, “Here is what we will do. We will hide their divinity deep in the center of their own being, for humans will never think to look for it there.”
All the gods agreed that this was the perfect hiding place, and the deed was done. And since that time humans have been going up and down the earth, digging, diving, climbing, and exploring–searching for something already within themselves.
What does this teach us?
In life we have all the power to achieve something we want, we cant get help from some one, we can get tools, we can get support or for that matter any damn thing, but what is needed for success lies with us only, So don’t hunt for things outside, first know yourself.
“Its only you who can change things.”
How do I relate this to Investing and Money Management?
Whatever it takes to grow your money, do better investments or take informed decisions, Its within you, you just need to explore it, You can read stuff on this blog or anywhere else, but the real wisdom lies within you, you have to work hard on it.
I know nothing spacial or advanced things, I know things which any one can learn, The only difference can be my willingness to learn and make the difference and confidence. You can do it to. Just make sure you have the fire to learn and see within you and have confidence.
Just like a good cook doesn’t need great ingredients to make good food, he can make great things out of simple and basic stuff, the same way, we don’t need fancy products for our investments, Even if we have basic products we can utilize them well and create wonders, Only the knowledge and willing to do is required. Its within you, search for it ..
Please leave your comments on the blog, on your view and whether you liked the articles or not. That way I can know atleast that people like my articles or not.
Leave Travel Allowances and medial Reimbursements – The tax free allowances
As we are in mid Feb of the year and its tax time, I thought to talk a bit on LTA and Medical reimbursement benefits. Though many of you might already know about it, let me go over it in brief for readers who have less knowledge about it.
What is LTA ?
As the name suggests, LTA i.e Leave Travel Allowance is an allowance that an employee receives form his employer for his traveling expenses while he/she is on leave. This allowance is given only for the domestic traveling, international traveling is not covered in this allowance.
There are normally two situations when employee gets this allowance :
#1. Employee receives this allowance while traveling alone or with family or dependents from his current employer.
#2. Employee receives this allowance while traveling alone or with family or dependents from his former employer after retirement or termination of job.
It is the benefit given to a salaried employee and you can claim travel expenses from any one journey in a year. Lets see some important features of this allowance:
Features of LTA
- There is a block of 4 yrs decided by govt ( current block is 2006-2009). In a block you can claim LTA for any two years. For other 2 yrs you cant claim it, so total 50,000 will be taxable in those 2 yrs.
- These blocks are not financial years (April 1 to March 31); they are calendar years (January 1 to December 31).
- If your LTA is not utilized, it gets added to your salary and you will be taxed on it.
- LTA covers travel for yourself and your family. Family, in this case, includes yourself, parents, siblings dependent on you, spouse (even if your spouse is working) and children.
- The entire cost of the holiday is not covered. Only the travel costs are covered. So, whether you fly, hop on to a train or take public transport, you will have to show the ticket to claim your LTA. This means you will need to keep your air, rail or public transport ticket.
- If an employee doesn’t claim once or twice in a block year, he/she can carry forward one claim to the next block year. But the condition is he/she has to claim for that allowance in the first year only of that particular block year.
- If husband and wife both are receiving LTA then they can claim for the allowance in the same year but for different destinations.
Restrictions on claiming LTA
- You can claim on only twice in a block year
- Only actual cost of traveling is covered in this allowance
- You cannot claim LTA 2 times in a year.
- If the children are born after 1 October 1998 then you can claim for only 2 children’s traveling expenses. There are no restrictions for the children born before 1 October 1998.
Watch this video of rules and exemptions of LTA:
How much amount can claim under this allowance to get tax benefit?
You have a limit up to which you can claim your spent amount on LTA and medical bills and save tax on that part. If you didn’t claim it, for that much amount you will be taxed .
Limit for LTA : 50,000 per year
Limit for Medical Bills : Rs 15,000 per year
So from your total salary, you can save tax on this 65000 if you want, if you don’t claim it, you will have to pay tax on this part .
Medical Reimbursement
You can also claim deductions on the medical bills for medicines and doctor visits. You just have to get the bills and submit a proofs .
The bills can be in the name of you or your dependents .
Final Note : Utilizing this benefit just requires you to keep the documents ready. many people do not claim this benefit because they are too lazy of keep the documents safe. Don’t be lazy …
What is mean by Risk Appetite? What determines Risk-appetite?
Have you heard the word “Risk Apetite”?
You might have heard this word from your mutual funds agent, your Ulip agent, your stock broker, from analysts giving tips or any other place, we hear the word and then we feel we understand it. may be you understand it, But how do you define it?
One of the reader asked me to include this in my article and it seemed a good idea to me. Before writing this article, I had a good understanding and explanation of “What is Risk-appetite”? but instead of using my words I thought it would be a good idea to surf the net and try to find some material on it to help it write article. As expected, each one was totally correct, but not easy to understand by common public.
So at last I thought I should write it the way I see it and feel it. One of a simple funda I apply in my life is “if its complicated, its not worth”, So let me start this small explanation.
What is Risk appetite?
Risk appetite is the amount of risk you can take on your investment. It is the point till which you feel that you should be in the game because still in the long run you will be rewarded finally. Till that point there will not be enough change in your mental state.
The moment it reaches a point from where you feel like getting out is the best thing you can do, That is the point where you accept that you were wrong at the time of investment. that’s your Risk appetite point. Now this is for a situation where you can not decide in advance about your risk.
Lets see a Psychological aspect of this, When you see your money increase or decrease it has direct relationship with your emotional state. If your money keeps increasing, you will feel euphoria and get excited, you will be on top, and when you see it decrease or going down day by day. Our emotions guide us in our life, and they are very helpful in your financial life (to determine risk).
Lets see an example :
Ajay and Manish invested 100 in Share A, After some days the value dropper to 90, at this point both were calm, and accepted that this happened because of market volatility and its totally normal. After some more days price went down to 70. At this point Ajay thinks starts feeling oohh.. and oucch.. in his stomach.
This is the point where his emotional pain increases to a point where he can no longer stay with this investment. That’s the risk Appetite for Ajay. whereas Manish is not affected that much, still he can take loss of 20 more, only where prices drop to 50, he will feel jitters.
What determines the Risk-appetite?
Risk Appetite is determined from many factors like Your Expectations, Your current Situations and your past experiences.
Your Expectations
You risk appetite has to be proportional to your expectation. If you want more you Will have to take more risk.
In the above example, Ajay will exit the investment and take Rs.30 loss, but what if Shares drop to 60 and then starts moving up and up and finally reaches 130. Who will make profit. The person who had more risk-appetite.
Your Current Situations
Your current situations determine your risk appetite, If you are sound financially and can afford to loose more, you can have high risk appetite and vice versa. A person with a family to support will have less risk appetite than some one who is is totally independent and has all his salary to spend on his own.
Your Past Experience
Obviously, what happened in past with you in different situations will determine your future decisions. People who lost lot of money by investing in Jan 2008 will now have less risk-appetite, because next when they invest there money somewhere, they will get panicked easily by a small drop and hence may get out fast.
Where as a person who made great money in 2003-2007 bull markets will have high risk appetite.
I personally like Equity a lot, the reason may be because I want to make lots of money fast (expectations), I can afford to loose some money currently because of less responsibilities (current situations), and because I have made some (very small number) of quick profits (past experience).
What is good? High or Low Risk Appetite?
Its a personal thing, There is nothing like good or bad. Its a subjective matter. At last everything boils down to “You get what you wanted”, It must give you emotional satisfaction and joy.
There are people who are fine with 9% return per Annam and there are people who are not even satisfied with 20% returns.
What is Risk Factor of a Product?
Many people do not understand what is there risk appetite, I have friends who invested in Dec 2007 in ELSS funds, and cried a lot after it went down by 50%. The reason was they never understood the risk factors. I also saw my investments drop to same levels, but my mental state was not affected because I knew that it was possible with mutual funds and before investing I had accepted that if it happens, Its fine.
Risk and returns are always proportional. If A gives more returns than B, than A has to be more risky than B.
Generally people choose a product which matches there return expectation and then compromise with the risk and then later when there is loss more then there risk appetite, they cry.
The better thing would be to choose some thing which matches your risk-appetite on risk side and then accept that you deserve the returns provided by the product.
I know people who want more than 12% returns and also don’t want to see there investments see any negative returns ever. they are totally foolish to expect this. This will not happen.
Also I know people who are ready to see there investments dip by 30-40% with happiness but they only invest in PPF or bank FD’s, these people are bigger fool than former one;s, by not utilizing the equity power.
I hope you got all of your answers. If you still have any query feel free to ask us. You can leave your doubt in the comment section.
How to manage ULIPS ? – Tips to become a smart investor
I am finally back from vacation, I feel bad for not writing anything for these 11 days .. I have written a post on GOLD Breakout here , People interested in investing in GOLD may be interested. Let me talk about IRR and ULIPS today.
When we see talk about ULIPS, people generally see its returns over some years , where as its not the true indicator for its actual returns , What we need to see is called IRR.
What are ULIPS ? , read here
What is IRR ?
Actually IRR is not only related to ULIPS, its a general concept. IRR is Internal rate of Return, It means returns after adjusting all the costs and expenses. IRR alone is not a single thing we should look at, Its calculated by assuming fixed rate of return like 6 or 10%. The other things to look are its actual performance too.
What are good ULIPS in markets currently ?
Some weeks back there are was a survey and study by outlook money on best Ulips, Birla Sun Life’s ClassicLife Premier and Kotak Life’s, Long Life Wealth Plus were some top funds compared on the basis of IRR. this article talks about the best ULIPS in detail, click on this to read more.
Full article related to ULIPS can be read here
Understand , Choosing a good ULIP is just 5-10% , the main part is how your manage it . how to take care of the advantages provided by ULIP, If you just want to buy a ULIP and sleep for 10 yrs , ULIPS is not for you then . you must buy Mutual funds Instead .
Manging a ULIP is the main part , If you manage a bad ULIP very well , you can earn good returns, but you can loose money by buying Best Ulip in markets and mismanaging it .
How to manage a ULIP ?
Managing a ULIP over a long term is very simple but not easy . You have to do some simple things . Always use switch facility when you anticipate the opportunity .
When you see markets are very high and there is lot of euphoria in market , Decrease your Equity allocation and shift it to Debt . And when you see dull ness in market and everybody is too afraid in markets its the time to shift your money in Equity .
Watch this video to learn how to manage ULIPS:
How to make sure that this is done easily ?
You should find out your Equity : Debt allocation ratio which suits you , which is comfortable for your risk appetite . Once you choose it . Make sure you maintain it once it goes out of sync . So suppose you decide that your Equity:Debt ratio will always be 75:25 . and suppose after an year , you see that it has changed to 65:35 . You should shift some of your Debt part to Equity and bring it back to 75:25 .
You can read how Equity Debt rebalancing helps in long term
This way you will make sure that if Equity has gone up (because if good market performance) , you are shifting some money back to Debt (because now chances to correction is high) and vice versa .
The main advantage of ULIPS is the you can shift between Equity and Debt without any tax liabilities , If you buy Mutual funds and do it , you will pay tax every time you buy and sell it in short time frame (1 yrs) . So until you utilize Switch facility well enough in ULIPS , you are not taking best advantage from your ULIPS .
So as a general rule :
– Increase your Debt allocation once markets are too high and every body is rushing to buy shares in stock markets .
– Increase your Equity allocation after markets are down a lot and there is lot of fear among investors (this is a good time to buy cheap stocks).
– Increase your Debt if you are too confused about what will happen .
Final Note :
If you cant invest for more than 10 yrs and cant look after switch facility and cant monitor markets at broad level , You should stay away from ULIPS, the best thing for you would be to invest in PPF each year and invest in Equity Diversified Mutual funds through SIP every month and review it at least once a year .
Please dont buy ULIPS for just tax savings , dont get out of it in 3-5 yrs . there is 3 yrs locking , but even if you get out in 4th or 5th year , there are heavy penalties you have to pay to get out , which your agent never tells you , Only after 5th year there are free exits .
ULIPS are not bad products , they are only bad if you dont manage it well and buy them for wrong reasons .
The basics of Trading with example of Reliance – For beginners
What is Trading?
I see many people who want to try there hands in trading .
Trading means buying and selling something with a short tenure in mind. Short tenure can be day, week or months. You can trade Stocks, Derivatives like Futures or Options or you can try out Commodities or currencies too.
The sad part is that many people just enter this trading business without much preparation and knowledge and burn there hands like anything. they continue loosing money every day, week, month and cant figure out why they are loosing.
Understand some things :
Trading is a profession, and its highly rewarding in every ways. BUT !! Trading is one of the hardest thing one can ever attempt, trading is simple but not easy. It takes years for one to master it and become successful as a trader.
If you are trying to learn trading and want to do this in your life. I can suggest somethings:
- Start Learning about markets and do it for at least 1 year (not 1 month)
- Learn Technical Analysis and try to do some analysis on your own.
- Read good books and make sure you have read it really well.
Once you have done this. Then you should paper trade for some time, may be 2 months. After you have paper traded and can see that you can trade well on paper, then start with small money (you must be ready to loose this money) … Do some real trading with this money and see how you perform.
Trading is a highly rewarding and satisfying profession. You can earn good money and you are your own boss. Trading can be fun and challenging. But Trading is the most challenging and highly risky profession one can attempt as I already said.
I have put up a simple Technical Analysis Example for Reliance, It discusses buying or selling Signal for Reliance in coming days. You can see it here
Why Technical Analysis?
Technical analysis helps in taking much better decisions for buying and selling. Its a must for short term traders, however it also helps people who have longer time horizon, With Technical Analysis you can make better entries, exits and manage your decisions well.
Some reading Material for people who want to learn technical Analysis is here
1. https://www.investorsintelligence.com/x/why_technical_analysis.html
Your investment must be the way you want your life to be – Simple and Easy.
Keep it Simple Please
Lot of people thinks that if they choose complex investment products then they can generate a good return. But then key to successful investment is make it as simple and easy as you want your life to be.
There are many products available in markets , Some are extremely easy to understand and strongest. While others are complex and on an average not very easy to understand by common public.
In Life, simple things works best. We all want our lives to be simple and easy, We don’t want lots of complications. In the same way we should use simple products while choosing our investments. Simple things works in the best manner.
There is a tendency of creating complex products because general public feels, that because they are complex and not easy to understand, they must be working very differently and in a smart way. This is far from truth.
Easy to understand products like Term Plans, PPF and Mutual funds works brilliantly. You don’t need ULIPS or product like Jeevan Astha and Endowment plans with lots of stupid clauses.
What happens when u choose simple products?
Your life is easy, you can understand them better, track them better and change it in a much better way.
Imagine a person A with ULIP or Endowment policy for Insurance needs and B with Term Insurance.
What are the benefits B enjoys?
– He understands every things about his products the reason being there is very less to understand. (If you die, your family gets money, if you don’t, you get nothing).
– He can choose to stop his stop his policy any time he wants (if he does not feel the requirement)
– He can change it to some other policy later in life if he wants.
There are many things like this, where as in ULIPS and Endowment policies , people are stuck with no mercy if they cant pay premiums some 2-3 yrs in a row. There are too many clauses and different types of sum assured, and things like those.
What is the Learning?
Take easy to understand and simple products which look Plain Vanilla, Complex products have nothing extra than complexity. Just make sure you understand easy products well and how to use them well. Your investing life would look much like your investments. Keep them Simple.
Early Investor , Smart Investor – magic of compounding
You are 25, and want to retire at 60, after 35 yrs. You earn anything more than 10k+, and can save more than 2k per month for investing if you wish. You might be earning 30k or 60k or whatever, but I am considering an average urban Indian who is earning 10k or 12k or anything like that and can save more than 2k per month.
Now, What would you like to do?
Choice 1 : Start now and invest total of 8.4 Lacs (8,40,000) distributed in a span of 35 yrs (till your retirement).
Choice 2 : Or after 15 yrs, when your salary is increased and you have good money, then Invest 72 lacs (72,00,000), in a span of 20 yrs (start when you are age 40).
In Choice 1 you will have to invest 2,000 per month for 35 yrs, so you invest total of 2000 * 12 * 35 = 8,40,000 (8.4 lacs)
In Choice 2 : You invest 30,000 per month for 20 yrs, so you invest total of 30000 * 12 * 20 = 72,00,000 (72 Lacs).
In choice 1 you pay less than 12% of what you pay in choice 2. I am sure that you must have got a hint by now that which choice will lead you to generate more money, But it has to have some assumptions.
Choice 1 : You are investing for 35 yrs. What is the return we should expect in this case, In last 29 yrs of history, Indian Equities have returned 17.5%, So we will expect same return of 17.5%, but I am expecting it to be much more.
Choice 2 : In this case you are investing for 20 yrs, we can easily expect close to 15% returns in this case.
Lets reveal the secret and see the numbers now.
Choice 1 : You pay 2000 per month for 35 yrs @17.5% CAGR, total amount at the end : 5.9 Crores
Choice 2 : You pay 30000 per month for 20 yrs @15% CAGR, total amount at the end 4.5 Crores
The graph below shows how the money increases with each choice (Early start and Late Start, I spent 2 hrs figuring out how to plot this graph using gnuplot (linux command for plotting graphs … man, it took me so much time to just do this)
CLICK ON THE GRAPH TO ENLARGE …
Now, What is the Learning?
This article is for people who think they don’t earn much money to invest, There are many who earn 7k, 10k or 15k per month and there are many who earn 30k, 40k, 50k per month. People who earn less often think what can 1k per month do, they fail to see what will happen in long term, they do not appreciate power of compounding.
Wealth is generated by people who invest smartly and with discipline, not who just earn lots of money.
Where to invest?
If you are a regular reader of this blog, then you know the answer, if you don’t, then let me tell you, Its Diversified Equity Mutual funds, take a SIP and invest small sum of money every month, The more you can contribute in the start, the lesser you need to invest in later years of your life.
For example : If you can invest RS.4000 per month (Instead of Rs.2,000) in the starting years of your career like 10 yrs, then you can stop investing for rest of 25 yrs and still generate more wealth (around 7 crore), considering same interest of return.
Is it practical to put 4k for starting 10 years and then leave it for 25 yrs, May be NOT !! .. People tend to take the money out when they require it and never give compounding any chance to show its strength. But if people leave it, they will see how amazing and powerful it is.
Why do you believe me and whatever I write here?
Ans : You never believe me or for that matter any one when it comes to investing and your money, you just choose to learn from me and check the authenticity of what I say, you can read what I tell you and what I write, Ask your self if there is any logic behind anything or not.
When I say expect 17.5% CAGR return in 35 yrs time duration, Its because equity outperforms every other asset class in long, and it has happened over centuries.
When I say that if you invest X amount every month @r% return for t years, you will get A amount at the end, you should go and check using your own calculations to see if the figures are right or not.
For people who are new to Mutual funds and don’t how to choose it can read my earlier post : https://www.jagoinvestor.com/2009/01/what-to-look-for-while-choosing-mutual.html
Be a early Investor, be a smart Investor.
I expect your comments related to this article whether you like it or not. If you have any query you can leave it in our comment section.
What to look while you choose a mutual fund :)
One of my readers was confused with the question “Which mutual fund should he invest in through SIP ? ”
He started an SIP of 1000 in Reliance Regular Saving mutual fund , suggested by an agent . How was his investment? It is a mistake or a good decision? This is a common problem with investors .
Let me today give you a simple way to think and a methodology to choose mutual funds for your investment depending upon your requirement . In this article we will only talk about investment in Equity Diversified mutual funds for long term (5+ years) .
For Beginners : Read what are mutual funds
Question : What does the return from mutual funds tells us? and how do you interpret it?
Ans : Understand that the returns of a mutual fund shows you how did it perform over than period, How did it manage his funds and took there investment decisions in good times and bad times. It means that you should see its performance in good times and bad times.
A simple analogy can be how do you want your wife/husband to be like, One who is really great in good times and excellent person to be with in Good Times, when everything in life goes great.
Or you want a person who is there with you in good and bad times, supports you in good and bad times. When times are good, everyone behaves good and performs well, There is a saying “Don’t judge people by there Sunday appearances”. Look at a bigger Picture.
Looks how a mutual fund performed in good times, in bad times, did it invest according to there plan, Is there management excellent. It does not matter if they were No 1 or No 2 this year or that year.
But if they were just good in every year, and perform well above there benchmark, and keep performing over time, Its bound to be become an excellent long term consistent performer.
Question : What about the last 3 yrs returns of a mutual funds?
Answer: It will give you a good indication, but not an overall picture. If you see 3 yrs return, you have to understand that out of those 3 yrs, 1st and 2nd years were strong bull markets, where any dog and cat has also performed very good if not excellent. and in last year they gave very bad returns.
So ultimately they will be in positive returns in 3 yrs. You should also look at there 5 yrs return and 3 yrs returns. Both in synergy with each other.
When you see Reliance Regular Savings Fund you can see that its 3 yrs returns are 7.82% which is very good compared to other funds (this fund is Rank 2/135 in the 3 yrs category ), but when you see its 1 yrs returns, you can see actual face, the returns are -51%, if you see the rank for 1 yr, its 127/210.
If you look at its portfolio allocation at https://www.valueresearchonline.com/funds/portfoliovr.asp?schemecode=2790
you can see that its allocation to mid cap and small cap companies is very high, It can give you good returns but also it has very high risk. Please understand that i am trying to say that this fund is good or Bad. No !! I am trying to tell you what to see, how to interpret.
What factors should you keep in mind before choosing a Mutual Fund?
People get excited by seeing returns of years 2003-2007, that was in range of 35-50%. Which is not possible in long term. Now from this point on (2009), the returns in long term will be in range of 12-15% (max 20%). Its difficult to see this kind of bull run in another medium term (5-7 yrs).
Now you should just expect normal 12-15% kind of returns in long term.
So, whom should you rely on, On mutual funds who launched them selves near 2001-2002 and gave great returns from there onwards because they them selves don’t know how they gave them.
Or shall you choose those mutual funds who have seen all types of markets in India and continuously gave much better than average returns from long term, They performed in good market, bad market, quiet market and roaring market.
So the things you should look at mutual funds are :
1. Long term performance, It should figure out in top 10-15 at least over 5 yrs returns.
2. They should have a track record of consistently outperforming its Bench mark (this shows that they did better than what they were based on and tracking ).
3. See that its management is good, Don’t just buy Any Idiot MF just because it returns 45% last year, but you have never heard of its parent name. Some long term Great AMC’s are DSP, SBI, Sundaram, HDFC, KOTAK, PRINCIPAL, HSBC, RELIANCE (In order of my liking), Make sure you dont follow this, it is just to give an idea. DSP is one of the best and old AMC in India, dont look only for Indian names.
4. Once you shortlist some mutual funds, then look for its portfolio allocation, see how it has put its money for large, Medium and small cap companies. If its concentration is high on Mid and small cap funds, it means that it has more than average risk, but potential for very great returns also, choose it if it fits your risk appetite.
For people who just want to take a short route and want to choose some mutual fund based fast, but with not great accuracy, you can just see the list of mutual funds appearing on 5 yrs returns list or since inception returns (Should be greater than 3-4 yrs at least) and choose any one of them.
This will make sure that you have not made a bad choice, if not great.
Some links :
To see the rankings of mutual funds and compare them on different parameters
1. Go to https://www.valueresearchonline.com/funds/default.asp
2. In the right side, you can see “Compare Fund”, choose “Open Ended” in the first box and for the second part choose “Equity Diversified” or “Tax Planning” or any other thing which you want to compare. and now click on Go.
3. You can now see a list with different parameters like Snapshot, Performance, Portfolio etc etc.
4. Click on Performance and then you can see different parameters like 1 month, 6 months, 1 yr, 3 yr, 5 yrs and ranks. You can sort them by clicking on 5 yrs or 5 yrs ranking to see the ranking. Example. When you click on 5 yrs returns on the top, you can see the ranking either in ascending or descending form (click once again to see in different order).
5. In the same way you can choose different parameter also.
This article gave you a general idea on how to choose a mutual fund and interpret different things. You can also do some advanced analysis the way I discussed in one of my previous article : https://www.jagoinvestor.com/2009/01/95-of-salaried-people-are-rushing-to.html
Question : Which Mutual funds I will invest in if given a choice?
Ans : I hate this part for suggesting some mutual funds, but i know people look for it and expect so let me give some.
Equity Funds :
1. Sundaram BNP Paribas Select Focus Reg
2. DSPBR Equity-D
3. Magnum Contra
4. Sundaram Taxsaver (For TAXSAVING) : see this for more
5. Nifty Beas (Index Fund, take SIP in this) : see this article for more
If this article helps you in anyways, please comment to tell if you liked it and learned anything important from this. I would be glad to hear from you. If it helped u anyways, this article would be considered as success.
I write this article on Saturday, 3:00 Pm after a chat with one of my readers. I am now getting ready for a Trek next morning. Looks like I have written for next 2-3 days of my quota, huff … Feeling tired now. (kidding).
Disclaimer : I think Reliance Regular Savings FIf this helps you in anyway und is a good fund. But there may be much better choices for long term. I hold no mutual funds other than some tax saving funds.
The Chemistry of Equity and Debt
Following is a small Table which discusses the Equity and Debt allocation for your Investments . (Click on the chart to enlarge it). It will tell you how Equity and Debt should be used for long and short term financial goals .
It has two parameters .
1. Importance of your investment goal (Left Downside)
– Low : Buying an a/c for you car , Going for a vacation .
– Medium : Buying a Car , Saving for a second home
– High : Retirement , Child Education , Family health Related things , Down payment for Home Loan .
2. Time Duration of your Goal . (Upper Right)
– Short term : 1- 2 years
– Medium Term : 3-7 years
– Long Term : 8+ years
Basic Idea : It is based on the following facts .
– Equity is extremely risky in short term
– Equity is highly rewarding in long run with almost no risk
– Debt is safe always
– Debt eats away your money purchasing power.
So on based of these observation. Your Equity : Debt allocation should be based on both parameters of Importance and duration of goal , not just one one them
Some Examples
Example 1 : Ajay wants to invest 1,00,000 for his brother Education in next 1 year .
His Action : This is extremely important thing and cant be risked with , also its a short term goal. Equity should not be used . He should invest in anything giving him pure protection of his money (even though he does not get high return) . A plain FD for 1 yr will be good enough .
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Example 2 : Robert want to save some money for his house down payment in next 4-5 yrs .
His Action : As this is an important thing with time goal of medium term , His investment should be mixed in both Equity and Debt . He should invest 35-40% in Equity (SIP in mutual funds) and rest in Debt products like Tax FD’s and Debt funds% .
Alternative : He can also choose to invest his money Balanced mutual Funds (as they have mix of both Debt and Equity built in)
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Example 3 : Ankit wants to retire in next 25 yrs .
His Action : Now this is a important thing , with a goal tenure of around 25 yrs . There is no reason why Debt must be involved here at all . The matter that Equity is risky does not apply here its true for short – medium term , not for Long term like 25 yrs . (probabilistically only , If you are extra unlucky , what can one do) .
He must invest 50% in some good 3-4 Equity Diversified Mutual funds though SIP route and and he can invest 50% of his money also in some very good fundamentally strong mid caps and large caps stocks directly .
Note : Understand that , your definition of “Importance of Goal” and “Duration” depends on your situation , For me buying a Car is “Not Important” ,whereas for some one with a family of 4 and requirement of often going places can be “Important” .