Ways2trade: SIP – Your family’s Earning Member

My Dear Valuable Clients, Friends and Prospects As a student of Economics (particularly my focus is on Applied Economics & Consumer Behaviour) and being a Professional Financial Planner (also consider me as an Investment Advisor), my major focuses are on two things................ 1. Financial Literacy 2. Investment Behaviour After spending more than 15 years in the field of Personal Finance, a one particular thing which I have been noticed very seriously so far is that.............Why majority of Retail Investors are not becoming Wealthy over the period of time? People are doing their commercial activities mainly like, retail businesses, pursuing different professions, self – employed and nowadays most of the young people are salaried. When we are earnings then we are also savings certain amt. with consideration to meet our certain medium to long term financial goals and then accordingly we do invest our money in different investments products. But what I have observed that most of the (more than 90 %) investors are not cleared about the concept of........... "Investments should be aligned with our Financial Goals" and that's why they are confused about where to invest their hard earned money and eventually they become victims of "Agents" who are misguiding them by offering (most of the time forcefully pushing) such Financial / Investments products with immediate objective to protect their commercial interest first. Mostly people taking their investments decisions based on "Perception" (that's nothing but their investments decisions are influenced by what majority of the people around them are doing that same thing they also prefer to do). Second thing, in our country most of the investors are not realized the importance of "Professional Advice" and that's why they are deprived from Financial Literacy or in other words their investments "Agents" are not giving them proper information about such financial products and then they simply investing based on those Agents "Words of Mouth". Now I will show you what happened when you don't consider these four things..... 1. Lack of Visibility - When you are not clear with your investments objective or in other words "why am I investing"?, then probably your investments will never generate best returns because there was no alignment between investments products and time horizon. 2. Professional Advice - it is always advisable to approach only those investments professionals who are Independent (they should not to represent any particular Financial / Investments Institutions or they should not be employees of any such institutions) who can give you unbiased advice. 3. Opportunistic Approach: - It is a human nature which has the temptation of getting "the highest Returns". I have seen that most of the time people allowing their money to invest in that asset class which has given superior returns in immediate past and that's why they are jumping here and there.........couple of years back in Bond /FD then in MF then direct in Equity then Gold then move to Real Estate. These kinds of opportunistic approach will never generate "Compounding" effect on your Investments. 4. Inflation --- The Real Devil in the journey of Wealth Creation. So far we have seen that majority of the retail Investors preferred to invest in Debt (Fixed Income) products but they have not considered the future impact of Inflation on their investments returns. In fact, their Investments "Agents" have never taken such responsibility to educate their clients about Inflation impact and how much Real Rate of Returns they will earn from their investments in a long run. Impact of Inflation (All figures are in Lakh Rupees) Financial Goals Present cost After 5 Yrs. After 10 Yrs. After 15 Yrs. After 20 Yrs. Buying a Family Car 6 8.81 12.95 19.03 27.96 International Holiday 3 4.41 6.47 9.51 13.98 Buying a Housing Flat 40 58.77 86.35 126.88 186.43 Child Higher Education 18 26.45 38.86 57.09 83.90 Child Marriage 5 7.35 10.79 15.86 23.30 Retirement Corpus 50 73.46 107.95 158.60 233.04 Considered 8 % Inflation Rate Now a million dollar question is that How to win the battle against this invisible devil (Inflation)????? Answer is very simple.............Be organized with your Financial Resources and maintain the Strict Investments Discipline to achieve your Financial Goals. But this is not just enough to reach to Mt. Everest. The first and foremost thing is that you have to change your perception and you have to have a strong conviction that Equity has the capacity to generate far superior returns in a long run as compared to Debt (Fixed Income) Investment products. Now see these below mentioned performance records will show you that which one is better option to generate "Inflation-beaten returns" and to "Create the Wealth" in a long run. Those who had invested Rs. 10,000 every month between Nov., 1999 to Oct., 2014 in Diversified Equity Funds and Bank/Postal RDs. Investment Products Monthly Investments Total No. of months Total Amt. Invested Value as on 30th Sept., 2014 CAGR % (compounded annualized growth rate) Diversified Equity Funds MF - SIP 10,000 180 18,00,000 1,20,95,364* 22.39 % Bank / Postal Recurring Deposits 10,000 180 18,00,000 43,40,298 10.50 % *An average returns of 25 equity funds. See the difference between what Equity and Debt products have given returns in a long run. Same time period, same monthly investments amt. and same economy but due to lack of conviction and in the absence of professional investment advice, traditional debt product investors have lost the game against equity investors in a long run. Not only that.............the most important thing is that according to prevailing rule of CBDT (Central Board of Direct Taxes) & MoF (Ministry of Finance), the Long Term Capital Gain (more than 12 months of investments) Tax on Equity investments are absolutely ZERO, whereas what returns you have earned (interest on your Bank and Postal RD) are Taxable. It is not that everybody should be rich enough to create the wealth. Nowadays most of young professionals, salaried, small & medium retail businessmen, entrepreneurs, etc. could easily invest monthly between Rs. 10,000 to 25,000 in well performed diversified equity funds through SIP (Systematic Investments Plan) mode and believe me this is the right way to participate into our country's macro economic growth on continuing basis. Diversified Equity Funds are giving enough diversification on your investments because Fund Managers are investing our hard earned money in so many different sectors and companies which are major contributors of our nation's economic growth and this kind of investments approach (diversified investment portfolios) to reduce the investments risk by large extent. So let's be committed with long term investments philosophy to achieve your above mentioned financial goals and to create the wealth for 2nd and 3 rd generation children of your family too. Now are you believed that MF – SIP could become your family's earning member??? Thanking you! Regards, Salim Momin, CEO CERTIFIED FINANCIAL PLANNERCM Disclaimers: 1. MF investments are subject to market risks, read all scheme related documents carefully. 2. Past performance of Mutual Fund schemes may or may not generate same returns in future also. _________________________________________________________________________________ INTEGROWTH INVESTMENT SERVICES Financial Planning & Wealth Management / Cash Management / Portfolio Restructuring Retirement Planning & Tax Planning / Investments for NRIs / Fixed Income & Pension Risk Management / Consumer Finance / Estate Planning 99304 33753 / 022 – 2678 3221 / integrowth@gmail.com / www.integrowth.co.in