investment & profitability

Reality Check: You, Your Investments & Profitability

Since the past month, equity markets have been significantly choppy. While many savvy investors have taken it in stride and are harping on the correction as an opportunity to buy more at discount prices, there is a large faction of mutual fund investors for whom the sweat on the brow has not dried since over a month.

Investors who have started investing in mutual funds only a year back or so are experiencing the real stomach-churns for probably the first time. All this time, novice investors had been exposed to only the bright side of the world of equities with overwhelming returns, many may even have regretted not investing more before the uptick. However now, as the cycle changes, the regret has switched sides because of the “red numbers” in the investment reports.

So, what’s the way ahead for a common Indian investor whose only goal to invest in mutual funds was to build wealth over a longer term? Tried & tested across periods, successful investors swear by these principles for investing during choppy times.

“Look at market fluctuations as your friend rather than your enemy; profit from folly rather than participate in it.” -Warren Buffet

‘Market Cycles’ are called cycles for a reason – Don’t react as if you did not know that equity markets are volatile.

Equity markets are sensitive to multiple factors including macro-economic environment, geopolitical scenarios, sectoral stress and similar. The markets react and reflect people’s expectations in the very distinct near term and quite often than not in an exaggerated manner. “Kneejerk reaction” is among the most used phrases on Dalal Street for a reason. However, those who stood the test of time and believed in investing discipline emerged with bountiful wealth.

Sure, the current pandemic has led to a steep decline in trade & commercial activities. But, do you really think that all businesses are going to come to a grinding halt, and more importantly – remain so forever? If not, there is no reason for you to not believe in a recovery of equities – which is nothing but reflective of business health in the longer term.
Right from the 2009 financial crisis to European crisis, North Korean missile tests, Fed Rate hikes and similar global tantrums, equity markets have survived it all and yet delivered spectacular returns over the period.

Ever wondered why?

Recovery and wealth building

Simple, do you believe that many years down the line, the world (includes national economies, sectors, companies, humans, art, music and everything) will reach a pedestal at least some place higher than now?

Basically, do you believe that mankind will continue to progress?

If your answer is yes, you must realise that equities are nothing but a reflection of economic progress (driven by mankind, obviously) and so has a direct correlation and reason to grow with the rest of the world.

“We continue to make more money when snoring than when active.”
-Warren Buffett

The ability to time the market right each time is not just a matter of intellectual ability, it also requires some amount of psychic abilities

Equity markets fluctuate basis the demand and supply by millions of entities.

Can you read a single mind? If not, why try read millions of them and time the market?

Millions of minds and algorithms maintain the demand-supply and consequent pricing in capital markets. What is the likelihood that you would be able to fathom the direction in which the majority decisions would flow?

Even when you think you can make some sense out of the chaos, let me tell you, very often even the entire market gets things wrong – hence the term “correction” instead of “decline” is used to describe such scenarios when sudden enlightenment reverses the effect of overtly optimistic valuations previously placed by the market.

Following is a classic illustration of what would have happened if your parents did what you are contemplating now –

Impact on skipping SIP

Honestly, nobody – literally nobody in the world can time the market while many are paid to try. The best way to go about investing is through a periodic investment (think SIP) just so that you manage to average your purchase cost across cycles and benefit from the rupee-cost averaging.

“Most People don’t plan to fail. They fail to plan.”

-John L. Beckley

Plan right & believe in it – That’s the reason you had a plan in the first place

Times like now are testing times where many novice investors get shaken by volatility and choose to step out of the markets instead of riding the tides till, they reach their goals. Statistically, an investor can expect failure 100% of the times he invests without thinking it through.

Asset allocation and financial planning are key to being profitable and building wealth. Let’s say you start exercising to get fit – you have a planned schedule, workout routine and diet plan. While planning, you knew it would take at least 8 months of perseverance before you achieve your target body. Now, what happens if you follow the regime regularly but don’t see much of an impact in one month? Would you stop? If you stop, you know who is to blame when eight months have passed, summer has begun, and you can’t get into your summer outfit on the beach.

Quite often in life, you will not be able to achieve goals (financial as well as non-financial) if you give up way before the time comes when you were expecting to reap the benefits.

It is extremely important that you plan extremely well, keep reviewing and make situational alterations – not a revamp.

Please understand, there’s a fine line between being reactive & course-correction.

While these principles are not a definite guide to becoming Uncle Scrooge wading through an ocean of gold coins, but it sure can help you achieve your financial goals.

Anybody can be a mutual fund investor with SIP

Did you know that it takes ₹100 to become an investor? Well, as curious as it sounds, it is far easier than you think to become an investor.

Anybody over 18 can be a pro-investor. Here’s how!

Did you know that it takes ₹100 to become an investor? Well, as curious as it sounds, it is far easier than you think to become an investor. If an individual has a PAN card and completed his KYC for investment, it takes only to be an adult to invest in mutual funds. But why would someone so young, want to invest in mutual funds? What kind of opportunity can it present to someone who is just out of college? 

Why would you want to be a mutual fund investor?

For every hidden Zuckerberg, Musk or Gates hidden among scholars and graduates one very essential ingredient is always missing. The ability to fund your life or career goals on your own. While this is just the tip of the iceberg, there are so many dreams and goals young individuals have that get lost in time because they don’t have the resources for fulfiling their dreams. This is where mutual funds could be the ticket to achieving goals and fulfiling dreams.

Anybody can invest in a lump sum mutual fund or an SIP. An SIP, is a Systematic Investment Plan where you are able to make investments on a monthly basis. While SIPs are a monthly affair, they start at ₹100/month and the investment amount can always be adjusted. It allows you to invest in regular intervals. It is also called the “planned way of investing.” It helps investors to cultivate a habit of saving and accomplish the goal of wealth creation. You can invest on an SIP on the go on MyWay Wealth app where SIPs are extremely easy to maintain can be tracked 24×7 with real-time tracking and much more.

How do you determine the amount and time for the investment necessary to achieve your goals?

Ever had the burning sensation of a new idea in your mind and did not know where to start? It gets tragic when people don’t work on their ideas because they do not have the financial resources. Here is what you need to do. You need to calculate how much time and how much money you would have to invest to achieve your goal. Such calculations may get overwhelming unless there is a tool which can calculate your investment requirements based on goals and invest accordingly. ‘Save for a Goal’ tool on MyWay Wealth app can help in doing so.

It takes a matter of seconds to select your goal on this tool and it will not only project the amount that you need to save for your goal but the amount of investment that is necessary to be made. You can also toggle with your risk appetite and plan your investment to save your particular goal.

What if your investment KYC isn’t done?

It has been made mandatory by the Government of India, to complete a once in a life-time KYC  process which allows people to invest in Indian mutual funds. It might sound like a task but it isn’t much of an effort if you get it done on MyWay Wealth app. It takes only a few minutes to complete it as long as you have your essential documents with you. It’s completely paperless and does not levy any charges

Don’t have dreams? You definitely need to start an SIP, then. With SIP, you would have to invest in regular investments helping you in maintaining a healthy financial routine because you know that a minimal portion of your income would go for your investment every month. Such investments would help to practise discipline when it comes to managing your funds or finances.

In other words, c’est la vie and start an SIP, only on MyWay Wealth app from an early phase of your career, so that you can use your professional skills to fulfil your dreams and not just others.

SIP vs SWP vs STP

Choose between NAV, SIP, STP, and SWP

STP (Systematic Transfer Plan)

In simple words, STP means transferring money from one mutual fund to another. STP is a smart strategy of investment over a specific term to reduced risks and balanced returns. Here, an AMC (Asset Management Company) permits you to put a lump sum in one fund, and transfer a fixed amount to another scheme regularly.
STP is a useful tool in mutual funds to average your investment over a specific period, which depends on three factors:

  1. Market view
  2. The risk profile of the investor
  3. An investor’s current allocations to equities.

Things to remember while investing via STP:

  • STP is the method that requires discipline; it’s not you who gets to cook your money overnight; it will take time to cover your returns.
  • It would help if you kept an eye on the underlying assets and their phases.
  • STP is one of the most reliable risk-reducing investments in which you can invest.
  • Go with STP only if you have a lump sum amount to invest.
  • You need to make at least 6 STPSs as per the SEBI guidelines.

In short, STP is a useful strategy to manage risks without affecting your returns significantly.

SIP – The recommended option

A SIP (Systematic Investment Plan) is an ideal way of investing in mutual funds. It allows you to invest in regular intervals. It is also called the “planned way of investing.” It helps investors to cultivate a habit of saving and accomplish the goal of wealth creation.
Through SIP, you can invest in a quarterly, monthly, or weekly basis as per your convenience. A fixed amount is debited from the policyholder’s account and invested in mutual funds. As you start investing a pre-decided number of units get allocated as per the current market price. Besides, mutual funds plans are flexible in nature, and you also have the option to discontinue it whenever you wish. However, you make the most out of Mutual Funds investments, remember to stay invested for a long period.

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De-Jargon SIP, STP and SWP

SIP, STP, SWP

Net Asset Value

NAV stands for Net Asset Value. Generally, the “net” arrives only when you remove the cost incurred from the price.

For example: Imagine there are 100 investors and each invested Rs 1,000 in an Equity fund. Each unit price will be Rs 10. Then the sum of Rs 1 lakh is invested in various stocks of mutual funds. A year later the value of Rs 1 lakh will be turned out to Rs 1.5 lakhs, giving a profit of Rs 50k.  If the cost of 10k is removed, then the profit earned is 40k. Then, the unit price will go from Rs 10 to Rs 14. Now, your 100 units worth is Rs 1.400.

Thus,

  • Investors can access the performance of the fund through the NAV differentials.
  • NAV helps to identify potential investment opportunities.
  • One can also use NAV to view the holdings in their portfolio.

Systematic Investment Plan

Why everybody is talking about SIP? What’s this cool new thing that you should know about.

SIP is a Systematic Investment Plan. This is the same as your Recurring deposits where you make periodic investments into mutual funds. Fixed money will be deducted from your bank savings account and will be directed towards the mutual fund for which you have opted for.

The two things which are good about SIP:

  1. Some people make a target for saving in SIP and spend the rest. Thus it’s very useful in building the habit of regular investment.
  2. SIP allows you to average out your price as you invest over the years, either monthly or quarterly.
  3. Also, SIP helps in reducing the risk of the market as it spreads the money throughout the various market cycle.

How SIP is different from a one-time investment:

SIP One- time investment
Periodic investment Lump sum investment
Earns better even when markets are low Earns when markets are high
Protect investment from a market crash Investments will be affected due to the market crash

MyWay Wealth

MyWay Wealth app screen shots

Remember, Systematic Investment Plan is a vehicle, not a goal, you use a SIP to make investments and you can choose to have financial adviser if needed.

You can start investing in SIP with just Rs 100. Here, you have the best investment platform- MyWay Wealth.

STP- Systematic Transfer Plan:

Investors worry about making lump sum investments because of risk appetite. This is where STP helps you to mitigate the risk. In SIP, you will move your money from saving to a mutual fund whereas, in STP,  you will move your money from one fund to another. Instead of investing all in one go, you can put money in a liquid fund and set up a monthly/ weekly/ yearly transfers into different equity schemes.

SWP- Systematic Withdrawal Plan:

Here, you can either choose to withdraw capital gains on your investments or a fixed amount.this way you will not only have money still invested in the scheme but also it can be part of your regular income and returns.

Why SWP?

  1. With the SWP, you can time your withdrawals as per your financial needs. It ensures the availability of funds at the right time.
  2. With this plan, an investor can create a flow of income from an investment that is regular.

Hope this article helped you to understand the various ways of investing. Remember to make a thorough analysis of each before you make your choice. However, the most recommended option is SIP as it allows you to get into the habit of saving and provides the benefit of compounding.

Think Smart! Think MyWay Wealth!

SIP vs Lump sum

The story goes like this. There were two bachelors living in the city of Bengaluru. One was getting his income monthly and gave the landlord a portion as rent. Whereas the other gave a whole deposit for the accommodation for a fixed time of stay. Now what does the two have in common and what do they have in distinction? Who has the better deal? This is the same as choosing on to take a lump sum investment or a SIP (Systematic Investment Planning) in a Mutual Fund investment.

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Don’t let your money go, let it grow!

Dear Customer,

Time becomes more precious when it comes to investments for the future. Don’t delay, here are 4 good reasons why you shouldn’t delay mutual fund investments.

1. Risk Horizon

Higher the risk, higher the return, so better to start young when you have a large appetite for risk.

2. Cost of Delay

Each month delay in a monthly SIP of Rs 10,000 (for 30 years) could cost 2 Lakh per month. (CAGR ~ 18%*).

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Worried about your investments in falling markets? SIP your way out of it

I assure you, no one would say these words of wisdom to you while having discussions about markets and money these days:

  • There could be no better time than right now to stay invested in your funds.
  • It might not be a good time to withdraw your money now.
  • The next few months could be great to invest systematically using SIPs.

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