Calculator for SIP returns
Don't forget to consider the entry load on SIP when entering the monthly contribution amount. For example, if you invest Rs 1000 p.m. (Enter only 1000- entry load as monthly contribution).
Just a thought
I was chatting with my neighbour, a couple of days back. He is not an equity investor. He was telling that the bull run was not at all justified and the markets are highly overpriced. When there is no change in earnings of companies in the past three months, how can the market shoot the roof?.
Definitely a logical question!!. My neighbour had booked a flat in 2006 for a huge amount of money. The flat would have cost only half of it, had he booked it in 2005. I asked him , when the rent in the place has been stable ( similar to earnings of the shares), how can the market value of house double...( the appreciation he expected on his flat is not happening now..that's another story....).
He did'nt have any answer too. Stocks are definitely expensive now but the flats are more expensive at P/E's exceeding 200!!.
May be , stocks will be driven more by liquidity than the fundamentals like the real estate. So, retail investors should follow a systematic investment plan to overcome the bumpy rides. Don't stay away from equity, but take the SIP route to benefit from volatility....Enter equity only if you can stay for long in the market ...(> 5 years).
Wondering what to do in a volatile market?? read this
Over the long run, equities have been known to outperform most other asset classes, yet rapid changes in stock prices, whether upwards or downwards, may tempt investors to exit the market, and deviate from their long-term financial plans. However, history suggests that staying invested in the market through volatile periods can be beneficial in the long run, as demonstrated by the following chart :
The data demonstrates that an investor who, through attempting to time the market, misses just the ten best days of market returns in the last ten years, will make considerably less than one who remains invested through volatile periods. This also demonstrates that volatile periods can account for a large part of upward changes in market levels. While it is uncertain whether the current upswing in market levels is sustainable in the short-term, for the medium-term, there have been no changes in economic fundamentals, which remain positive. India’s economy is still fore casted to grow on track, with FY08 forecasts ranging from between 8% to 8.5%. In this volatile market, the Systematic Investment Plan (SIP) method continues to be a viable way of investing in stocks through a professionally managed mutual fund, regardless of current levels. It is also important to distinguish between the run-up in the Sensex (to a great extent driven by just 5 out of the 30 stocks in the index), and the situation in the broader market, where there continues to be long-term stock picking opportunities that active fund managers can capitalise on.
The data demonstrates that an investor who, through attempting to time the market, misses just the ten best days of market returns in the last ten years, will make considerably less than one who remains invested through volatile periods. This also demonstrates that volatile periods can account for a large part of upward changes in market levels. While it is uncertain whether the current upswing in market levels is sustainable in the short-term, for the medium-term, there have been no changes in economic fundamentals, which remain positive. India’s economy is still fore casted to grow on track, with FY08 forecasts ranging from between 8% to 8.5%. In this volatile market, the Systematic Investment Plan (SIP) method continues to be a viable way of investing in stocks through a professionally managed mutual fund, regardless of current levels. It is also important to distinguish between the run-up in the Sensex (to a great extent driven by just 5 out of the 30 stocks in the index), and the situation in the broader market, where there continues to be long-term stock picking opportunities that active fund managers can capitalise on.
Source - Fidelity AMC Newsletter
The great fall is here ( Smart recovery later on)
"The Sensex has plunged by 1500 points to 17,500. The Nifty has crashed by 500 points.
The trading has been halted for an hour. The trading has been halted for the time since May 2004".
The trading has been halted for an hour. The trading has been halted for the time since May 2004".
Something BIG as expected has happened and now we are seeing this feat repeated by FIIs again and again. Only way to get away with this is prudent systematic investment. Domestic investors should get more muscles than FIIs. It will be a long time before this happens.
Sensex recovers smartly by end of day... down only by a small percentage. !
Returns proportionate to index
One of my friends was asking me . How to get returns in proportion to index ( Sensex/ NIFTY,etc).?
The simplest answer would be buy the index stocks in the same proportion that the index is made of . You can also choose to invest in index funds which try to closely track the composition of index in their portfolio.
There are also exchange traded index funds like NIFTY BEES , JUNIOR BEES and so on. These ETFs can be bought and sold just like stocks.
I know a friend of mine who is used to buying units ( very small quantity) from such an ETF every week (cost price averaging). He would also do value cost averaging by buying more Index fund ETF units on the day when ETF falls apart from his regular buying. This has helped him a lot and he is sitting on huge profits when the sensex is at a great height now....
Sounds like a smart strategy..you can try it out too!.
ETF- Exchange Traded Funds.
An even faster 1000
Sensex crosses 19K
A few days after we saw the sensex achieve the fastest thousand, we have seen a even faster 1000 ( from 18k to 19k).
There are predictions of 20,25 and 30K. As we all know, no expert can give a correct prediction. But one thing is sure....something BIG is awaiting for the indices ( may be a big fall too??)
Sitting on the fence
Sensex has been soaring. It is said that only 4% of the country has invested in stocks.
Many people are yet to figure out the power of equity. Of course, equity is one of the riskiest investments. But systematised investment and time generates great returns . Personal finance literacy is very low and proper education in this regard from schools would help us a lot.
I have had multiple opportunities to talk to many from the 96% group ( non-equity investors). They have either turned a blind eye to the equity or have been sitting on the fence expecting the sensex to fall( right from days when sensex was at 6000 levels).
Even today, sitting on the fence wouldn't help you create wealth for yourself. Sensex may fall drastically even tomorrow. But you can't keep out of it for that sake. Come in with a long term plan ( not a couple of years !!)and invest systematically through SIPs. This is definitely better than sitting on the fence and waiting for the indices to go down.
POMIS news
For those of you , Who haven't heard about this yet...
The investment limit for POMIS has been increased from 3 Lakhs to 4.5 Lakhs. For a joint account, the investment limit has been raised to Rs. 9 Lakhs.
But with 8% return, POMIS is not an attractive investment aveneue currently.
POMIS- Post Office Monthly Income Scheme.
Futures and options - an eye opener
For those who are looking forward to understand the basics of derivatives, find below the following links.
Was going through these a couple of days back. They are really good in introducing the readers to derivatives and will help understand basics of Futures & Options.
Happy reading
ideasmoney hits a TON
Ideasmoney hits a ton with this post. Thanks for all the readers of the blog.
The most searches that led viewers to this blog during last week is 'ICICI regular income bonds 2007'. This bond issue has seen a lot of interest. Some have asked whether the issue is safe. Any investment has risks associated with it. Risk - return analysis and an investor's need should be considered before you invest in any product.
NFOs - Global Funds- questions
We get a a lot of questions like" Should I invest in global fund NFOs"?. ( esp . wrt Birla International equity fund and Tata global infrastructure fund")
Refer ~ article which appeared in ideasmoney sometime ago for the same.
Overseas trading facility now offered by ICICIdirect , this is one another first from ICICI. The important point one should keep in mind in investing overseas is the exchange rate movements!! For eg. if you invest in a U.S company and the value of stock goes up by 10% but meanwhile dollar falls against rupee by a greater percentage- you stand to loose and vice versa.
Anyhow, good to see equity investments going really & seamlessly GLOBAL.
Sensex out of minor -hood
Sensex has crossed 18k mark. 789 points gained yesterday is the biggest single day gain. Much of action has been happening in large caps. We need to see whether small and mid cap stocks too catch up .
If there is news of political instability again or any adverse news , we need to see how the indices react!.
This journey looks more thrilling ( and risky?) now.
Stock Markets, P/E and experts!!
Sensex is trading at a P/E of 24.13 times. Some experts say that global liquidity is the reason and we are under priced when compared to China ( P/E multiple of around 40).
Sensex has moved on from very low P/E in 2004 of 15,16....and so on. We have been hearing this low P/E concept at every phase. (Now its relative low price earning muliple concept?)
Stock market zoom is faster than actual growth. May be, we were genuinely under priced all these days!!. We can see whether this is a sustainable price to earnings multiple only when a global crisis looms large and FIIs start shedding the stocks. Direct retail investors have to get much more careful, if they are not investing for the long run.
( BSE -P/E multiple during Harshad Mehta was more than 40, Current BSE Realty Index -P/E Multiple 63.81 times, Current BSE Capital Goods -P/E Multiple 42.22 times)
Is there a big bubble in realty and capital goods?. Are we poised for a BIG growth?. I am atleast not sure about the hype around realty index.!!
Jump start of a gold fund
When there is so much happening in the equity market, there has been a silent roof shooter.
DSPML World Gold Fund-G which was launched in August 2007 has started of with flying colours.
Latest NAV
12.8327 (01/10/07)
12.8327 (01/10/07)
Return Since Launch 28.33 * source - value research.
Gold as an investment has always managed to beat inflation. This investment jump start has been on par with an equity performance!!!
May be this is a shorter time to compare..So. Let's wait and watch.
Search paths to this blog
On analysing the recent search paths to this blog , two searches still stand out . They are 1) ULIP compared with SIP and 2) How to make money in stock market.
For beginners ULIP is Unit linked Insurance Plans which invest in units as desired by the investors. ULIPS are Insurance cum Investment Plans. SIP is not an investment instrument but an investment method to invest in Mutual Funds. You can regularly invest in equity mutual funds through SIPs. ( Read posts labelled SIP, Insurance and ULIP for more info).
SIP definitely scores over ULIP as an investment.
Unfortunately, the trend reflected through data is not that great. Data from preceding month shows that flows ( into equity market) from insurance companies (ULIPs) into equity were four times greater then flow from MFs. It's a good sign that people have realised the power of equity, but still we have to mature in terms of understanding and choosing the right instruments.
To answer the second question, Investment in equity mutual funds through SIP is the best way for retail investors. You need to spare time and need to have patience to achieve your long term goals in this route. Happy Investing!.
Readers can feel free to write to us or comment on the posts regarding any questions/ clarifications.
For beginners ULIP is Unit linked Insurance Plans which invest in units as desired by the investors. ULIPS are Insurance cum Investment Plans. SIP is not an investment instrument but an investment method to invest in Mutual Funds. You can regularly invest in equity mutual funds through SIPs. ( Read posts labelled SIP, Insurance and ULIP for more info).
SIP definitely scores over ULIP as an investment.
Unfortunately, the trend reflected through data is not that great. Data from preceding month shows that flows ( into equity market) from insurance companies (ULIPs) into equity were four times greater then flow from MFs. It's a good sign that people have realised the power of equity, but still we have to mature in terms of understanding and choosing the right instruments.
To answer the second question, Investment in equity mutual funds through SIP is the best way for retail investors. You need to spare time and need to have patience to achieve your long term goals in this route. Happy Investing!.
Readers can feel free to write to us or comment on the posts regarding any questions/ clarifications.
10 year bond yielding 10% p.a
ICICI Bank has come up with a regular income bond issue. The 10 year option yields 10% p.a interest. There are annual and monthly payout options for interest depending on the option you choose. This bond is also available for 5 year period.( subscription from September 29, 2007 and closes on October 12, 2007.)
In a scenario, where interest rates are seemingly cooling down, this may be a good option . 10% p.a. interest for a 10 year period may be a great boon for those who keenly looking at investments like FD & other low risk investments.
Those who have the zeal to take a bit of risk , can safely avoid this. 10 Year is a good amount of time in which one may get a slightly better than this through equity/balanced funds.
For more details on the issue visit this link.
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