INSUBCONTINENT EXCLUSIVE:
working hard or making assets work for you
Making money through hard work has been a truism for times immemorial
It is a different matter that depositing the hard-earned money in one's back-pocket or even in a saving scheme may not be such a good idea
as passive money offers no scope for appreciation and inflation would actually gnaw into the savings
Given this situation, investment is the only viable option to generate more money
Investments are made for a variety of reasons ranging from beating inflation and achieving financial independence to having a decent
retirement life and preparing for a rainy day
And investments come in different flavors, such as stocks, bonds, commodities, mutual funds et al.Mutual funds are managed by professional
fund managers and pool the investors' money into diverse financial instruments such as stocks, bonds, etc
As beginner investors have limited financial resources and lack the wherewithal to pick individuals stocks, they gravitate towards mutual
But the questions remain: Should one jump onto the mutual fund juggernaut, after all? When is a good time to start investing in Mutual
Funds? A simple, yet profound Chinese proverb, has the answer, which goes thus, "The best time to plant a tree was 20 years ago
The second best time is now." Having decided that the best time to invest is Now, there are two avenues for investing in mutual funds - park
a lump-sum amount or opt for systematic investment plan (SIP)
The lump-sum route is a single payment route, while the SIP route allows a fixed amount to be invested at regular intervals.SIP mutual funds
are a buzzword in the investment world today as they allow a person to invest a pre-determined amount in the market at regular intervals
They come in many shapes and across time horizons
Among SIP funds, equity funds invest in equity, debt funds are solely focused on debt instruments, and hybrid funds' investment portfolios
are divided between equity and debt instruments
And SIP funds are available for various time periods such as daily, monthly, quarterly and semi-annually.Consult a Professional AdvisorThere
are about 44 registered fund houses in India (registered with the Association of Mutual Funds in India), together offering a staggering
2,500+ mutual fund schemes, making it obviously difficult for small investors to navigate through such a maze
It is best to seek out professional investment advisors, who know the schemes at hand and can provide buying and selling decisions specific
After all, choosing the right schemes is half the investment battle won
Good advisors can be chosen on the basis of their past experience, track record and word-of-mouth.Start SmallSmall is beautiful, affordable
Think biscuit and toothpaste sachets in the FMCG space
Akin to FMCGs, SIPs are 'small and smart' financial products for the small investors, a la sachetization of mutual funds
Mutual fund SIPs can be started for as little as Rs 100 a month, depending on factors such as income, risk appetite and financial goals
A smaller monthly investment is easier on the wallet, compared to lump sum investments
And there is immense room to scale up the invested amount thereafter, depending on one's financial situation and portfolio growth.Automate
InvestmentsThe market cannot be timed
The best of us often fall prey to chasing market rallies due to fear of missing out on profitable stock transactions
Conversely, panic selling occurs near lows as the investors scurry to salvage something from a sinking ship
Automating the investing process is the best approach to investing as it leaves nothing to chance and emotional frailties
A fixed amount can be auto-debited on a monthly, quarterly, semi-annually or annual basis through ECS (electronic clearance service),
thereby allowing the interplay of technology, maths and algorithms to take emotions out of markets.Harness Magic of CompoundingCompounding
is an important principle of the investing world
It works by growing the principal amount, augmenting it with previously accumulated interest and thus ensuring a growth in the entire amount
An SIP makes it possible to increase the investment amount by a fixed amount and thus get the benefit of compounding
An SIP investor purchases more units of a mutual fund when the market is down and vice-versa, thereby lowering the average investment cost
and averaging out the purchase price.Be PatientThe mantra, 'slow and steady wins the race', is a critical element of successful investing
According to Paul Samuelson, the foremost economist of the 20th century, "Investing should be more like watching paint dry or watching grass
If you want excitement, take $800 and go to Las Vegas." George Soros, the celebrated hedge fund tycoon, also had a similar take on investing
"If investing is entertaining, if you're having fun, you're probably not making any money," he said.The bottom line is that SIP is merely a
way of investing, especially for a small investor, and getting the right fund is thus of paramount importance.
