Equities give better returns in long term

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"It doesn't matter how much money you make, it's what you do with it," says Timothy Munkeby, a financial planner and celebrated author in his book "If I Had a Million Dollars", explaining how you can achieve financial independence faster than your parents do.

As we continue to provide investment solutions to a large pool of customers, irrespective of their age and income, Munkeby's statement assumes increasing relevance to early savers and those who have just started earning. While you face several new expenses to deal with as you draw your first salary, like repayment of student loans, etc, it is equally important to set aside a small amount for investments.

That would make sense even more if you look at how the magic of compounding works to your advantage if you start early: If you invest a fixed amount regularly at the age of 25, your investments would grow 3.2 times by the time you are 45, even at a modest 10% rate of interest. For instance, a Rs 1,000 monthly systematic investment plan (SIP) began with a mutual fund in May 1999 is Rs 8.7 lakh now, while BSE sensex grew annually at a much lower rate,at 13.64%,during the same period.

To put things into perspective, let us take note of events that occurred during this period. We saw the markets crash 35-40% in February 2000 after the dotcom burst; slowdown prolonged till 2001-end when sensex hovered around the 2,700 levels, down from its dizzy heights of the previous year; several rounds of market correction followed as there was political instability, subprime crisis and commodity price crash, rocking the confidence of investors and made equity markets look lot more volatile. And yet, sensex is back to its peaking mode.

Equity markets tend to be volatile in the short term, but have great potential to generate higher returns in the long term. Averaging out the cost of purchase, systematic investments into equity plans of MFs inculcate the healthy habit of regular investing, making your money work harder with the power of compounding.

TIME: With time on your side, you will have a longer investment phase as against those who start late. Even if the amount invested every month is lower at early stages, the power of compounding will enable you to multiply your assets.

COMPOUNDING RETURNS: The magic of compounding returns will ensure that you generate yields way above regular returns and will prove extremely powerful over the long run.

 

HIGHER SPENDING: It's an absolute misnomer that those who start early have low spending habits. A systematic investing process will always ensure that you spend wisely which do not necessarily mean you spend low. In fact, some investments provide you regular goodies in terms of dividends and bonuses that one can spend.

 

BETTER LIFE: Quality of life for early investors would be distinctly different from those who haven't. Several financial goals, including buying a house, children's education and retired life are well planned out for the early investor while others need to compromise and grapple with stress.

Happy Investing!!

We can help. Call 0 94 8300 8300 (India)

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You can write back to us at PrajnaCapital [at] Gmail [dot] Com

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Invest in Tax Saving Mutual Funds ( ELSS Mutual Funds ) to upto Rs 1 lakh and Save tax under Section 80C.

Invest Tax Saving Mutual Funds Online

Tax Saving Mutual Funds Online

These links can be used to Purchase Mutual Funds Online that are regular also (Investment, non-tax saving)

Download Tax Saving Mutual Fund Application Forms from all AMCs

Download Tax Saving Mutual Fund Applications

These Application Forms can be used for buying regular mutual funds also

Some of the best Tax Saving Mutual Funds available ( ELSS Mutual Funds )

1. ICICI Prudential Tax Plan Invest Online
2. HDFC TaxSaver Invest Online
3. DSP BlackRock Tax Saver Fund Invest Online
4. Reliance Tax Saver (ELSS) Fund Invest Online
5. Birla Sun Life Tax Relief '96 Invest Online
6. IDFC Tax Advantage (ELSS) Fund Invest Online
7. SBI Magnum Tax Gain Scheme 1993 Invest Online
8. Sundaram Tax Saver Invest Online
9. Edelweiss ELSS Invest Online

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Best Performing Mutual Funds

1. Largecap Funds Invest Online
1. DSP BlackRock Top 100 Fund
2. ICICI Prudential Focused Blue Chip Fund
3. Birla Sun Life Front Line Equity Fund
2. Large and Midcap Funds Invest Online

1. ICICI Prudential Dynamic Plan
2. HDFC Top 200 Fund
3. UTI Dividend Yield Fund
2. Mid and SmallCap Funds Invest Online

1. Reliance Equity Opportunities Fund
2. DSP BlackRock Small & Midcap Fund
3. Sundaram Select Midcap
4. IDFC Premier Equity Fund
3. Small and MicroCap Funds Invest Online

1. DSP BlackRock MicroCap Fund
4. Sector Funds Invest Online

1. Reliance Banking Fund
2. Reliance Banking Fund
5. Tax Saver MutualFunds Invest Online
1. ICICI Prudential Tax Plan
2. HDFC Taxsaver
3. DSP BlackRock Tax Saver Fund
4. Reliance Tax Saver (ELSS) Fund
6. Gold Mutual Funds Invest Online

1. Relaince Gold Savings Fund
2. ICICI Prudential Regular Gold Savings Fund
3. HDFC Gold Fund