Financial Services

1. Health - Physical and Financial are the most desired aspirations of a human being. While physical health enables you to face and enjoy the roller coaster path of life it is the financial health which provides you the tools to do so. As a defence personal, while we are privileged to be in an organization which offers plenty of opportunities to maintain our health, we have hardly any training on how to build up wealth and lead a comfortable life after retirement. In fact it is more important for defence personnel since we all retire earlier than our civilian counterparts making our earning span shorter.

2. Lack of knowledge - on how to maintain our financial health has led to lot of defence personnel burning their fingers and losing their hard earned money by investing in PONZI SCHEMES, speculating in shares and Investing in properties which are only bought but cannot be sold. Our Aim is to provide you with some important tools of financial planning which will enable you to create wealth, while serving, after retirement, in pure and simple ways. Please remember NO ONE CAN MANAGE YOUR MONEY AS WELL AS YOU CAN. IT’S THE SAME PRINCIPLE WHICH APPLIES TO YOUR PHYSICAL HEALTH, NO ONE CAN LOOK AFTER IT BETTER THAN YOU CAN.

3. As Faujis, the only financial planning we do is to invest certain amount in our provident fund account every month and be happy with the cheque we get at retirement. This is passive investing. Lets take an example 2nd Lt. Rahul joins Army and contributes Rs 10000 in his PF every month. He takes premature retirement after 15 years of service in 2015..he gets a cheque of Rs.35,41,911 which is due to PF giving a return of 8.5% per annum. Money seems to be good. What made it good is not Rs. 10000 he saved every month but the money saved compounded year after year. So the first lesson of financial planning is to understand THE PRINCIPLE OF COMPOUNDING. IN FACT IT IS SUCH A PROFOUND PRINCIPLE THAT GREAT SCIENTIST ALBERT EINSTIEN NAMED IT AS 8TH WONDER OF THE WORLD.

4. Is there anything else Rahul could have done to get a bigger cheque at his retirement, purely legal and simple . Well yes , applying the same principle of compounding , the INDIAN STOCK MARKET INDEX (S&P BSE SENSEX ) HAS GIVEN A RETURN OF 15.59 PER ANNUM ON CAGR(COMPOUNDED ANNUAL GROWTH RETURN) BASIS. (Source : NJ Performance Watch April 2015). HERE A 2ND IMPORTANT LESSON TO BE LEARNT IS THAT WEALTH CREATION IS A MARATHON AND NOT A 100 METERS RACE. THINK LONG TERM AND YOU CREATE WEALTH, THINK SHORT TERM AND YOU DESTROY WEALTH . AS SIMPLE AS THAT. WITH THIS EXAMPLE RAHUL COULD HAVE GOT A CHEQUE OF RS 64.64,222. ON HIS INVESTMENT OF RS 10000 A MONTH COMPOUNDED AT 15.59 % PER ANNUM . NOW ARE WE SUGGESTING THAT AS FAUJIS YOU START INVESTING IN THE STOCK MARKET. ABSOLUTELY NOT REPEAT NOT. We are aware of thousands of faujis who have tried to invest in stock markets and lost their money . Why because investing in stocks or shares of companies require deep financial analysis, study of financial markets, and thorough knowledge of business models of companies. All these parameters are alien to faujies, so why try something which we are not familiar with . Well is there any other Alternative ? Yes there is and a better one.In the same last 15 years MUTUAL FUNDS have given average SIP return of 22.01 % CAGR (Source : NJ Performance Watch April 2015) Now compound this return on an investment of Rs.10000 every month, and as per our example above,our friend 2nd Lt. Rahul would have got a cheque of Rs. 1,17,57,187 on his retirement.

Comparison table of PF, stock market , mutual funds returns for 15 years period (as on 31/03/2015), On an investment of Rs.10000 per month.

Type of investment Provident fund BSE Sensex Average Mutual fund returns
Total amount invested in 15 years 18,00,000 18,00,000 18,00,000
Annual returns (compounded every year) 8.5% 15.59% 22.01%
Amount received as total returns after 15 years 35,41,911 64,64,222 1,17,57,187

The above example is to show you the power of compounding and the wealth generating potential of doing an SIP in mutual funds over long term . Service personnel can keep their PF investments going and invest any surplus in sip of mutual funds. Even the pf amount can be split in two parts one part in pf and other in tax saving mutual strike a balance between social security and wealth generation. Both give you tax rebate under section 80 cc of income tax upto a limit of Rs.1,50,000. Per annum.

For premature retired ,and working personnel make maximum investments in equity mutual funds with 1.50 lakhs per annum going to tax saving funds and balance investments in equity mutual funds. For superannuated personnel you can invest in balance or debt funds depending upon your personal needs Well the above example showed the power of mutual funds returns in generating long term wealth. How about other asset classes. How do they score as comparison to mutual funds . well have a look at this comparison



10.10% 9.70% 5.80% 9.30% 8.80% 23.65% 36.39%

The message is very clear—on a long term basis equity mutual funds give far better returns than other Asset classes. Also note that they are all pre tax returns, that means on all cases of real estate, gold and fixed deposits you have to pay taxes on the gains made known as capital gains. Whereas in case of equity mutual funds, capital gains after one year of investments are totally free of any tax. What else we want. Its like having a cake and eating it too.

5.ADVANTAGES OF INVESTING IN MUTUAL FUNDS - As you are aware by now that mutual Funds invest in shares of companies from the money pooled in by various investors. Suppose 100 people invest Rs 1 lakh in a mutual fund. Then the Fund will Invest one crore in various shares of various companies, the fund allots units to investors in proportion of their investments. So at start the value of each unit would be worth Rs 100 (ONE Crore divided by Rs ONE LAKH)This is known as NAV(NET ASSET VALUE)AND AN Investor will get 1000 units of the fund (ONE LAKH OF INVESTMENT DIVIDED BY 100 i.e the NAV of the unit. Suppose after few years the total value of the fund increases to Rs 2 crore due to gains made by the fund by investing in stocks of companies so the NAV will increase to 200 (2 crore divided by one lakh). Therefore the value of the units of the investor will become Rs 2 lakhs (200(NAV) into 1000 (no. of units held by investor).

While Mutual Funds were introduced for the first time in USA way back in 1924 and have become the favourite tool of American households to create wealth they were introduced very late in India in the late nineties. Mutual funds are the No. One reason for America to have the maximum number of millionaires in any country and its time for India to follow suit. Besides the ease, and simplicity of investment, Mutual funds have the following advantages as a style of investment and wealth creation.

  • DIVERSIFICATION - A mutual Fund has the combined strength of numerous Investors and can invest in bulk in shares of large companies. Suppose today you want to buy 100 shares of Colgate You would require Rs 2 lakhs (at present value of Rs.2000 per share) Difficult for an individual investor to share wealth creation by large companies but a Mutual fund can afford to buy thousands of shares of colgate. Tata motors, Hindustan lever and like. When these companies make profits year after year you also gain since your fund has invested in these companies. In effect you become part owner of various businesses without doing any work.
  • PROFESSIONAL MANAGEMENT- The operations of mutual funds are carried out by highly professional people with financial background. When experts can handle your investments why take the risk of doing it yourself without being qualified to do so. You go to a doctor not a tailor when you are sick. Let experts do their job and you reap the benefits.
  • TRANSPARENCY - Every mutual fund has to list its NAV on daily basis. This is available on the net and in newspapers. So at every time you know what the fund is doing with your money.
  • WELL REGULATED - The Indian mutual fund Industry is well regulated and governed by strict laws framed by SEBI (Securities and Exchange Board of India). It has also got an autonomous body like AMFI(Association of Mutual funds of India) monitoring the functioning of the funds and the intermediaries. That is why there is not a single instance of default by any mutual fund in its history.
  • LIQUIDITY - The value is money is to have it when you need it. Try selling a property and, you will understand. Investments in Mutual funds can be redeemed any time by the Investor and money is transferred to your account immediately.
  • TAX BENEFITS - When you invest in fixed deposit in banks the interest you earn is taxable. You make some gains by selling in property again its taxable. However consider these tax benefits when you invest in mutual funds.
    • All DIVIDENDS earned on mutual funds are tax free.
    • Gains made out of EQUITY MUTUAL FUNDS are totally tax free if investment if held for an year or more.
    • Your investments made in EQUITY LINKED SCHEMES OF MUTUAL FUNDS are tax free to the tune of Rs. 1.50 lakhs per year (same benefit you get by investing in provident fund).
    • Any income arising out of DEBT FUNDS IS SUBJECT TO INDEXATION in case the investment is held for more than 3 years. This makes them a better saving investment than bank fixed deposits in case of conservative investors.
    • INTERNATIONAL EXPOSURE - As an investor can you buy shares of coca cola, google or apple? These are all US based companies which have created immense wealth for their shareholders. But you can do so by investing in INTERNATIONAL FUNDS SCHEMES OF mutual funds.
    • INVESTMENT ACROSS ALL ASSET CLASSES - Generally people feel that Mutual Funds only invest in shares of companies. What About about other asset classes like Gold and property. Well we do have mutual funds schemes which invest in Gold. And shortly REIT(REAL ESTATE INVESTMENTS TRUST)ARE GOING to be launched in India. By Investing in these funds an investor can take benefit of real estate investing without 2 of the biggest pitfalls of real estate investing i.e big investment required in one go and liquid asset i.e you cant sell it easily.(watch out for these funds going to be launched soon)

6. HOW TO INVEST IN MUTUAL FUNDS -IF YOU BELIEVE IN THE POWER OF COMPOUNDING, investing for long term to create genuine wealth and above all have faith that Indian economy can only grow in upward direction from here then start investing in mutual funds. How you do it, you have money in the bank and invest the whole of it . No. please don’t do that. Mutual fund investing has a very simple and effective principle to invest and that is SIP ( Systematic Investment Plan) In this you invest a fixed amount of money every month in a chosen scheme and see the money accumulate and by the principle of compounding and the historic returns given by mutual funds as explained above, you are more likely to be wealthy in your life time. As seen in example above, Rs.10000 invested in SIP of an average mutual fund for 15 years has resulted in wealth generation of Rs.1.17 crores. WHO SAYS YOU CANT BECOME A CROREPATI DURING YOUR SERVICE LIFE.

7. TYPES OF MUTUAL FUNDS - For your appreciation, you can invest in the following types of mutual funds.

  • EQUITY MUTUAL FUNDS - These funds invest only in equities or shares of companies and show the largest gains over the years. In this universe there are LARGE CAP FUNDS and MID AND SMALL CAP. FUNDS As the name suggests Large cap funds invest in very large size companies and MID and small. Cap funds invest in smaller companies. Historically Mid cap funds give you larger gains if you hold them for a longer period. If you hold equity funds for more than a year, all the profits are TAX FREE, so are any dividends.
  • DEBT FUNDS - Some Faujis may not like the risk specially, veterans who are retired, then you have option to invest in DEBT funds. They are broadly of 2 types. SHORT TERM DEBT FUNDS and LONG TERM DEBT FUNDS. For those who want safe and steady returns of 9 to 10 % you can invest in short term funds. LONG term funds are linked to interest rates of the country and one should invest only if familiar with movement of interest rates. Taxation has been explained earlier.
  • BALANCED FUNDS - This is a mix of equity and debt funds. Can be invested in by faujis who want to take limited risk. TAXATION is as in case of equity funds.
  • GOLD FUND - You can invest subject to a total of 5-10% of your total portfolio.
  • ELSS FUNDS - Also known as equity linked saving schemes or tax saving funds. Investment in these funds gets you tax rebate from your income. As on date an investment of Rs.1.50 lakhs per year in these funds are exempt from income tax. You have to hold these funds for 3 years. Profits made are free of any tax. SONE PE SUHAGA.

8. When to invest – It is always recommended to invest in SIP. You can start any time of your career.

  • Lets take an example- Ajay and Vijay are two friends, Both joined Indian Air Force and become Airmen. Ajay starts investing in SIP of Rs 10000 per month the moment he become AC, but Vijay thinks let him become corporal so he starts investing in SIP of Rs.15000 per month 5 years after Ajay does. They both retire after 15 years . see the difference in their wealth when they retire. (RETURNS BASED ON THE average returns of MUTUAL FUND OF LAST fifteen YEARS) -Ajay Has made 1,17,57,187 @ 22.01% CAGR in last 15 years. But Vijay made only Rs.44,48,323 @ 16.81% CAGR in last 10 Years. Although he invested more money than Ajay per month. Moral of the story - Start investing in SIP as early as you can save. JAB JAGO TAB SAVERA.

9. Be your own wealth Manager - Financial management is no rocket science if you understand and follow few simple rules of investment like power of compounding, having a long term view, and starting early. Take control of your investments. The above guide is like a ready reckoner for you. Since life is dynamic we suggest you also do the following to keep yourself abreast with current financial times. After all you do health runs to keep your physical health so :-

  • * Buy and read one economic daily like economic times every day.
  • * Read a fortnightly financial magazine like outlook money.

Both wont cost you Rs.100 every month.

Also you can visit a good financial website like These are enough exercises to keep you financially fit through your life. Besides we will also be updating you from time to time through this blog. For starters we are listing below some excellent funds to start Investing you in SIP today.

Top equity mutual funds to do sip today returns are on CAGR (compounded annual growth return) basis
1 year 3 years 5 years 10 years
Birla sun life mnc fund 88.375 51.70% 34.34% 25.53%
Dsp black rock micro cap fund 71.94% 55.49% 34.34% n/a
Sundaram S.m.i.l.e fund 68.08% 53.09% 31.39% 21.27%
Canara rebeco emerging equities fund 59.28% 51.34% 33.71% 22.62%
L&T equity fund 48.21% 22.92% 15.28% n/a
UTI equity fund 43.29% 23.51% 16.2% n/a
Tip-- if you are going in for long term SIP of 10 years and above , invest in mid cap funds for better wealth generation.
TOP ELSS (Equity Linked Savings Scheme) or Tax Savings Fund
1 year 3 years 5 years 10 years
Birla sun life tax relef 96 fund 51.65% 38.87% 24.71% 17.07%
Axis long term equity fund 51.36% 44.50% 31.16% n/a
IDFC tax saver fund 48.05% 36.73% 24.98% n/a
Reliance tax saver fund 46.18% 45.25% 29.95% n/a
Top balanced fund to do an sip
1 year 3 years 5 years 10 years
Birla sun life 95 fund 43.04% 22.45% 14.98% 18.57%
HDFC prudence fund 41.84% 20.4% 15.38% 20.11%
TATA balanced fund 53.16% 26.24% 17.41% 19.14%
Tip -if you have very large sum to invest don’t do it in one go, put all your money in a liquid fund. slowly transfer the amount in a balanced fund . the tool to do so is systematic transfer plan . wherein after investing the money in liquid fund you give online instructions to transfer periodically to a balanced fund . this way your large sum is protected at safe return of approx 9% and you get the benefit of SIP on the transferred amount.
Top short term debt funds to invest today
1 year 3 years 5 years
Birla sun life short term fund 10.88% 10.03% 9.02%
Franklin India short term income plan 11.77% 10.44% 9.22%
Religare invesco medium term bond fund 10.57% n/a n/a
Tip - if you just want to have a safe return of 9-10% its better to invest in short term debt funds.they give you more returns than a fixed deposit in a bank because of indexation.
Top Long term debt funds to invest
1 year 3 years 5 years
IDFC dynamic bond fund regular 16.27% 10.85% 9.93%
ICICI prudential long term plan cumulative 19.93% 13.12% 10.73%
TATA dynamic bond fund plan A 14.46% 11.06% 9.14%
Tip - long term bond funds should be invested only by persons who are familiar with interest rate movement. The principle is that if the interest rates go down the value of bond funds will increase. As of date(Mar/April 2015). The scenario in india is that interest rates will come down gradually.

Note - Always prefer to invest in growth option for all funds you are investing, unless you want a dividend income. All returns shown above are annual returns on compounded basis - source NJ wealth

10. CONTROL OF INVESTMENTS AT A CLICK s - Earlier Faujis were wary of making investments because of lot of paper work and their frequent postings leading to missing of dividend cheques and other opportunities. Things have changed, technology has made it possible to have an online account, which once opened can be operated anywhere from the world. Investing and redeeming your investments takes just a few seconds. From any place you can monitor your fund investments on your computer or your mobile. So frequent transfers are in no way are a hurdle in investing in mutual funds the requirement of online account is to have just your bank account. Just see that you can operate this bank account from anywhere in India. Most of the banks offer you this facility these days.

11. OPEN YOUR ACCOUNT TODAY - INDIANFAUJIES.COM HAVE TIED UP WITH NJ INVESTMENTS TO OPEN FREE DEMAT ACCOUNT FOR DEFENCE PERSONNEL AND THEIR FAMILIES. MOREOVER THIS ACCOUNT COMES WITH A PRIVILEGE OF HAVING TO PAY ZERO BROKERAGE ON ANY OF THE TRANSACTIONS THROUGHOUT YOUR LIFE. NJ investments is one of the leading companies offering mutual fund services and do not recommend any particular fund to invest (which is normally done by agents and even banks to promote their own funds) you are free to invest in any fund of your liking. Remember this whole exercise is to make you your own wealth manager. Having an online demat account is only a tool to become so.

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Note - This blog has been put up by sukhsampati financial planning services which is an Ex-serviceman enterprise and is registered as mutual fund advisor with Association of Mutual Funds of India (AMFI).

Disclaimer - Mutual funds investments are subject to market risk. Read all scheme related documents carefully.