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 funds.to 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
COMPARISON TABLE OF ALL ASSET CLASSES
5 YEARS PRE TAX RETURN AS ON JAN 2015,ON COMPOUNDED ANNUAL GROWTH BASIS
|BSE SENSEX||REAL ESTATE||GOLD||BANK FIXED DEPOSIT||POST OFFICE TIME DEPOSIT||AVERAGE MUTUAL FUNDS||BEST MUTUAL FUND|
|SOURCE- HINDUSTAN TIMES DATED 22 APRIL 2015||SOURCE- NJ PERFORMANCE WATCH FEB 2015|
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.
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.
8. When to invest – It is always recommended to invest in SIP. You can start any time of your career.
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 :-
Both wont cost you Rs.100 every month.
Also you can visit a good financial website like valueresearchonline.com. 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
|MID CAP FUNDS|
|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%|
|LARGE CAP FUNDS|
|L&T equity fund||48.21%||22.92%||15.28%||n/a|
|UTI equity fund||43.29%||23.51%||16.2%||n/a|
|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%|
|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|
|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%|
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.
Kindly fill up the form below.
The form will be printed and sent back to you for your signatures and enclosing some documents. After receiving the same your account will be opened within a few days and you will be ready to embark upon the journey for creating wealth for yourself and your family. REMEMBER CREATION OF WEALTH IS NOT ONLY YOUR RIGHT BUT ALSO A DUTY. SO ACT TODAY AND BUILD YOUR OWN FUTURE WITH YOUR OWN HANDS.
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.
BECOME YOUR OWN WEALTH MANAGER TAKE CHARGE OF YOUR FINANCIAL HEALTH
REMEMBER CREATION OF WEALTH IS NOT ONLY YOUR RIGHT BUT ALSO A DUTY. SO ACT TODAY AND BUILD YOUR OWN FUTURE WITH YOUR OWN HANDS.