I am not rich because My dad is not rich and I don’t earn enough. That’s what I used to tell myself. If I only earned a little more, I could save and invest better. The problem with that theory was I was probably making exactly the same argument before my last several raises. Fellow Toastmasters and Dear guests ,Your probability of becoming rich depends not on how much money you work for,but on How much does your Money Work for you? .Today I am going to talk about a financial instrument that will make you a millionaire irrespective of how much you make . The Pill I prescribe is Mutual Fund.
Lets look at what is a mutual fund : A mutual fund is a company that combines, or pools, investors' money and, generally, purchases stocks or bonds.Its run by an expert team that know to read the balance sheet and invest in them. It’s a vehicle for investing in Equity forFinancially lay person like me.. If you have got that ability . Please go ahead and invest in Stocks directly instead of a Mutual Fund.
The next question is How to Choose a Mutual Fund Scheme : In India there are 32 Mutual funds companies that mange around 370 schemes .Huh!!! . It’s mind-boggling to pick a fund . is it not ?
Outlook Money is a simple finance magazine that you could follow to get the top rated funds. You could also follow the website : moneycontrol.com to get the top-rated funds.
Once you have chosen the scheme , Its now time to invest. According to Superstar of Stocks, Warren Buffett “Stocks markets work on two sound principles fear & Greed”. We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.” In simple terms, Buy Less when the Market Soars& and Buy Lot when the Market sinks.One way to accomplish this easily is by signing up for systematic investment plan whose acronym is SIP with the chosen mutual fund. So what is SIP ? As the name suggests you register with the mutual fund to invest periodically over atleast an year in the chosen mutual fund. Let me show you how with my personal example. See Graph1
Lets look at what is a mutual fund : A mutual fund is a company that combines, or pools, investors' money and, generally, purchases stocks or bonds.Its run by an expert team that know to read the balance sheet and invest in them. It’s a vehicle for investing in Equity forFinancially lay person like me.. If you have got that ability . Please go ahead and invest in Stocks directly instead of a Mutual Fund.
The next question is How to Choose a Mutual Fund Scheme : In India there are 32 Mutual funds companies that mange around 370 schemes .Huh!!! . It’s mind-boggling to pick a fund . is it not ?
Outlook Money is a simple finance magazine that you could follow to get the top rated funds. You could also follow the website : moneycontrol.com to get the top-rated funds.
Once you have chosen the scheme , Its now time to invest. According to Superstar of Stocks, Warren Buffett “Stocks markets work on two sound principles fear & Greed”. We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.” In simple terms, Buy Less when the Market Soars& and Buy Lot when the Market sinks.One way to accomplish this easily is by signing up for systematic investment plan whose acronym is SIP with the chosen mutual fund. So what is SIP ? As the name suggests you register with the mutual fund to invest periodically over atleast an year in the chosen mutual fund. Let me show you how with my personal example. See Graph1
I invested monthly over a period of 18 months and this is the picture of share value over the 18 months . Seeing this graph : Where do you think I stand ? Am I at loss or at least break-even or at profit ? anyone….
One more clue : this is the shares that I accumulated each month .See Graph 2 You could clearly see that at peak share values which are “Greed” points I bought a fewer shares. When the share values bottomed out ,which are “fear” points I bought more.
This is how the story looks like as of today. See Graph 3 .Blue line indicates the investment. Brown line indicates the actual value.Until more than an year I was more at loss with my investments as the share value kept on going down. I persisted despite severe domestic pressure. Because I knew that I am adding more value in terms of number of shares ,and they will help me one day.So as the share proce began to rise again , I returned to break-even in a matter of two months . As it stands today my investment is returning a cool 20% per annum.
You may ask a question, what if the market collapses tomorrow. Yes that’s a distinct possibility. But I will still continue to invest as I consider it an opportunity to buy more value . Fear and Greed operate in the short term and will help in over a longterm of 3-5 years which I consider to be when the Sanity prevails.
Finance has less to do with money and more to do with discipline. So you need to invest regularly.You should not Gulp it all at once. Just SIP it. As long as you do that , You can go into a deep hibernation without worrying if the market is soaring up or sinking down. Be rest assured that The money that you earn will work for you and will return you at least 15 % year after year over a long term.
One more clue : this is the shares that I accumulated each month .See Graph 2 You could clearly see that at peak share values which are “Greed” points I bought a fewer shares. When the share values bottomed out ,which are “fear” points I bought more.
This is how the story looks like as of today. See Graph 3 .Blue line indicates the investment. Brown line indicates the actual value.Until more than an year I was more at loss with my investments as the share value kept on going down. I persisted despite severe domestic pressure. Because I knew that I am adding more value in terms of number of shares ,and they will help me one day.So as the share proce began to rise again , I returned to break-even in a matter of two months . As it stands today my investment is returning a cool 20% per annum.
You may ask a question, what if the market collapses tomorrow. Yes that’s a distinct possibility. But I will still continue to invest as I consider it an opportunity to buy more value . Fear and Greed operate in the short term and will help in over a longterm of 3-5 years which I consider to be when the Sanity prevails.
Finance has less to do with money and more to do with discipline. So you need to invest regularly.You should not Gulp it all at once. Just SIP it. As long as you do that , You can go into a deep hibernation without worrying if the market is soaring up or sinking down. Be rest assured that The money that you earn will work for you and will return you at least 15 % year after year over a long term.
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