Discipline in Investments

In our previous edition, we spoke about how easy it is and how important it is to start your wealth creation journey. To take this further and how you can partially bring in more discipline and automate your investing.

We often say this; discipline in anything is the key to success.

How much do we really follow specially when it comes to our own self, may it be pertaining to our Health, personal life goals or may it be finance / investments.

I have been observing this since sometime that slowly people who are kind of beginners or freshers or who have been thinking since sometime and have taken there most important first step towards starting there wealth creating journey.

It’s important for a person to start their investment journey and then gradually when one gets on the train the ball gets rolling.

Best way is Mutual funds once started that too especially modes like SIP / STP...These modes of investments itself creates discipline...  To inch up further and add more solid approach towards increasing our investment amount gradually without us being much bothered periodically – STEP-UP SIP is the way to go.

How does step-up sip works? 

Basically while initiating your sip we need to opt for step-up sip which basically will lead to increase in your sip amount by a lumpsum amount or it can be increased by a specific % of your existing sip amount. Say for eg. You have an ongoing sip of rs.5000/- and you want to increase your sip amount from next year by 10% so from the next year the sip amount shall become 5500/- (5000 +10% = 5500). This shall automatically lead to an increase in the basic investment amount gradually and result of this over a longer period can be very beautiful. Also it is important to decide the amount which can be non hurting the cash flow and whatever is comfortable amount.

Small Illustration depicted below

Regular SIP

    §  SIP Amount: Rs.15,000

    §  Tenure of Investment: 20 years

    §  Expected rate of return (growth rate)%: 14% CAGR (Assumed)

Amount Invested	36 Lakhs
Corpus	1.76 Crores

 

With STEP-UP-SIP

    §  Initial SIP per month: Rs. 15,000

    §  Tenure of Investment: 20 years

    §  Step- up investment: 10% every year.

    §  Expected rate of return (growth rate)%: 14% CAGR (Assumed)

Amount Invested	1.03 Crore
Corpus	3.39 Crores

Disclaimer: The above calculations shown are for illustration performance only. Mutual fund investments are subject to market risk. Refer to the scheme related documents carefully.

Author: Mr. Bhavin Shah

Latin Manharlal Group

Wealth Creation

Every person desires to create wealth since young age. Day in, day out we work and keep hunting for business opportunities to earn money, to meet our needs and desires. We might have often experienced this that by the time we are able to gather the required amount for a specific goal and we realise that the goal has become more expensive.  Hence it becomes important for us to understand that how better the planning can be done. Please remember unless it is not planned well the cost of the financial goal is going to increase faster than the value of your investment.

As quoted by Warren Buffet “Never depend on a single income. Make investment to create second source” Hence it becomes very important that we need to plan well and get our money start working for us simultaneous with our regular income.

We being a financial service provider often come across this question that what is the right time to start investing and how much should we invest? The answer is - there ‘no right or wrong time’ to start investing, what matters is to start investing with whatever investable surplus is left. You can start your investment with as low as 2000/- rupees. For e.g. one can do a SIP (Systematic Investment Plan) through Mutual Funds. What is more important is prioritising your expenses.

Every person should manage his cash flows i.e. review his earnings, calculate his expenditure and savings and invest accordingly based on his risk appetite, financial goal and liquidity needs. In the market there are many investment options available with different characteristics like, Debt, Gold, Real Estate, REIT’s.

For the purpose of ease it is always better to have some financial goal in mind and plan for the same. Any good Financial Advisor can guide and help you better to understand your goals and invest in the right avenue.

There is an old saying that “Time in the market is more important than timing the market”. For wealth creation just setting a financial goal and choosing right investment instrument is not enough you need to give your investments time to grow and there should be disciplined and consistency in your investing habit.

Review & Rebalancing is Important for Portfolio Management

Investment is not only the important point but at the same time, review and rebalancing plays a very vital role. Like we always say regular HEATH CHECK-UP is important, similarly REVIEWING our PORTFOLIO’S HEALTH is equally important.

1.      Helps maintain the original asset mix.

2.      Better risk management.

3.      Useful in implementing changes in investment strategy.

One must review their investment portfolio periodically to identify if any market changes have led to an immersion or rise in the value of your assets, thereby making your portfolio too risky or non-progressive. Over time, the risk-to-return ratios of assets might change. You might see your risk profile and financial needs change.

Re-balancing your portfolio helps to stay in line with your asset allocation strategy and implement any changes you make in your strategy. Some of the benefits of re-balancing your portfolio are listed below:

Author Mr. Bhavin Shah

Latin Manharlal