Hello Sir,
I am a private sector employee, aged 43 years, my monthly take home is 70k. I am new to share market and mutual funds. I have been investing in RD, FD and now want to invest in SIP, Mutual Funds and share market with a target of good returns in of next 5 years. I am planning as following:
1. Invest monthly 10k in SIP for 5 years, withdrawal after 10 years. Aiming for 25-30% returns.
2. Invest 2/3 lacks in MF, withdrawal after 5 years. Aiming for 25-30% returns.
3. Start trade with 5/10k and step by step invest 50k to 1 lac in next 6 months.
I am positive that i will receive your guidance on above points with best options.
Thanking you in advance.
Ans: I understand you're excited to explore new investment avenues beyond RDs and FDs. That's a great first step towards securing your financial future! Let's delve into your plan and discuss some key points to consider:
1. SIP for Long-Term Goals (10 Years +):
Thumbs Up! SIP (Systematic Investment Plan) is a fantastic way to invest in Mutual Funds regularly. It inculcates discipline and benefits from rupee-cost averaging, which helps you purchase more units when the market is low and fewer units when it's high.
Setting Expectations: A 25-30% return expectation over 5 years is quite aggressive for Mutual Funds. Historically, actively managed Equity Mutual Funds (diversified across sectors) have delivered average returns in the range of 12-15% p.a. Remember, past performance isn't a guarantee of future results, but it gives you a realistic idea.
Time is Your Friend: Extending your investment horizon to 10 years increases your chances of achieving better returns. The longer you stay invested, the more you benefit from compounding (earning returns on your returns).
2. Lump Sum Investment (2/3 Lakhs):
Good Thinking! A lump sum investment can potentially magnify your returns if the market performs well. However, keep in mind that it's a one-time shot.
Diversification is Key: Consider investing this amount in a diversified Equity Mutual Fund that spreads your investment across various sectors. This helps mitigate risk if a particular sector underperforms.
Stay Invested: The 5-year timeframe might be short for aggressive return expectations. Similar to SIPs, a longer investment horizon like 10 years can be more suitable for potentially achieving your goals.
3. Stock Market Trading:
Caution Advised: The stock market can be volatile, and success requires in-depth knowledge, experience, and discipline. Starting small and learning the ropes before risking a significant amount is advisable.
Consider Mutual Funds: Actively managed Equity Mutual Funds are helmed by experienced professionals who research, analyze, and invest your money in a basket of stocks. This approach can help you benefit from the market's growth without the risks associated with direct stock selection.
Building Knowledge: If you're keen on understanding the stock market, there are many online resources and courses available. However, remember that success in the stock market isn't guaranteed.
Here's a Recap and Next Steps:
SIP for Long-Term: Regular SIPs in diversified Equity Mutual Funds are a great way to build wealth over the long term (10 years or more).
Lump Sum Investment: Invest a lump sum in a diversified Equity Mutual Fund for potentially higher returns, but with a longer time horizon (ideally 10 years or more).
Start with Mutual Funds: Consider Equity Mutual Funds as an alternative to direct stock market trading, especially if you're new to investing.
Seek Professional Guidance: A Certified Financial Planner (CFP) can help you create a personalized investment plan aligned with your risk tolerance and financial goals. They can also guide you on selecting suitable Mutual Funds based on your investment needs.
Remember, investing is a marathon, not a sprint. Patience, discipline, and a well-diversified approach are key to achieving your financial goals.
Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
