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8 Easy Ways To Reduce Your Expenses

Spend less than you earn. That’s the mantra of personal finance success. Every week, month, and year that you spend less than you earn, the more you save and the better your financial situation will be.

A big part of that solution is cutting back on spending, and for many people, the thought of cutting back on spending seems unpleasant. Losing out on the things that bring you pleasure in life seems like a pretty steep price to pay for a little financial success.

The secret is to intentionally target spending on the things you don’t care about and rarely use while holding steady on the things you do care about.

Scale back on entertainment costs
1. Cut cable: These days, streaming services and free over-the-air television provide more content than any one person could ever watch. Take advantage of the variety by eliminating cable service.
2. Focus your interests on finishing rather than collecting: Rather than collecting physical or digital items in a media collection, focus on actually finishing those things or enjoying them to completion. For example, instead of buying yet more books that go unread, aim instead to build a long list of books you have read. Make doing the center of your hobby, not buying. After all, isn’t that what you really love?
3. Don’t treat shopping as entertainment: It’s fine to go out in the town to be entertained but keep to a simple rule: don’t go into a store unless it’s for the purpose of buying something you’ve already decided you need before going in. Don’t go to stores just to browse for entertainment, as they’re designed to convince you to buy things you don’t need or even really want, but just react on impulse. Find other places to be entertained.

Reduce your food costs
4. Use a meal plan and make a grocery list: Instead of going to the grocery store whenever you feel like you need food, get into a routine of making a meal plan once a week, then constructing a grocery list from that plan. The time invested in making that plan is more than saved by spending less time in the store and having a list to stick to saves a ton of money on grocery store impulse buys that just sit in your pantry.
5. Learn how to cook: Cooking for yourself doesn’t have to involve three-course meals or Gordon Ramsey-level skills. Start by identifying things you enjoy eating, then look for how to easily prepare it from scratch and with basic ingredients.
6. Buy in bulk: The big bulk packages might seem like they have a high price, but they’re usually quite a bit cheaper per use, meaning you get more value for your dollar. If you frequently buy something at the store, look at the big bulk versions and save up for them. You’ll save over the long run. It's basically what our parents or grandparents did - buy - store and use efficiently.
Cut your monthly bills
7. Go through your bills: Sit down with every regular bill you have and go through it line by line, making sure you understand everything you’re being charged for. If something isn’t clear, Google it. If it doesn’t seem like something you should be charged for or is a service you don’t want, call the bill issuer and get it removed from future bills.
8. Cut your subscriptions down to just the things you actually use: If you have a subscription or membership that you haven’t used in the last month, cancel it. Turn off any auto-renew you have with that service and allow it to expire. You can always renew it in the future if you decide you have a need for it again.

What you should do with the money saved from trimming your budget?
The key to making frugal living tips really work for you is to not simply spend that money on something else fun. Keep your “fun” spending at the same level and use the money you save when you cut down your monthly budget on something smarter.  Cut un-fun things like your energy bill for something financially useful that can build a bright future for you.

One great option is to open an account and use your savings to create your emergency fund or you could save it up for your next trip. Whatever excites to reduce your unnecessary spending. These are just some of our suggestions. Do let us know what you had like to read and learn more about and we shall share more content on that.

 

Disclaimer: - The articles are for information purposes only. Information presented is general information that does not take into account your individual circumstances, financial situation, or needs, nor does it present a personalized recommendation to you. You must consult a financial advisor who understands your specific circumstances and situation before taking an investment decision.

10

Leave Travel Concession Cash Voucher – new ways to claim your LTA

Hello fellow investors,

It is that time of the year where we all start planning to submit your tax proofs to claim tax deductions. One such claim is the Leave travel allowance. Given that, none of us are really venturing into travel, a new component of leave travel concession - a cash voucher was introduced for salaried individuals.
 
This leave travel allowance (cash voucher) scheme initially announced for central government employees has now been extended to all other employees with riders to boost consumption during the festive season and also help you get tax deduction. The government has announced that all non-central government employees will be eligible for income tax exemption for the entire leave travel concession amount up to Rs 36,000 per person without producing travel bills. However, such employees will have to spend three times the amount for purchasing goods or services on which GST of 12% or higher is levied, said a press release from the Central Board of Direct Taxes.
 
Employees will have to make purchases through digital payment mode and submit the invoices to avail of the benefit.
 
What’s LTC For Private Sector? 
 
Unlike government employees, their private-sector peers have a part of their salary or cost to the company, structured as leave travel concession. This is done to save tax on the total income of the employee. By showing travel expenses, the employee can avail of the income tax exemption on the travel amount. Those who haven’t availed of this benefit during 2018-21 would be eligible for the tax exemption.
 
Points to Note:
  • The employee exercises an option for the deemed LTC fare in lieu of the applicable LTC in the current block (the year 2018-21); 
  •  The employee spends a sum equal to three times the value of the deemed LTC fare on purchase of goods/services which carry a Goods and Services Tax (GST) rate of at least 12% from GST registered vendors/service providers through digital mode; 
  • The expense is made between 12 October 2020 and 31 March 2021; and 
  • The employee obtains the voucher indicating the GST number and the amount of GST paid.  
 
What Government Is Offering An employee?
 

An Employee who has not availed LTC during 2018-21 would be eligible to avail of the tax exemption subject to the condition that the person spends three times that amount on goods or services with GST of 12% and above.

 

Those who spend less than three times the fare amount will get proportionate income tax exemption. For example, if the LTC fare is Rs 20,000, and is claimed for a family of four, then the employee would get Rs 80,000 (20,000 x 4). The amount that the employee will have to spend would be Rs 2,40,000 (Rs 80,000 x 3). However, if the employee ends up spending only Rs 1,80,000, the person would get  tax exemption of Rs 60,000 (75% of 80,000 or 1/3 of 1,80,000).
 
Thus, this income tax benefit may actually be considered as a discount on expenditure, which the employee has already planned to incur, instead of a reason to incur expenditure. On the other hand, income tax foregone by the Government may be offset by the additional GST revenue on expenditure incurred by the employees.
 
It is advisable to check with your HR department and your employer to see if the policy is modified to include the leave travel concession component and how you can claim this benefit for yourself. It was initiated to encourage people to shop more and take tax benefits on the same, so don't rush to buy new items but if you are buying anything, ensure you have GST documents of the same to claim tax benefits under LTC.  



9

Indian Stock Market timings

Indian Stock Market Timings

Trade in the stock market can only be undertaken during a specific time interval in India. Retail customers have to perform such transactions through a brokerage agency between 9.15 a.m. to 3.30 p.m. on weekdays. Most investors undertake the purchase/sale of securities listed on the major stock exchanges in India – Bombay stock exchange (BSE) and National Stock exchange (NSE). Indian stock market timings are the same for both these major stock exchanges.

 

Indian stock market timings for trade is divided into three segments:

Pre-opening Timing

This session lasts from 9.00 a.m. to 9.15 a.m. Orders to purchase or sell any securities can be placed during this time. It can be further classified into three sessions:

  • 9:00 a.m. – 9.08 a.m.

During this stock market opening time in India, orders for any transaction can be placed. The order entry is given preference when actual trading begins, as these orders are cleared off in the beginning. Any requests placed during this time can be changed or canceled according to need, which is beneficial to investors, and no orders can be placed after this period of 8 minutes during the pre-opening session.

  • 9:08 a.m. – 9.12 a.m.

This segment of Indian share market timing is responsible for the price determination of security. Price matching order is done by corresponding demand and supply prices to ensure accurate transactions among investors who want to purchase or sell a security, respectively Determination of final prices at which trading will begin during normal Indian stock market timing is done through a multilateral order matching system.

Price matching order plays a vital role in determining the price at which the security is transacted during a normal session of Indian stock market timing.

However, the benefits of modification of any order already placed in not available during this session.

 

  • 9:12 a.m. – 9.15 a.m.

This time acts as a transition period between preopening and normal Indian share market timing. No additional orders for transactions can be placed during this time. Also, existing bets already placed from 9.08 a.m. – 9.12 a.m. cannot be revoked as well.

Normal Session 

This is the primary Indian share market timing lasting from 9.15 a.m. to 3.30 p.m. Any transactions made during this time follow a bilateral order matching system, wherein price determination is done through demand and supply forces. The bilateral order matching system is volatile, thereby inducing several market fluctuations which are ultimately reflected in security prices. To control this volatility, the multi-order system was formulated for the pre-opening session and was incorporated in Indian stock market timings.

Post-closing Session 

Stock market closing time in India is marked at 3.30 p.m. No exchange takes place after this period. However, the determination of closing price is done during this time, which has a significant effect on the following day’s opening security price.

Stock market closing time in India can be divided into two sessions –

  • 3:00 p.m. – 3.40 p.m.

The closing price is calculated using a weighted average of prices at securities trading from 3 p.m. – 3.30 p.m. in a stock exchange. For determining the closing prices of benchmark and sector indices such as Nifty, Sensex, S&P Auto, etc. weighted average prices of listed securities are considered.

  • 3:40 p.m. – 4 p.m.

This period is post stock market closing time when bids for the following day’s trade can be placed. Bids placed during this time are confirmed, provided adequate buyers and sellers are present in the market. These transactions are completed at a stipulated price, irrespective of changes in opening market price.

Thus, capital gains can be realized if the opening price exceeds the closing price by an investor who has already placed their bids. In case closing price exceeds opening share price, bids can be canceled during the narrow window of 9.00 a.m. – 9.08 a.m.

The overall stock market operating time in India can be demonstrated by the following table:

S. No. NameTime 
1.Pre-opening session9.00 a.m. – 9.15 a.m.
2.Normal session9.15 a.m. – 3.30 p.m.
3.Closing session3.30 p.m. – 4.00 p.m.

Aftermarket Orders

Post this time frame. No transactions can take place. However, investors can place aftermarket orders, for securities of chosen companies, which would be allocated at opening market price the following day.

Muhurat’ Trading 

Indian stock market is generally closed for any transactions on Diwali, as it is a religious festival celebrated all across the country. However, a one-hour trading session is conducted from 5.30 p.m. to 6.40 pm as it is considered to be auspicious.

 



7

A Fixed Interest Of 8.5% With Low Interest- Invest Now?

Hi fellow investors

Have you recently checked returns of debt investment options like Fixed deposits/Liquid Funds? I am sure you would have been very disappointed by the return numbers there.  The approx interest from some of the popular debt investments today are::

1. Overnight/Liquid Debt Funds (Up to 90 days): 3.5% - 4.0%
2. Short term Debt Funds (1-3 yrs): 5.5% - 6.5% 
3. Fixed Deposits (1-5 years): 5.5% - 6.5%
4. Bharat Bond ETF (5-year bond) - 5.46%
5. Public Provident Fund (PPF) (15 years) - 7.1%

Clearly, the returns have reduced by 3%-5% across different debts in the past few months and debt as an investment category doesn't look very attractive. With the latest inflation number hovering at 6%, our money invested in the above debt options barely covers the impact of inflation on our expenses.

What if I told you that there was an option to earn 8.5% per annum?

For salaried fellow investors, it is something you deal with every payslip; Employee Provident Fund (EPF), giving an interest rate of 8.5% (for FY 2020-21) which is not only risk free, but also tax free. 

How can you make the most of it? 

If you are a salaried individual and your company has a provident fund and you have not opted for EPF,  you could opt for it as in the current market scenario no other debt investment is giving returns as high as 8.5% p.a.


1. Maximize your EPF Limit 

 If you are just contributing only INR 1,800 (the minimum required under EPF rules) towards your EPF account, you could consider increasing it making it to 12% of your basic salary. That way you can make the full use of the EPF limit available to you.


2. Invest as VPF (Voluntary Provident Fund) 

Where you are already investing 12% of your Basic Salary towards EPF and want to invest more to earn 8.5% you have an option to increase your contribution in EPF by opting for VPF (Voluntary Provident Fund). You can invest an amount up to your entire 'Basic' salary with the EPFO and earn the same interest rate of 8.5%. Please note your employer is not obliged to match this higher contribution and hence, it is called a 'voluntary' provident fund.

Features of VPF that you must know of 

  • It will earn you the same interest as your EPF i.e. 8.5% per annum (currently)
  • It will have a lock-in period of 5 to 10 years but you can withdraw for some specific reasons. Check out when can you withdraw from your EPF here.
  • Your employer will not match the contribution of your VPF unlike EPF
  • our contribution to VPF is eligible for tax deduction under section 80C.
  • The interest earned from VPF would also be tax-free (provided it is not withdrawn within the first 5 years).

So, if you have funds that you want to invest in risk-free investments and can park it for a while, (EPF + VPF) is a good debt investment option and can be mapped to your retirement goal. 

How much should you invest in VPF?

We are not advising you to invest your entire salary as VPF and have no money to pay your bills or cover your short term goals. We also don't want you to miss out on your equity investments that result in wealth creation over the long run. You can compute how much to invest as your VPF as under:

For example, if your in-hand salary is INR 1,50,000 per month (A basic component of INR 50,000):  

  • 12% of your basic salary i.e. INR 6,000 would be invested as your EPF.
  • A matching amount of INR 6,000 will be contributed by your Employer.
  • If your monthly expenses are INR 100,000, you have a monthly savings of INR 62,000 (INR 50,000 + INR 12,000).

Now if you are looking to invest in VPF, the lower of the 2 parameters will help you compute the same.

Limit I: 
Not more than 40% of your total portfolio holding should be in illiquid investments (Know about the step-by-step process to withdraw your EPF). You can ensure this by not contributing more than 40% of your monthly savings towards Illiquid investments.
Accordingly, 40% of your savings (INR 62,000) will be INR 24,800 out of which INR 12,000 is already invested as EPF. So the balance you could additionally invest is INR 12,800 as per this.

Limit II: 
It should be considered as a part of the contribution you make towards your retirement goal. Now if your retirement goal requires you to invest 18,000 per month for the next 25 years to achieve your corpus to retire peacefully (based on Wealth Cafe Investing tool) and you are already investing INR 12,000 from the EPF, then only the balance of INR 6,000 should be invested towards VPF.

Limit III:
You are already investing INR 12,000 towards EPF. A maximum of another INR 38,000 can be invested by you in VPF.

Based on the above limits, INR 12,800 or INR 6,000 or INR 38,000 whichever is lower can be additionally invested in your VPF.

For simplicity sake, the above computation assumes that you are not investing your money in any other illiquid investments and are not saving for your retirement in any fund apart from EPF and VPF. If you are doing so, the amount invested in that could be reduced from the amount arrived at in Limit I & II above.

Another advantage of using the VPF route is that it is invested directly from your salary and then the balance salary comes to you, ensuring the consistency of your investments. 

Do review your numbers and you will have to contact your HR/accounts team to start contributing to VPF. Let us know if you have any questions about this in the comments section of our blog.

Disclaimer: - The articles are for information purposes only. Information presented is general information that does not take into account your individual circumstances, financial situation, or needs, nor does it present a personalized recommendation to you. You must consult a financial advisor who understands your specific circumstances and situation before taking an investment decision.



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How am I investing in current times – Akruti Agarwal


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Hoping you all have looked at your investments and decided on your next course of action. I thought it is only fair that I share my investing journey with you at the end of these email series on ‘what should you do with your Investments’. I have listed what I have been doing about my investments for the past couple of weeks.
1. I started investing in 2011 with the guidance of my colleagues and newspaper articles. Even for me, this is the first Market Crash where my entire investment portfolio is down by 27%.
It is said that an average investor faces 3 recessions and 1 depression in his life span of 75 years. 
 
We all have to learn how to manage it and make the most of it.
2. This is the time where I can practically put to use everything that I have learnt and read about investments. I am trying my best to deal with the big notional loss in my portfolio, be ok about it and then do my asset allocation.
It is not easy but discussing my money decisions with my family helps me keep my emotions aside and make rational decisions about investing further.
3. Before Investing, let me tell you that I have my term & health insurance in place.  I have my Emergency Fund kept aside in a liquid mutual fund which I am not touching. I also had 2 short term goal funds – Travel Fund (though not a priority for the next 1 year, but untouched) and my father’s health fund (important right now, so untouched and safe)
4. How am I doing my Asset Allocation?
After ensuring my goals are secured, I set out to do my Asset Allocation.
As per my Risk Profile, I am a Balanced Profile, my Debt: Equity ratio is 50:50
As you can see from the above table, my Equity ratio is down to 36% and to rebalance my portfolio back to 50%, I have sold 14% of my total investments in Debt and started investing them in Equity in a staggered manner. Given that my Risk Profile is a Balanced Profile,  I am investing in the Equity market to the extent I am comfortable as per my risk profile and investing it in a staggered manner given the uncertainty in the market.   Also, I have been sticking to investing in Large Cap companies and good businesses rather than small-cap companies as I do not want to compound the risk exposure I have in equities. However, where you are an Aggressive Risk Profile, you could invest in small-cap & mid-cap Equity Mutual Funds to take advantage of the beaten-down markets.
‘Be greedy when the times are fearful and be fearful when the markets are greedy’
Maintaining my asset allocation is making it easier for me to invest comfortably in the markets right now without letting the emotions take the best of me.
Lots of courage to every investor out there. Keep your cool and think rationally before you make any decisions.
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Should you sell your Existing Investments in Equity?


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Hello fellow investors

In one place, where investors are planning to invest more money because there is a downfall in the market, there are some investors who are really worried and are asking us if they should sell their existing investments in Equity Mutual Funds/Equity stocks, book their losses and try to move on.

For the ones who are checking their portfolio every day and abusing their stars for investing in Equity, please read through.

Equity investing was always about ‘Long Term – Goals’ for more than 3 years.

Don’t forget the reasons for which you started investing in the first place.

Think Equity – Think Long Term 

Your Asset allocation and goal setting will always be the answer to all these questions.

 

How does it help to invest in Equity for a long duration?

The way to manage market risk in Equity is by investing for a long period of time.

Historical data from the Sensex proves that if you stay invested in Equity for a longer period your probability of loss reduces. Analysis of BSE Sensex data for the past 29 years shows that the probability of loss diminishes as the investment tenure exceeds 5 years. Data shows that investment for a period of 1-year duration on the first trading day between 1990 and 2018 created a loss probability of 25%. The probability of loss goes down further to 4.55% when the investment tenure goes up to 7 years. The benefits of long term investing are clearly visible as the investment tenure grows beyond 10 years and above.

(this graph & numbers above have been taken from business today article-https://www.businesstoday.in/markets/stock-picks/analysis-why-you-should-be-a-long-term-investor-in-equities/story/267408.html )

In the above graph, you can see that as your number of years of investing in equity increases, your probability of loss reduces.

Having said this, one must always check the quality of shares and mutual funds that they have invested in to ensure that they do not fall under the exceptional cases of this analysis.

Further, note that the analysis presented here is based on historical data, so it is not a true predictor of future outcomes. However, we can gather from this analysis that even with the lack of ability to forecast the future, by investing with a long term horizon, an investor is able to better withstand the detrimental effects of volatility, market downturn and bouts of recession, and achieve a positive ROI.

Hence, if you are planning to sell only because you are worried about what is happening with the markets right now, you should look at your goals & asset allocation and decide accordingly.

Don’t try to be speculative right now with the market; just stick to the core values of your investing, do Asset Allocation and long-term investment planning.

 

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Should You Invest More In Equity Right Now?


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Hello Investors

 

We believe that our first email in this chain would have given you direction on how you should go about investing in current times.

Some of you were asking us if they should invest more money in Equity right now?  Is this the Big Sale we were all waiting for and should we start investing? Will the market fall more so should we wait or invest now?

No one can tell you with certainty whether we have reached hit rock-bottom. Every time one is thinking it cannot go further down, the markets are reaching another lower circuit.

‘You can never predict what is going to happen with the markets as that is not in our control. What is in our control is how we react to the market and take actions accordingly.’

You must keep a note of the below mentioned before you start investing all your money into Equity:

1.Always have an Emergency Fund (at least 4 times your monthly expenses) invested in risk-free investment options.

I cannot emphasize enough on how important it is to have that emergency fund in place, especially in times like these. I do not intend to scare you but I am sure everyone is an expert in their fields and are aware of how the near future looks like. Hence, even before you start investing ensure that your emergency fund is enough to help you sail through the worst-case scenarios in the coming months.

Keep some surplus money with you before you go all investing in Equity right now.

 

2.Have your Health Insurance and Life insurance in place.

With the current pandemic situation, it important to prioritize our life and health. You must have these insurances to ensure your family has something to fall back on. Also, where there is no security about the future, it is not the smartest decision to just rely on your company’s health insurance. It is advisable to have one for yourself and your family members. You can read more about it on our blog.

 

3.Do not forget the goals and reasons for whichyoustarted Investing in the first place.

Remember our entire discussion from the workshop on how to Invest.

 

For short term goals – less than 3 years – Invest in Debt (Risk-free Investment options)

For long term goals – more than 3 years and beyond – Invest proportionately in Debt and Equity based on your Asset Allocation.

Debt Investments acts as a cushion when the Equity markets are volatile.

Note: Once your long term goal (more than 3 years) becomes a short term goal (you reach closer to that goal), redeemed/ sell off the equity investments and shift the same to secured debt investments so that any change in the equity market while attaining your long-term goal does not impact your investments.

Now do your Asset Allocation that shall determine how much money you should invest in Debt & Equity in the current market scenarios. Your asset allocation will help you invest based on your risk profile and sleep peacefully even where the markets are being volatile.

First-time investors should also invest based on their Asset Allocation and not invest 100% in Equity.

Remember that it is not the stock that determines your exact return from portfolio but your asset allocation which determines over 90% of the return.

This is probably a good time to open your goal- working sheets (shared during the workshop) and review your portfolio.

 

 

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How Should You Invest Right Now


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Tough times call for tough decisions! Well for us, it is about utilizing our time at home as much as possible and evaluating the action plan what to do now! With COVID 19, the world financial markets are also giving investors quite a scare. While we are all sitting at home and doing our bit to avoid the spread of COVID 19, we at Wealth Cafe decided to share more information on what you as an investor could do to manage your money better.

‘Investing is not about avoiding the risk but managing the risk to make maximum returns possible’

 Investing Rule 101 – High Risk = High Returns & Low Risk = Low Returns

Never forget the Rule of Investing.

Only after you have understood and digested this fundamental Rule of Investing that you should read further.

How should you Invest?

– Know your Risk Profile (How much risk can you bear)

– Invest in financial products that match your risk appetite by doing Asset Allocation

How to do Asset Allocation?

– We have attached the asset allocation table based on your Risk profile to help you understand how much you should be investing in debt & equity. Further, we believe that you all remember the Risk profile Questionnaire you took in the Workshop.

– A simpler method is to use your age to determine your asset allocation. If you are in the age bracket of 25- 35 years, invest 30% in Debt and 70% (100 – 30) in Equity. The rationale here is that the younger you are the more risk you can take as you would have a longer investment horizon and have a higher risk-taking appetite. While this appears to be a simple method, this is a crude method and risk profiling is the best way to arrive at your personal risk profile.

 

What Next?

Once you have determined your investments into Debt: Equity-based your Risk profile. Ensure that you maintain your Asset Allocation Ratio.

 

For Example:

This is how you begin your investing journey.

Now, given the current volatile markets, if after a month, Equity falls further down (which we are not sure of!), you must do Asset Allocation again.

This action of checking your investments and selling/buying as per your asset allocation is known as re-balancing your portfolio.

How often should you re-allocate/re-balance your portfolio?

You must re-balance your portfolio where your asset allocation varies by more than 5% from the desired Asset Allocation ratio.

How does this help?

By sticking to this rule-based allocation, all sentiment-based investments can be kept aside and you end up buying equities when they are cheap and selling them when they are expensive.

 

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Impact of Compounding – Why should you start your SIP now.


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Compounding is also one of the reasons why you must invest as early in your life as possible, even if the amount that you are planning to invest is small.

SIP (Systematic Investment Plan) is the best way to achieve the same too.

Many people keep waiting to have enough before they could start investing. In fact, the key to wealth creation lies in starting to invest immediately and staying at it for a long period of time. Let’s understand this with the help of this example.

Bunny – A planned guy, started investing at the age of 25

Avi – A bit laid back, started to invest only at the age of 35.

Bunny Invested 10,000 per month for 30 years, investing a total of 36 lakhs, whereas Avi started late so he invested 15,000 per month for 20 years, totalling his investment of 36 lakhs and matching Bunny’s Investment.

At the age of retirement at 55, Bunny makes 6.92 crores, 3 times more than Avi, who makes only 2.24 crores.

Bunny has the edge over Avi for starting 10 years early and continuously investing even if it is with smaller amounts.

Now what if Avi wants to achieve the corpus of 6.92 crores that Bunny did. How much will Avi have to invest to achieve that?

Well given that Bunny is making 3.5 times more than Avi at the age of 55, Avi will have to invest 3.5 times more than what she was investing originally. Avi will have to put aside INR 46, 240 per month from the age of 35 to 55 i.e. a total investment of 1.1 crores. Versus Priya invests only 36 lakhs to achieve the corpus of 6.92 crores.

Now one thing that is very clearly evident from the case is that the investing style is the difference in their portfolio and how Starting early can make all the difference in your returns. Bunny started 10 years earlier than Avi in his 20’s and he achieved a higher corpus by over 4.5 crores. Another best thing done by Bunny is he stayed invested for a long period of time. i.e. 30 years.

Tabular representation

ParticularsBunnyAvi
SIP amount             10,000                15,000
Start Age2535
Invested Till5555
Maturity DateAt age 65At age 65
Maturity Amount6.92 crores2.24 crores
Total Amount Invested          36,00,000 

1.1 crores

 

So the 2 things that create magic for your investments are

1.Starting early

2. Investing for long……….. Long term.

When it comes to investing, the earlier you start the better, the compounding effect grows your money exponentially.

These can give you astonishing results, so what are you waiting for! Start today.

That is the power of compounding taking effect for the investor who started early.

 

Most Essential Factor for a Successful Investor


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Scores of articles have been written on this topic, what does it take to be a Successful Investor. A quick search on Google will give you results which include Fundamental Analysis, Technical Analysis, Economic data Analysis, Understanding the business of company, Timing the markets, monitoring Currency movements, and the list goes on and on. Then, what is the Most Essential Factor for a Successful Investor?

DISCIPLINE.

This one word overrides all other factors.

Discipline to stick to one’s investment plan.

Discipline to continue to contribute for one’s goals.

Discipline to book profits and re-allocate based on one’s Asset Allocation.

DISCIPLINE PAYS OFF

Studies have shown that more than 90% of the returns earned by an investor can be explained by Asset Allocation. That means, right Asset Allocation (for example, Debt or Equity) is more important than the selection of the actual instrument (say an HDFC Fund scheme or a Reliance Fund scheme). And it requires DISCIPLINE to maintain the Asset Allocation as time passes and as markets fluctuate.

Investors reaped enormous profits when the markets reached new peaks in January, 2008. This was followed by the famed crash in September, 2008 all across the globe. This led to panic redemptions on part of many many investors. Unexpectedly, the markets recovered quickly to reach the 2008 highs in November, 2010.

Investors who stayed invested were the ones’ who reaped maximum returns on the systematic investments made in the dips. Investors who exited in 2008 out of panic have only themselves to blame for missing out on the rally.

Again, the longer you stay invested in the equity markets, lesser is the probability of getting negative returns. A study of the Sensex returns for the past 30 years have shown that, if you were invested in the index for any period of 14 years or more, there is zero probability of earning negative returns. As one of the Investment gurus rightly said, “Time in the market is more important than timing the market”.

Successful investors from around the world swear by only one thing…DISCIPLINE. A Financial Plan helps you initiate and maintain that Discipline.



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