Systematic Investment Plan (SIP) as we know it, has become the most favoured route of investments for not only the investors but also Financial Advisors in India. That is not surprising since they have so many advantages:
Become a Disciplined Investor
A SIP helps you to discipline yourself. You can commit a fixed amount each month to investments, and the amount gets invested at the pre determined date. This ensures that money does not lie in your savings account at a meagre 3.5% and there is no temptation to spend that amount as it is not there to spend.
Rupee Cost Averaging
Enormous sums of money have been lost by investors in a bid to time the market. But no one has been able to do it consistently. When experts have failed, the rookie investors will obviously not be able to gain much. It is a useless activity, even attempting to time the increasing volatile markets. SIPs ensure that a fixed amount is invested irrespective of the ups and downs in the market and hence the cost of acquisition of investments is averaged out.
The timeless principle is "Buy Low Sell High". However, investors tend to sell out when there is a fall in the markets due to panic. A rising market tempts them to enter the markets at high levels. SIPs help overcome this problem.
Bit by Bit, you can grow your fortune
Achieve your Financial Goals
Your future financial goals like buying a car, buying a house, a child's education can be converted into the required monthly SIPs. For example, if you need INR 6 lakhs after 4 years to purchase a car. Assuming that your investments earn 15% per annum, you will need to save INR 9,198 per month to achieve a corpus of INR 6 lakhs. By converting your goals into monthly investments, you can view the achievability of your goals clearly and this also motivates you to stay on track with your investments.
Compounding Benefits
The biggest advantage of regular long term investments, compounding benefits. The investments made continue to grow year on year and the invested profits participate in growth in future years.
Effortless Investments
Once initiated an SIP can go on for as long as you want it to run with no further intervention required from your side. With a simple instruction, the SIP can be stopped at anytime.
The convenience, returns and all the other benefits of SIPs have made SIPs the most preferred and the favoured form of investments. If you still have any questions, you can ask the same in the comment section below.
Did you know that you could know all the details about your mutual fund investments by just giving one missed call to the mutual fund company? Many people are not aware of this feature provided by most mutual fund AMC's.
This facility is available anytime, anywhere in India round the clock.This is the total cost-effective way of knowing the mutual fund balance instantly.
What are the details you will get it by giving a missed call?
1) Your Folio(s) Details
2) The total valuation of your Folio(s)
3) Scheme-wise valuation(s) for your investment(s)
4) Few AMCs provide facility to send the statement to your registered Email Id too.
Eligibility to know Mutual Fund Valuation with Missed Call facility
It is free but it does not mean all can avail of this facility. There are certain eligibility conditions and they are as below.
The facility is available only for folio(s) where you hold any units.
The mobile number has to be registered in the folio(s).
For receipt of account statement, the email ID has to be registered in the folio(s).
Missed Call Facility – Know Mutual Fund Valuation via SMS instantly
Now let me explain you the procedure to know the mutual fund valuation via SMS instantly at free of cost.
Give a missed call to respective Mutual Fund Companies provided Missed Call facility numbers (I shared the list below) from your registered mobile number. You may prefix “+91” to the number if you are not able to get through or if you are dialing from a registered international mobile number.
You may hear a message acknowledging receipt of your missed call. (The phone will get cut in case of a few companies, however, you must wait, you will receive all the date in the form of text messages)
You will shortly receive SMS on your registered mobile number providing scheme-wise valuation(s) along with total valuation.
The details will be received for all your folio(s) where you hold any units and the aforesaid mobile number is registered.
If email ID is also registered, then the account statement will be additionally received for the folio(s) on your registered email ID.
If your mobile number is not registered, you shall receive an SMS stating the same with a request to get the mobile number registered with us in the folio(s).
List of numbers of Mutual Fund Companies to know Mutual Fund Valuation via SMS instantly
Here are the numbers with respective AMCs whereby giving a missed call, you can know Mutual Fund Valuation via SMS instantly at free of cost.
Sr No
AMC Name
Phone Number
1
Aditya Birla Sun life
8976096036
2
DSP Investment Managers Pvt Ltd
9015039000
3
HDFC Asset Management (India) Pvt Ltd
8506936767
4
ICICI Prudential Asset Management Company Ltd
8882244488
5
IDBI Asset Management Ltd
9212993399
6
L&T Investment Management Ltd
9212900020
7
SBI Funds Management Pvt Ltd
8010968318
8
UTI Asset Management Company Ltd
9289607090
9
Karvy Missed Call Facility to receive SMS from Karvy Services AMCs
ELSS or Equity Linked Savings Scheme is a dedicated mutual fund scheme which helps you save tax. When you invest your money into a mutual fund - ELSS scheme, you get a deduction under section 80C of the Income-tax Act, 1961 of an amount up to INR 1,50,000.
An ELSS fund manager invests in a diversified portfolio, predominantly consisting of equity and equity related instruments that carry high-risk and have the potential to deliver high returns. Hence, ELSS is an equity mutual fund bearing similar risks and returns.
1. Lock-In period of ELSS of 3 years and more.
You have to stay invested for 3 years into an ELSS fund to continue the benefit of tax savings. However, many people believe that after 3 years you have to sell the ELSS. This is not true. You can stay invested for as long as you prefer based on your goals and market movements. There is no upper limit. In fact, if you want you can sell your ELSS before 3 years as well, you just have to bear the penalty and pay the tax you saved by investing in ELSS in the first place.
In fact, compared to other 80C investment options available, ELSS has the least waiting period. Like PPF has 15 years, the fixed deposit has 5 years and ELSS has only 3 years.
2. You can invest more than INR 1,50,000 into ELSS
Given that ELSS is an 80C investment option, many people assume that only INR 150,000 can be invested in any ELSS scheme. You can invest a minimum of INR 500 and maximum of anything into ELSS (like any other mutual fund).
3. It gives a higher return and hence, higher risk
ELSS are equity-based mutual funds and hence, the return on the same is higher. High returns mean higher risks. There is a good possibility that at the end of 3 years, there are negative returns in ELSS. As we have always said, equity investments are for long term goals and you must stay invested in equity for at least 7 years to avoid the risk of nil or negative returns. Countless studies prove that one can beat volatility and make superior returns from stocks by staying invested for a long period. You should remind yourself that equity has the potential to offer superior returns than other asset classes over a long period.
4. Growth or Dividend - ELSS Fund
If you choose the Growth option it ensures compounding your capital in the mutual fund investments. The final amount can be redeemed once at the end of the lock-in period.
But, the dividend option gives you some amount for various periods of time. It offers some liquidity even during the lock-in period. This dividend paid out can be further invested in other mutual funds depending on the investor’s portfolio or re-invested back into ELSS Fund.
The dividend received by the investors from these mutual funds is tax-free in the hands of the investors.
5. The tax of ELSS mutual funds
ELSS funds are equity mutual funds. Capital gain tax on ELSS funds is the same as in equity mutual funds.
If you sell your equity mutual funds after a year, the returns will qualify for long-term capital gains a tax (LTCG).
Investors will have to pay 10 % tax on profit gains exceeding ₹ 1 lakh made from the sale of stocks or equity oriented mutual fund schemes held for over one year. If you sell your equity mutual funds before a year, you will have to pay short-term capital gains tax of 15 percent on your returns.
Hence, ELSS helps you to save taxes by allowing a deduction of 1,50,000 but they are themselves not a tax-free product and returns from ELSS are taxable exceeding 1 lakh INR.
Wealth Cafe tip - Do not just look at the returns and invest in ELSS, invest with the same mindset in ELSS as you would in any other mutual fund. Also, do not just sell ELSS after 3 years. Sell them only when your goals for which you investing in ELSS is achieved or reaching near.
Annualized return and CAGR are not technically the same thing. They refer to the returns on various investment options computed on per annum basis. All long term investments multiply by your wealth by compounding.
Where investment has grown at different rates over a few years, CAGR is the formula used to define the number at which the investment has grown year on year.
Compounded Annual Growth Rate (CAGR) shows how much a person’s investment grew in one year. In other words, it is the average returns an investor earns on his investments after one year. The bank or the financial institution calculates this rate in terms of annual percentage.
How to calculate CAGR?
To calculate CAGR, you must know the following:
The investment made in the initial year (the year of investment)
Amount invested in the current year and
Tenure of investments
CAGR = [(End value/beginning value)^(1/year)] – 1
Example:
For example, you bought a stock for ₹100 in 2015. It appreciated by 25% to ₹125 in the year 2016 and further appreciated to ₹150 in the year 2017. Therefore, the appreciation in the rate from 2015 to 2017 was 20%.
If you want to know the growth rate of your investments for the complete period of time, use CAGR. If we put the above values in the formula, Compound Annual Growth Rate for your investment between 2015 and 2017 will be 14.47%.
Mutual Funds/Equity and CAGR
Return on any investment is discussed in terms of CAGR. Especially, in case of equity and mutual fund investments. When you invest in mutual funds, the return that is shown in CAS statements and your Dmat statements are in CAGR.
This is because the actual return % on mutual funds is dependent on the movement in the stock market which keeps changing. It never grows or falls at a fixed rate.
Hence, it could be possible that an investment in mutual fund grew at the rate of 20% in year 1, 30% in year 2, 10% in year 3. In such a case, it becomes very difficult to discuss the actual gains. This is when and why CAGR is used in market-related variable returns investments.
In our Article, how to set goals, we have discussed the expected returns on various asset classes, we are always talking about CAGR.
Wealth Cafe Note:
CAGR is an average rate. Hence, if a CAGR is of 15% of an investment made for 4 years. It could be possible that the first 3 years have 30% gains and the next 2 years lower gains.
The gains are not distributed evenly over the period of investments. One must stay invested for the right time based on the asset class to benefit the most.
CAGR is different from absolute returns and year-on-year gains.
There is a chance that two investments may reflect the same CAGR, with one being more lucrative than the other. This could be because the growth was faster in the initial year for one, while the growth happened in the last year for the other.
WCafe Financial Services Pvt Ltd (formerly known as Wealth Cafe Financial Services Pvt Ltd) is a AMFI registered ARN holder with ARN-78274.
WCafe Financial Services Pvt Ltd (formerly known as Wealth Cafe Financial Services Pvt Ltd) is a SEBI registered Authorised Person (sub broker) of Sharekhan Limited with NSE Regn AP2069583763 and BSE Regn AP01074801170742.
