10 things I have learned about investing

by | Jan 20, 2021 | Mutual Funds, Personal Finance

Its been more than 10 years since I have been investing into stock market, mutual funds and insurances. I have learned a lot lesson from my good and bad decisions. I think its worth sharing to everyone.

  1. SIPs does wonder in long run. I have started my first SIP in year October 2013 in a Fund namely ICICI Prudential Value Discovery Fund – Regular Plan – Growth. I started with merely 2K monthly and It has become around 3 Lakhs.
  2. Mutual Fund Distributors do not suggest index fund despite it has beaten more than 90% of active funds in long run in past because Index Funds comes with way lesser expense ratio than active funds so the Distributor’s commission becomes even lesser. One should Invest in index funds even if you don’t know about market because India is going to grow no matter what. I will not show any comparison but I have given an index fund performance 
    UTI Nifty Index Fund - Direct Plan

    UTI Nifty Index Fund – Direct Plan
    Note : I personally like Nifty 50 over Sensex that’s why I have taken Nifty for showing return
  3. Emergency Fund should be an first step towards you investment journey. Everyone of us like to earn more and lead a healthy and prosperous life. If I will ever have a super power, then I will make this a fundamental right for everyone until then one should start investing for a better future. But There is a very interesting fact that most of the people have no idea how much is their monthly expense?  Its very common question people ask before investing is that “Will I be able to withdraw my money if I am in a need of it?” 
  4. Life Insurance is must to have. You should purchase at least one life insurance specially term plan with only natural and accidental death cover of 20X of you current yearly income. I am not suggesting to take any rider because it inflate the insurance cost unimaginably high.
  5. LIC Policies are not investment plans. You must be wondering , Why I am saying so. I got my first LIC policy namely Jeevan Saral (Plan-165) on 12 Sep 2009 and It got matured in 2019 and  I have paid premium of 2450 Quarterly (~800 Rs per month). I have paid about 96K as investment but guess how much I got ?  It was 1.21 Lakh only but if the same amount would have been invested in a value fund then I would have got more than 1.45 Lakh easily.
  6. Purchasing a house is not an investment unless you have black money or you are owning it to live in it. Real Estate is not a good investment until you are getting rent or annuity of ~7%. Still Real Estate has very soft corner in the people’s heart. Specially in villages, I have been asked this question many times: “तोहार केतना खेत बाटे?” . They understand it as symbol of prosperity which is actually not.

  7. There is something very much interesting about ULIP. Some of its promoters says, ULIP is “इनवेस्टमेंट भी इंसुरेंस भी” and My reaction to it is “कुछ भी 👊”. I am again these ULIP plans because they neither create good wealth nor give better risk cover. So it actually becomes like “Dhobi ka Kutta”.  I always prefer to keep insurance and investment portfolio completely separate. 

  8. You are going to get low interest if you are paying low interest on your home loans. We all hate low return on our safe investments like term deposits like bank’s FD, Post Office’s Saving Certificate but we love the low interest rates on the home loans. Its practically impossible to get good rate of return on our safe investment and home loans on lower return.
  9. Watching TV Channels on stocks market are not gonna help you in getting rich. I used to see people wearing suit boot and giving financial advise on how to make money from stock market. I always wonder if this fellow knows this much about stock market then why is the on TV. He should be making money and chilling out somewhere else.
  10. Trading will never make your rich instead it will surely makes your broker rich. Every time you trade you take additional leverage and trade values more than 10 to 20 times more money than you actually have in your trading account and at the end of the session 
 
PS: 
These are from my personal experiences and I will keep on adding new ones with time. Please let me know if I missed anything that should have been enlisted.

5 Things to do with Your First Salary

by | Jun 13, 2020 | Blog, Kick Start, Personal Finance, Uncategorized

When I was in college, I used to make lot of hypothetical plans in my mind that I am gonna do this and that after I get my first First Salary. But the underlying reality is, When you get your first salary and you cannot do everything you have planned with it because it is the lowest pay cheque of your life.

When I received my first salary, I used to login and see the balance in my account for no reason and I used to feel so happy just by seeing it. I don’t have exact idea but i must have done it at least 20 times at first.  What did you do? Please comment below 👇

I am writing this with my 8 years experience of wasting, investing and learning money. I have seen youngsters wasting their money on the wrong things. With their money, they either make rich to bigger clothing brands by purchasing branded clothings, phones, bike… or spend money on so called fun things like drinking, smoking etc.

I do a lot of talking on investing money and financial planning with my colleagues and friends and sometimes they criticise me for this. Then I kinda remind myself what Aristotle said long back :

There is only one way to avoid criticism: do nothing, say nothing and be nothing.

So I have made a list of 5 things to do after you receive your first salary. Here they are

Get a Term Insurance

You will meet many new people around you and these faces will change around you. One things will always be the same i.e. Your family. Most of the people who start earning they become sole bread winner to their family after parents gets retire.

No body has foreseen the future and causality might happens. But just imagine, What will happens to your near and dear one when you are no more. Nothing can complete that void but Yes, Insurance amount can support your family in your absence. So do think about this once.

Terms Insurances are cheaper once you get it at early age. It is comparatively offers high risk cover in less amount compare to other. endowment plans.

Note: I am not promoting this plan rather I am simply giving an idea that you can have an insurance cover of Rs 1 Crore by merely spending Rs 552 per month.

Get a Medical Insurance 

Causality is something that comes always uninvited and in the most unwilling times.  You need to protect yourself from financila threat of huge medical expenses. You should take a medical plan for yourself and your family  specially when wearing mask, social distancing have become new normal.
You must see how the world is witnessing new deadly diseases like Zika virus,Corona Virus and so many flues. If you or any of your family member met with any of these disease you gonna bleed financially like anything.

So It becomes very very important for you to have a Health Insurance. You may feel like these things are unnecessary burden to you but believe me its worth taking one and It’s an essential part of Financial Planning.

Note: This is just to give you an idea that you can have an health insurance of 5 lakhs annually in just Rs 363 per Month.

Start Building an Emergency fund

Normally, We do not believe in making an emergency fund because we are reluctant to accept the fact that change can happen any time.  But We forget the fact that almost nothing is in our hand.
In todays scenarios, It is very easy for me to explain why an emergency fund is important because of the lockdown we must have heard of people getting fired from their jobs or not getting salary during the lockdown.
Also lets take a simple scenario, Where everything is normal (I mean the old normal not the new one). Your are attending office at 9 AM and leaving at 5 PM and enjoying at home afterwards and all of sudden you got to know you phone is not working or it got broke. Now you got to know that it gonna cost Rs 8000 for the screen or it’s completely not working . What will you do then?
I know its completely hypothetical but such incidences happen now and then. What will you do then who will you ask for credit? In case you are planning for credit card then you are simply shifting the burden to next month.
Let suppose you are through with the above situation, What if after working for 1 year, you are fired from the organisation not because of your performance but because the company don’t have enough cash or upcoming projects?
At least you need some money to support you till the time you get a job. Let say, It is taking 6 month in worst case. You should accumulate enough cash to manage your expenses for 6 months.
For this purpose, I would suggest to save money in savings bank(25%) , fixed deposit(25%)  and  two debt mutual fund (25% each). You must have heard that mutual fund give better return than Bank Fixed Deposit but I see with that you are putting you emergency fund  in too much risk for 1%-2%  extra return.
Earlier I also used to suggest liquid fund but after the Franklin’s Debt Fund Case, I have started considering Bank Fixed Deposit as a best instrument to put in the emergency fund.

Start Planning  Your Retirement

Every day and every moment we are inching towards and death. Death is beautiful thing which gives you freedom from all your worries and responsibilities this mortal world but before your death there comes a time when you are no more earning i.e. RETIREMENT. You should be ready for that since very first salary. You should project an amount you would need at the time of retirement and start Investing for that. Right now, National Pension Scheme (NPS) is the best tool to plan your retirement because it also gives you tax benefit along with your retirement planning.
Just for an estimate, you can receive Rs 24000 per month as pension just by investing merely Rs 2500 per month along with getting tax benefits upto your retirement. I  have done this calculation for a person with age 23 years and retiring at the age of 60 Years and taken 10% of CAGR with 6% of annuity which is very much reasonable.
 

 

Kill the Bloody Loan First

If you had taken student loan for your studies so its now your responsibility to pay it off . Because any loan is a biggest burden to your mind and obstacle to your financial independence. You should start killing it from your very first pay cheque.
In case you are lucky enough and have not taken any loan during your studies then you should start investing for your short term goals like bike, car or even marriage. You can start investing in mutual funds or stocks directly  (NO TRADING!!!).
PS:
Apart from all these, You should also do some donation of any kind you like. Donation makes your hard earned money more pure. Please purchase something for your Mom and Dad as a token of Love 💛,  Gratitude 😇  and Respect 🙏   for their long term commitment to make you like this. I always wanted to write at this topic. I hope you will like it and Please do let me know how you feel. Also if you have any question comment below, I would love to answer them.
 
Reference:

When to invest in stock market for better profit?

by | May 10, 2020 | Personal Finance, Stocks

You must have heard about market indexes like Nifty 50 or Sensex. These indicates the market movement and capital appreciation from a particular time.

Most of the time rising indexes creates FOMO* in the investors mindset and they start investing in a hurry and just with a small movement in market they get trap in situations neither they can exit from their positions nor they left with enough money for further investment.

Now the question is, What is the good time to invest?

You must have heard of famous quote from Warren Buffett for investment timing.

“Be fearful when others are greedy & greedy when others are fearful”

~ Warren Buffett

So how would an investor know, whether people are being fearful or greedy right now?

Solution to this complex question is very simple i.e. MMI i.e. Market Mood Indicator. MMI is a sentiment tool that describes the current mood in the market as emotions.

So whenever MMI is in Extreme Fear Zone, one can start fresh open positions.

Reference: