SIPs best way to create wealth via mutual funds
Mar 18, 2014
Source : The Times of India
 
DELHI: At the very basic, wealth creation refers to the process of deploying your money in a manner that there is real-value accretion over the long run. In other words, you should deploy your savings in such a way that the rate of return on your money beats the rate of inflation.

For example, today you spend Rs 100 to buy Product A. Now the rate of inflation in the economy is, say, 8% per annum. So we can assume that one year from now, the cost of the same Product A will be Rs 108. So to create real value, you should deploy your Rs 100 today in such a way and in such products that after a year, after paying for taxes if any, you should still have more than Rs 108. If your savings after one year is just Rs 108, you have not created any value, while if the value of your savings is less than Rs 108, you have actually destroyed value in real terms.

The idea here is to invest in such a way that your purchasing power is always more than what the rate of inflation is able to destroy. It is true that you may not be able to beat the rate of inflation in the short term, like in every year. But the aim should be to beat the inflation rate over the long term, that is over 10, 15, 20 years.

In India, over the past several years, stocks, gold and real estate have beaten the rate of inflation, while instruments like bank fixed deposits and bonds have not been able to do that in any significant way. So financial planners advise their clients, who are not very financially savvy, to take the equities route for wealth creation with some parts of the money going into debt, gold and real estate.

The illiquidity factor attached to real estate — which is your not being able to sell your property exactly when you need the money and also at the right price — is one of the most limiting factors for any decision to invest in this investment product. And for investing in equity and debt, financial planners advise their clients to take the mutual fund route.

For example, according to a note prepared by Bhavin Sangoi and Bhuvana Sreeram of Ffreedom Financial Planners, in the last five years, a portfolio of five mutual fund schemes — consisting of four equity schemes investing in large-, medium- and small-cap stocks and one debt scheme — returned about 12.70% on a compounded annual basis. So a systematic investemnt plan (SIP) of Rs 10,000 every month for five years in these funds amounted to about Rs 8.3 lakh. In comparison, if the same Rs 10,000 was put in a monthly recurring deposit for five years, the total corpus would be Rs 7.44 lakh, the note shows.

And this return in the mutual funds came despite the fact that the stock market has mostly remained flat on a point-to-point basis over this five-year period. "The important thing here is to invest regularly and stay away from reacting to market volatility. Undisputedly, mutual funds are a great wealth-creation vehicle," the note by Sangoi and Sreeram says.

To follow this route, financial planners and advisers say that the SIP route to invest in mutual funds is the best way: It inculcates discipline in one's approach to investment, helps the investor negotiate volatility and has a strong potential to create wealth in the long run.

 

 

Latest Realty News

Golden State Capital to raise $500 m from REIT listing
Mar 18, 2014
DELHI: Private equity firm Golden State Capital (GSC) said it will set up a real estate investment trust (REIT) to spearhead operations in India. The company, which hopes to raise $500 million (around ?3,060 crore today) by listing the REIT in Singapore, intends to invest $1 billion over the next three years in stabilised offices that are FDI-complaint.
Entry of high-speed elevator manufacturers bring a paradigm shift in high rise buildings
Mar 18, 2014
DELHI: Indian real estate has progressed in leaps and bounds in the last decade and one can marvel at the rapid growth of high rise buildings across the country, be it in the inner cities, suburbs or 2nd tier towns.
Freehold property will boost NCR’s market
Mar 18, 2014
DELHI: There is good news for homeowners who bought flats on hire purchase basis but could not pay in time and are unable to convert their properties from leasehold to freehold as the Delhi Development Authority (DDA) has recently approved a fresh Penalty Relief Scheme.
Name owners of multiple plots: Chandigarh High Court
Mar 18, 2014
DELHI: Taking up the issue of allotment of multiple plots in the defence category and under discretionary quota by HUDA, the Punjab and Haryana high court on March 13 asked the urban development authority to submit the names of all allottees who were allegedly granted multiple plots. According to HUDA records, around 8,000 people have taken multiple plots under various categories in contravention of the norms.
Hunt for Gurgaon’s best homes narrows to 15 condominiums
Mar 18, 2014
DELHI: The Clash of the Condominiums has come to the deciding stage. A survey conducted by the Indian Market Research Bureau in association with The Times of India has identified 15 finalists among 150 societies that will vie for the honour of being among the best five places in the city to live in.
Jung plans facelift operation for DDA
Mar 15, 2014
DELHI: A thorough restructuring is in store for the Delhi Development Authority. According to information issued by Delhi LG’s office, an exercise will be carried out “not just to revamp the DDA but to equip it with modern processes to enhance its efficiency.”
Developers pushed for tourism in Aravalis
Mar 14, 2014
DELHI: The minutes of an NCR Planning Board committee meeting to consider changes in the regional plan reveal how hard Haryana pushed for opening up the state’s fragile conservation zones, such as the Aravalis, for tourism.
‘Millennium City’ Gurgaon comes a long way
Mar 14, 2014
DELHI: As Delhi slips from the reach of property buyers, Gurgaon emerged as a hot destination, providing world-class infrastructure and better connectivity. In the National Capital Region (NCR) Gurgaon saw immense growth. After witnessing a spurt in commercial and residential properties, Gurgaon has come a long way.
Udyog Vihar industrialists urged to not pay double tax
Mar 14, 2014
DELHI: Udyog Vihar’s plot owners have asked local industrialists not to pay their annual maintenance charges to the industry authority for the next financial year.
Decoding paperwork required for buying property
Mar 14, 2014
DELHI: For the purchase or lease of residential or commercial real estate, as an investment or end-use, various factors need to be considered beyond the price and location. For properties in new projects by reputed developers, there is no reason to be too stressed about this. However, it can and often does become necessary while purchasing a resale property. One of the most important aspects to verify is the title of the property.

Latest Realty News Of State

Realty Talk's