Hello,
I am a Financial Planning Consultant. Financial Planning is an essential subject
needed for every one of us. We are earning members and we earn for a happy
life. We also have the habit of saving. Very few of us, have the habit of
working out a Financial Plan for our future.
Many of us save the money after spending what we have. Often the amount
left after our expenditure remains as our savings. When we plan our future, we
decide what we want and save for that.
What is Mutual
Fund:
Mutual Fund is a collection of Investor’s Money. The money
is invested in Shares (Equities), Debentures, Company deposits (Debt) etc.
Revenue earned from the equities and debts are given back to the investors as
dividend or the Unit holding in the Fund. The Fund Managers manage the Funds
with their expertise. The Funds incur expenses for Managing the Funds and for
getting money from investors through Distributors/Advisors.
Why do we need to
invest:
We need to grow our hard earned money safer and faster to
make a better living and to create wealth.
Equities and Debts
Equities have the potential to grow fast. However there are
risks in equity investment. The rise and fall of share prices can be predicted
by experts in the financial services industry. As equity investments have the
elements of risk, the investment in Mutual Funds investing in shares also have
the same risk. However it is better than we ourselves making direct investment
in shares. The risk mitigation happens through diversification. The experts study
the fundamentals of the companies and make investment in those companies that
will show growth. Thus investments in Equity Funds are good in the Long term.
Debt Funds invest in safe instruments like Govt of India
Bonds, Deposits in reputed companies etc. The return on investment may be low
but the fluctuations in the Returns are less. For conservative investors, Debt
Funds are more suitable because chances of capital erosion are less. Mostly the
Debt Funds bring better returns than Bank Deposits. Some Debt Funds give yields
as high as 12% to 18%.
Other Advantages
of Investment in Mutual Funds:
Mutual Funds help the habit of saving for the future. When
we have surplus and when we do not invest, we often have the habit of spending
the money. Often expenses are controlled when the funds available for disposal
is less.
There are some funds that give tax benefits. One can make
savings under 80C upto 1.5 Lakhs when invested in some Mutual Funds known as
ELSS.
Government of India, encourages investment in Mutual Funds
by giving Tax benefits. Equity investments are exempt from Capital Gains.
Dividends from Debt Funds are exempted from Tax. Debt Funds are better than
Bank Deposits as there is indexation benefits for the investments which are
held for more than 3 years.
Mutual Fund investment s are often better than Unit linked
Insurance plans. Insurance is necessary.
When we analyze the cost of insurance, the lock-in period, the return on
investment etc, it is often possible to find that Mutual Funds are more
flexible and cost effective with better returns.
As Mutual Funds ensure better liquidity, we can be better
assured that it is like having money in Savings bank account. This flexibility
is not available in ELSS.
We can get Dividends which are periodical returns from
Mutual Funds. This is possible during the lock-in period also.
Examples of Growth
possibilities:
Nowadays we can say that achieving Rs 1 Crores saving will
be something great. But we do not set our goals to that figure because we may
think that it will be a tall target which may take a lot of time. A simple
calculation on excel can show that a little over Rs 5000/- for a period of 20
years, with an increase in investment by 10% every year and with a return on investment
of 12% pa can give returns more than Rs. 1 Crores.
There are examples from actual data that one person who
invested Rs 10,000/- per month in HDFC Equity Funds for 10 years from 1996 to
2005 stopped further investment after
that and allowed that fund to grow next 10 year has made Rs 4.25 Crores. His
outflow is Rs 12 Lacs only his current value of assets has grown over 35 times
20 years. Similar investment in Reliance Growth Fund gave Rs 5.10 Crores ie a
growth over 4250%.
How do we achieve
it:
To achieve growth and create wealth, we must invest
correctly in the best fund. There are some entry points and exit points
advisable in Mutual Funds also. Selection of Funds can be done with the help of
Financial Advisors like us. We have lot of aspirations in life. We must invest
our savings prudently and allow the investments to grow. Take the help of a
Financial Advisor and try to achieve your goals.
Financial Advisors help in Financial Planning. Financial
Planning is not only investing in some Mutual Fund. It is the advise to achieve
your Financial goals by making prudent investments in Financial Assets keeping
in mind the need for your financial needs, insurance needs, tax saving,
housing, children’s education, children’s marriage, retirement planning etc.
For Financial Advisory Services
Contact:
Mahesh R
0091 9444 509 510
