sip – Stable Investor

SIP Vs Lump sum – Which is better in Mutual Funds Investing?

by Dev AshishFebruary 13, 2019February 13, 2019 1 Comment

I don’t like such questions.

Is it better to invest lump sum or monthly SIP in mutual funds?

A lot of people ask me such questions – whether SIP (Systematic Investment Plan) is better than lump sum investing in mutual funds in India? Or whether lumpsum investing is better than mutual fund SIP?

Why I don’t like these questions (are SIPs better than lumpsum investments?) is because as usual, there is no one right answer here.

There are shades of grey and it isn’t exactly an ideal comparison.

People want to simply compare SIP vs one time investment in mutual funds or just want to find out which are top mutual funds for SIP in 2019 or best mutual funds for lump sum investment in 2019 and what not. But there are no perfect answers or ready lists that predict anything.

And let’s look at it from a common-sense perspective.

Before even getting into lump sum vs monthly investment debate, the decision to invest in lump sum or SIP depends on whether one actually has enough investible surplus that can be called as lumpsum!

Right?

If one doesn’t even have this ‘lump sum’ then this question of SIP or lump sum in itself is meaningless. It’s only when this ‘lumpsum’ is actually available that the question holds any relevance.

And once the lump sum is there, the next question should be whether investing in one go is better or whether it’s wiser to spread that lump sum over a short period of time, as there can be several best ways to invest a large sum of money in mutual funds. Just because the lump sum is available doesn’t mean that the money should be invested in one go. There are can various other tactics to deploy it more efficiently.

But nevertheless, there are those who prefer SIP (and have SIP success stories to tell) and there are those who prefer lump sum investing.

And to be honest, both methods work in different set of circumstances.

Let’s try to do this comparison as objectively as possible.

SIP vs Lumpsum in Rising (Bull) Markets

In a rising market, your lumpsum investments in mutual funds will produce higher returns than SIPs. That’s because the cost of purchase in a lumpsum investment in a rising market would always be lower than the average cost of purchase in SIP, which is spread out across higher and higher purchase prices for each SIP installment.

Let’s take a very simple hypothetical example to show this.

Suppose one investor invests Rs 5000 per month in a rising market for 12 months. While the other invests Rs 60,000 as lumpsum at the start itself. Both invest in mutual funds a total of Rs 60,000. Here is how it pans out over the next 12 months:

As can be seen above, the average cost (average NAV) for the SIP investor in a rising market is higher. And hence, the future hypothetical profit when sold later, will be lower for the SIP than that of the lumpsum investor.

Now let’s look at a falling market scenario.

SIP vs Lumpsum in Falling (Bear) Markets

In a falling market, the SIP investing would result in comparatively lower losses than that in lump sum. And that is because the cost of purchase in a lumpsum investment in a falling market would always be higher than the average cost of purchase in SIP.

Here is how it looks:

As can be seen, the average cost for the SIP investor in a falling market is lower. And hence, the future hypothetical profit when sold later, will be higher for the SIP investor than it is for the lumpsum investor.

So basically what is happening is that if the market grows continuously, then lump sum investing gives higher returns whereas if it falls continuously, then SIP investing is better (lesser losses than that of lumpsum investing in such scenario).

Ofcourse in practice, the markets neither go up nor go down continuously for very long. So the actual reality may be somewhere in between the two above discussed scenarios of sip vs one time investment in mutual funds.

In some cases, SIP may give better returns than lumpsum investing. While in other cases, lumpsum will give better return than SIP investing. And in many other cases, the result of both will be pretty similar.

It all depends on the future sequence of returns that the investor gets. If you want to know how much wealth your SIP will create, try using this SIP maturity value calculator.

But let me circle back to the original point I made – whether you invest lumpsum or otherwise first depends on whether you have a lumpsum or not.

Right?

And if you have, then obviously it would be wiser to just invest lumpsum when the market is low. Remember Buy-low-sell-high?

But problem is that you will never know when the market is really low. You can be wrong about your assessment and enter at precisely wrong times.

And that said, what about our ‘real’ nature and how we behave?

Most investors are unable to use common sense when their portfolios are down.

We know that the best returns come after markets have crashed.

But very few people have the guts to go out and invest more money (assuming they have more). Fear plays a major role in investing and unfortunately, you can neither back-test emotions nor fear. And you will only know in hindsight whether is it best time to invest in mutual funds or not.

Imagine investing lumpsum in December 2007 when markets were peaking and then helplessly witnessing the fall down till March 2009. On the other hand, if you invested a lump sum in March 2009 instead (at the bottom), you would have been called the next Warren Buffett!

Both are extreme examples but show how lumpsum investors potentially expose their portfolios to the vagaries of the market. There is always the risk of being completely wrong and mistiming. And that is the problem. To be fair, one can also get the timing right and if willing to spend sleepless nights in the short term, can go on to make much higher returns than usual in medium to longer term. But that’s how the dynamics of lumpsum investments are.

Due to their structural nature, SIPs reduce this risk of being completely wrong as the investments are spread out. So asking whether is this the right time to invest in SIP is immaterial as SIP spreads out your investments. Ofcourse your returns will depend on how the markets play out during the spreading-out period. But that is how it is.

For small investors, SIP is also suitable from their cashflow perspective. They rarely have access to large lumpsum that is ‘surplus enough’ to be available for long term investing.

By putting away small amounts periodically, there isn’t a large pressure on their resources and no doubt is convenient. This is the reason that for small investors, SIP is their best bet even if not a perfect strategy.

Remember that SIP is a tool to optimize returns and match your investment needs to your cashflows. It is not a magician’s magic to generate superior returns to lumpsum investing. Read that again.

And it is for this reason that SIP is better suited when investing for long term goals like retirement planning, children’s future planning, etc.

One can use the SIP investing to slowly build up a large corpus over the years without straining the finances in present or worrying about timing the markets perfectly. You can try to use this sort of yearly SIP calculator to understand how much money you need to save for various financial goals.

I know that many of you are more focused on saving taxes.

And one popular way to save taxes these days is to go for best tax saving ELSS funds vs PPF. But there also, people tend to get confused whether to go for SIP or lump sum for ELSS when investing in top ELSS mutual funds. Nevertheless, the logic that we have been discussing till now remains the same irrespective of whether it’s an ELSS fund or a normal mutual fund.

Now let’s take a step further…

What if you have a lump sum that can be invested. Should you go ahead and invest it in one go or do something else?

Should you Invest Lump Sum In One Shot Or Systematically & Gradually?

A smart investor would recognize the market bottoming out and invest in one go. But we all aren’t smart. So if you aren’t sure if it’s the right time to invest in one go, you can even deploy your lump sum gradually.

There is no one single answer to which is the best method to invest a lump sum in mutual funds?

So depending on the market conditions, investor’s investment horizon and risk (and volatility) appetite, a deployment strategy may have to be worked out. This strategy may either aim for lowering risk or maximizing returns or a combination of the two.

One way is to put lump sum investment in debt mutual fund and gradually deploy the money using STP or Systematic Transfer Plan into an equity fund.

Different investor needs would demand different lumpsum deployment strategies.

Also, it’s important to invest in the right funds and build a solid mutual fund portfolio.

Even after the recent SEBI’s mutual fund cleanup exercise, there are still several categories and hundreds of funds out there.

Being a small investor, it can be daunting to find out which are the best SIP plans that can be considered for long term investments. Or for that matter to find out which are the best mutual funds for lumpsum investment or the best tax saving mutual funds in India or whether to do ELSS SIP or lump sum.

If you don’t know how to find good funds or need help with planning your investments, do get in touch with a capable advisor to help you. It is worth it.

Finally…

I am sorry if you did not find the one specific answer to your question of SIP or Lumpsum which is better for investing.

A direct comparison between SIP and lumpsum investing is neither fair nor accurately possible. And unless we know everything about the investor in question, one cannot say confidently which is better suited for whom.

You may feel that there is a secret to find the best time to invest in mutual funds India but there is no secret. Different investors need to follow different investment strategies for SIP and lump sum investing. And ofcourse an awareness of market conditions and how market history plays out is absolutely necessary. You can’t be blind to that.

All said and done, SIP is a comparatively safer option but we cannot deny that at times, lump sum investing will provide better returns if done correctly.

Which is better SIP or lump sum investment in top best mutual funds in 2019?

This may sound repetitive but the truth is the superiority of SIP over lump sum or of lumpsum investments over SIP varies under different conditions.

Is SIP better than one time investment? Or lump sum is better than SIP? Systematic Investment Plan vs Lump sum Investment? It is all a matter of probability and what is the sequence of returns that comes in future and how investor behaves during the period in consideration. That’s all there is to it.

SIP may not be perfect; but it’s Small Investor’s Best Bet

by Dev AshishJanuary 29, 2019January 29, 2019 Leave a comment

If you are a mutual fund SIP investor, you would already have been bombarded with thousands of articles about why mutual funds and more particularly mutual fund SIPs are great.

And that is true.

But I wanted to re-highlight this fact in a different light.

SIP is not perfect like the theoretical (but attractive) concept of Buying-Low-Selling-High. But still, it works best for small investors and is their best bet when it comes to equity investing.

I recently wrote an article for MoneyControl on this topic. If you wish to understand why SIP isn’t Perfect but still the small investor’s best bet, then please do read the article by clicking the link below:

[Click to read] – SIP isn’t Perfect; but it’s the Small Investor’s Best Bet

Hope you find the article useful.

Your Tolerance for Market Falls Is Probably Not What You Think

by Dev AshishSeptember 19, 2017 18 Comments

When markets fall or the economy goes into a recession, you will remain invested. Or better still, you will invest more (buy low philosophy) to ensure great future returns when markets recover.

Right?

That’s the plan?

Great! It is exactly how it should be. And staying invested (and investing more) in the market falls is how you can create a lot of wealth from stock markets.

But it’s easier said than done.

You ‘think’ that you will remain invested or invest more in market falls. But will you actually do it?

That is something that only time will tell.

But I feel that people’s tolerance for market falls is probably not what they think it is. I cannot prove it. But let me show you an example and maybe you will realize it too.

I am simulating a Rs 10,000 SIP in HDFC Equity Fund starting from January 2007.

I have picked this starting point for one reason. The returns just before Jan 2007, i.e. upto Dec 2006 were great and hence would have attracted many new investors into the market.

So these investors would have begun their investment journey having their own ‘easy money’ notions about investing due to (recent) past experience.

Now have a look at what happens to the value of the investments from January 2007 to March 2009:

Observations

In the 1^st year of SIP, the investor would be patting his back that it was the right decision to begin investing. By December 2007, the investment would be up by almost 30%.
But then came what we all remember – the great leveller – the crash of 2008-2009.
The investor would have continued his SIP of Rs 10,000.
By March 2009, his investments would have come down drastically. Value of total investment of Rs 2.7 lac would have been about Rs 1.7 lac. So from highs of around +34% to a gut-wrenching low of -35%.

And this is where I want to stop this simulation.

What happened after this is well known to all. Markets kept moving higher and higher… and higher.

But think about it.

How many people would have got the guts to remain invested after seeing a drop from +35% to -35%. I know many who lost money and exited.

The notion that equity will give high returns no matter what… is not correct. It’s a volatile asset class and will remain so forever. Investors need to realize that these things will happen whether they accept it or not. And when this happens, their tolerance for losses will be tested.

People have different tolerance(s) for big market falls:

When they think about market falls
And when market falls actually happen 🙂

How people feel about big falls depends almost entirely on what has been happening in the market recently.

Investors who are asked about their tolerance following high past returns are likely to overestimate it, swayed by exuberance. Investors who are asked following low past returns are likely to underestimate it, swayed by fear.

In rising markets, it’s very easy to claim that you will remain invested in big falls. But most people’s tolerance for portfolio falls is not what they think it is.

And just to clarify, it’s not about starting or stopping SIPs to time the market.

SIP is a small amount when compared with a multi-year old portfolio.

Assuming the investor in discussion is not a new one and already holds a Rs 20 lac portfolio at the start (with Rs 10,000 SIP running), here is what he will have to face in 2007-2009:

After having Rs 20 lac at the start with Rs 2.7 lac in fresh investments, it is not easy to see your portfolio go down to Rs 14.8 lac. And notice the fall from Rs 32 lac (in Jan-2008) to Rs 14.8 lac in March 2009.

This investor would be less worried about starting or stopping SIPs and more about containing the fall of his multi-lac portfolio that he had already built.

I don’t want to scare you.

For most common people, SIP in equity mutual funds is the best approach to benefit from stock markets.

My only aim with this post was to highlight that you need to accept losses ‘too’ when doing your SIPs. It cannot be one way up. Equity is not a bank FD.

So think about it.

Is your tolerance for market falls and losses really what you think it is? If not, teach yourself to overcome the fear when things really do get bad.

Mutual Fund SIP Return Calculations – How much Wealth is Created?

by Dev AshishSeptember 10, 2017April 3, 2019 1 Comment

Do you wish to know how much your monthly SIP investments in mutual funds will grow over a period of 5 years, 10 years, 15 years, 20 years, 25 years or even 30 years?

Then you will find answers to all your SIP returns and monthly investment growth amount-related concerns here. And you don’t even need a SIP calculator as I have already done the hard work for you.

SIP investing can create tremendous wealth for you and to know is how much your money can grow when investing via monthly SIP in good mutual funds, simply click on any of the links or image below. All links take you to individual detailed posts that tell about the final value of the chosen SIP amount and model MF portfolios:

Or click on the images below:

Using the above links, you will have clear idea how your SIP investments will grow when you remain invested for 5 years, 10 years, 15 years, 20 years, 25 years or even 30 years!

Investing via SIP in best mutual funds for long-term is one of the best ways to begin your wealth creation journey. And since most common people are unable to big lump sum investments, SIP makes it very easy for such people to make small regular investments every month using their monthly salaries without feeling burdened.

To convince you further, here is a Real Life Story of how one person accumulated Rs 3.7 crores via SIP investments over long-term. Or read how investing Rs 1 lakh a year for 20 years can create a wealth of Rs 90+ lakh without much fuss.

But wealth creation is not the only benefit of SIP…

You can even use mutual fund SIPs to do your financial goal planning + invest regularly to achieve them. Saving for goals like children’s education, children’s marriage, retirement planning, saving for your house purchase, foreign trips, etc. can be done easily and profitably through systematic investment plans of mutual funds.

Here is a FREE (Downloadable) Financial Goal Excel Worksheet that you can use to plan out your financial goals.

As a professional investment advisor, I do help investors create goal-based financial plans to achieve their real financial goals. If you wish to get yourself a solid financial plan that tells you how much to invest, where to invest and for how long to invest for your financial goals, you can contact me for professional advice.

Here is how to contact me:

Go through the Services Page to see how I create your financial plan and use the form (at the end of the page) to contact me
Contact me directly using this form

So if you still haven’t done it, it’s time to start a SIP in Equity Mutual Funds.

I can assure you that over the next 5-10 years, you will create a lot of wealth and it will easily be one of your best financial decisions till date.

Invest Rs 5000 per month SIP Mutual Funds

by Dev AshishSeptember 10, 2017 2 Comments

Many people are of the view that they should only begin investing when they have a large sum to invest. The underlying belief is that small regular investments cannot create wealth.

But this is not true!

Did you know that by investing just Rs 5000 every month in equity mutual funds through a monthly Systematic Investment Plan (SIP) can create a corpus of Rs 1 crore in 15-20 years?

This might seem surprising. But you can easily accumulate Rs 1 Crore by investing just Rs 5000 Monthly.

So if you wish to know the best way to invest Rs 5000 per month or how to invest Rs 5000 per month and get Rs 1 crore, then you are at the right place.

Investing in mutual funds is one of the best ways to begin your wealth creation journey. And if you have already decided to invest 5000 per month in mutual fund SIP, then it’s all the more better.

Why do I say so?

Because it’s well proven; I have benefited from it greatly myself and also because I can share a real-life proof of how one person used SIP investing to create a portfolio of multiple crores.

SIP or Systematic Investment Plans are simple – invest a fixed sum in mutual funds at a regular frequency (generally monthly). Since most common investors are incapable of making big lump sum investments, SIP makes it easy for such people to make small regular investments every month using their monthly salaries without feeling burdened.

Once you have decided to invest a sum of Rs 5000 every month regularly, I am sure that you would be curious to know how much money you will have when you invest Rs 5000 a month in mutual funds for several years?

Right?

So let’s do some basic calculations:

Value of Rs 5000 per month SIP (Systematic Investment Plan)

Historical SIP returns of good mutual funds have been between 12-18%. The actual returns might differ for different investors. But for this discussion, let’s be conservative and assume the average SIP returns in 10, 15 or 20 years to be 12% per annum.

Here is what a Rs 5000 per month SIP in mutual funds can do over the years:

5 year SIP of Rs 5000 monthly = Rs 4.2 lakh
10 year SIP of Rs 5000 monthly = Rs 11.7 lakh
15 year SIP of Rs 5000 monthly = Rs 25.0 lakh
20 year SIP of Rs 5000 monthly = Rs 48.4 lakh
25 year SIP of Rs 5000 monthly = Rs 89.6 lakh
30 year SIP of Rs 5000 monthly = Rs 1.62 crore

Wow!

Those are some big numbers…atleast towards the end. And the picture becomes clearer when you compare these figures with the actual investments made:

5 year = Rs 5000 x 12 x 5 = Rs 3.0 lakh
10 year = Rs 5000 x 12 x 10 = Rs 6 lakh
15 year = Rs 5000 x 12 x 15 = Rs 9 lakh
20 year = Rs 5000 x 12 x 20 = Rs 12 lakh
25 year = Rs 5000 x 12 x 25 = Rs 15.0 lakh
30 year = Rs 5000 x 12 x 30 = Rs 18 lakh

The route of SIP investing can create a lot of wealth for you.

And just notice this – If you invest Rs. 5000 per month via SIP for 10 years, you are actually just investing about Rs 6 lakh. But return you are getting is around Rs 12 lakh. It is double of what you originally invested over the 10-year period. And the longer you keep investing, the better the returns get!

So just imagine the kind of wealth you can create if you start investing early on in your career (let’s say at age 25-30) and continue till 60.

Your monthly investments of Rs 5000 in equity funds can grow into Rs 1.62 crore in 30 years! This is the magic of compounding at play. Many who think that becoming a crorepati on regular salary is impossible – need to see these examples. They will realize that seemingly unachievable wealth targets can be achieved by investing as small as Rs 5000 per month.

Compared with other options like fixed deposits, PF, etc. (where you won’t get more than 7-8% returns), equity funds are great for real inflation-beating wealth creation.

And at the cost of sounding repetitive, I would say that starting early is unimaginably important. Here is something (very detailed) I wrote about the huge cost of delay in investing. It’s about two friends who start investing at different ages of 25 and 35. You will be shocked to see the difference in the final corpus they create. Do read it!

Real Example – SIP of Rs 5000 in Good Mutual Funds

The calculations shared above were done using simple SIP calculator (using fixed average returns of 12%). But in reality, the returns fluctuate and neither stock markets nor mutual fund NAVs move in straight lines.

So let’s use some real life SIP examples instead.

Let’s see what would have happened if you would have started investing Rs 5000 every month via SIP in some good mutual funds years back:

Note – The choice of fund(s) or fund house is just for sharing the concept. It should not be construed as an investment recommendation.

Starting January 2000, if you had invested Rs 5000 per month in HDFC Top 200, HDFC Equity and HDFC Prudence, your actual total investment in each would have been about Rs 10.55 lac (up to July 2017).

And the value of your investments would be…

….hold your breath….

Rs 87.1 lakh in HDFC Top 200 Fund
Rs 93.1 lakh in HDFC Equity Fund
Rs 81.4 lakh in HDFC Prudence Fund

Read those figures again. 🙂

We often think it’s difficult to get rich. The above examples prove otherwise. Rs. 5000 Per Month For 15 to 20 Years and you will become a Crorepati.

Investing in mutual fund SIPs can make you a SIP crorepati even with a normal income! No need for a rich father. 😉

So how to get Rs 1 crore in 20 years? The answer is to invest 10000 every month. How to get Rs 1 crore in 15 years? The answer is to invest Rs 20000 every month.

So now you have answers to your questions like how to become a crorepati by SIP.

But…

Don’t you feel something is odd in this discussion till now?

There is. And let me highlight it for you –

There is absolutely no need to keep investing just the originally decided amount of Rs 5000 per month for 20-30 years. Your income would increase every year. So your investments too should increase accordingly. Isn’t it?

Just imagine what would happen if you decide to go for a Step Up SIP? An SIP that increases every year in line with your income. So for example, it can be Rs 5000 in the first year, followed by 6000 per month in next year, 7000 per month in 3^rd year and so on…. (i.e., increasing SIP by Rs 1000 every year).

If you want to start a SIP, always keep in mind that you can create ‘more’ wealth if you are able to increase the SIP every year.

Now ofcourse I have chosen funds that help me prove my point. And there have been several other bad funds too where a systematic investment strategy would have resulted in much lower SIP returns. But I am trying to highlight the potential of serious wealth creation here. And if you believe in the power of equity, then for most common people, the best way to invest regularly in equity is to do it via mutual fund SIPs.

Model SIP Mutual Fund Portfolio

If you wish to create a portfolio of mutual funds by investing in a SIP of 5000 per month, it’s suggested to have 1-3 funds. Going for more is not necessary.

Depending on one’s risk profile, some possible options are:

Rs 5000 in Large Cap fund
Rs 2500 Balanced fund + Rs 2500 Large Cap fund
Rs 2500 Large cap fund + Rs 2500 Small & Mid Cap fund
Rs 3000 Large cap fund + Rs 2000 Small & Mid Cap fund
Rs 3500 in Multi Cap Fund + Rs 1500 Mid & Small Cap fund

There can be any number of combinations. Suitability of SIP portfolio will differ from one investor to other.

If you are not sure about where to invest or are looking for the best SIP for Rs 5000 per month or start to invest 5000 per month and get 1 crore, it’s better to take help of an investment advisor.

Note – It’s assumed that if investing Rs 5000 in equity funds, you have already taken care of debt investments (via PF, PPF, etc.) in accordance with your asset allocation based investment plan. It is also assumed that you wish to invest for atleast 5 years. Anything lower (like 2-3 years) and you should go for debt options or have a very small percentage in equity.

SIPs are really helpful when it comes to investing in equity without much effort or stress.

But SIPs in equity funds can be helpful when it comes to goal based investing too. You already know that equity has the potential to offer much better returns than other asset classes. This in turn helps you beat inflation which is essential to achieve long-term goals.

I have already written at length as to how setting goals can help better manage investments.

It is always advisable to attach a goal to your investments. It helps keep you motivated and stick with the investment plan for long enough. And this is exactly how the remarkably powerful goal based financial planning works.

You can easily use SIPs to plan for all your goals (Download FREE Financial Goal Excel Worksheet here) and then invest regularly to achieve them. Goals like saving for children’s education, children’s marriage, saving for your house purchase, foreign trips, etc. can be done easily and efficiently through systematic investment plans of mutual funds.

And why leave the biggest financial goal of them all?

You can even do retirement planning or early retirement planning using mutual funds. In addition to the mandatory savings you do for your retirement (via EPF or PPF), you can use SIPs to create a good retirement mutual fund portfolio. Investing in mutual funds for retirement is a no-brainer if you don’t want to run out of money before you die.

Here is how to contact me:

Go through the Services Page to see how I create your financial plan and use the form (at the end of the page) to contact me
Contact me directly using this form

As you must have realized, just knowing where to invest Rs 5000 every month is not enough. You need to know how much to invest in SIP to achieve your financial goals and then, invest in a more structured goal-based manner to live a financially fulfilling life that takes care of all your financial goals.

I will end this post now.

But before I do, let me tell you something important – SIP is no magic that will solve all your financial worries. Also, it does not guarantee high positive returns. But if you understand and believe in equity and the real power of compounding, I can assure you that taking the SIP route is your best bet to earn high returns offered by equity and that too in a limited monthly income that most people have. You have a real chance of getting very rich over time. And you don’t want to miss that. 🙂

Also please, don’t be under the impression that SIP is only for small investors. You can invest much more than just doing a SIP of 5000 per month.

You can go for (click links below for details):

By investing regularly via SIP in best mutual funds for long-term SIP investment, you can create a solid portfolio that earns inflation-beating returns without any hassles.

So…

Are you still thinking whether or not to start a SIP in equity mutual funds?

I would suggest you stop thinking and start acting now.

SIP is a wonderful tool available for investors who wish to create wealth in the long-run.

And more importantly, after reading this post, you have all the answers now. So you don’t need to wonder what would happen if I invest 5000 a month in mutual funds.

You know exactly how much wealth your small regular systematic investments can create. So start investing if you still haven’t, or increase your SIP investments if you are already investing Rs 5000 per month in mutual fund SIP. Over the long term, you will do incredibly well.

Invest Rs 10000 per month SIP Mutual Funds

by Dev AshishSeptember 10, 2017 7 Comments

Do you wish to know where and how best to invest Rs 10000 per month?

Then you are at the right place.

Investing in mutual funds is one of the best ways to begin your wealth creation journey. And if you have already decided to invest 10000 per month in mutual fund SIP, then its all the more better.

Why do I say so?

Because it’s well proven; I have benefited from it greatly myself and also because I can share a real life proof of how one person used SIP investing to create a portfolio of multiple crores.

Once you have decided to invest a sum of Rs 10000 every month regularly, I am sure that you would be curious to know how much money you will have when you invest Rs 10000 a month in mutual funds for several years?

Right?

So let’s do some basic calculations:

Value of Rs 10000 per month SIP

Here is what a Rs 10000 per month SIP in mutual funds can do over the years:

5 year SIP of Rs 10000 monthly = Rs 8.5 lakh
10 year SIP of Rs 10000 monthly = Rs 23 lakh
15 year SIP of Rs 10000 monthly = Rs 50 lakh
20 year SIP of Rs 10000 monthly = Rs 96 lakh
25 year SIP of Rs 10000 monthly = Rs 1.79 crore
30 year SIP of Rs 10000 monthly = Rs 3.24 crore

Wow!

Those are some big numbers…atleast towards the end. And the picture becomes clearer when you compare these figures with the actual investments made:

5 year = Rs 10,000 x 12 x 5 = Rs 6 lakh
10 year = Rs 10,000 x 12 x 10 = Rs 12 lakh
15 year = Rs 10,000 x 12 x 15 = Rs 18 lakh
20 year = Rs 10,000 x 12 x 20 = Rs 24 lakh
25 year = Rs 10,000 x 12 x 25 = Rs 30 lakh
30 year = Rs 10,000 x 12 x 30 = Rs 36 lakh

The route of SIP investing can create a lot of wealth for you.

And just notice this – If you invest Rs. 10,000 per month via SIP for 10 years, you are actually just investing about Rs 12 lakh. But return you are getting is around Rs 23-24 lakh. It is double of what you originally invested over the 10-year period. And the longer you keep investing, the better the returns get!

So just imagine the kind of wealth you can create if you start investing early on in your career (let’s say at age 25-30) and continue till 60. Your monthly investments of Rs 10,000 in equity funds can grow into Rs 3.5 crore in 30 years! This is the magic of compounding at play.

Compared with other options like fixed deposits, PF, etc. (where you won’t get more than 7-8% returns), equity funds are great for real inflation-beating wealth creation.

Real Example – SIP of Rs 10,000 in Good Mutual Funds

So let’s use some real life SIP examples instead.

Let’s see what would have happened if you would have started investing Rs 10,000 every month via SIP in some good mutual funds years back:

Note – The choice of fund(s) or fund house is just for sharing the concept. It should not be construed as an investment recommendation.

Starting January 2000, if you had invested Rs 10000 per month in HDFC Top 200, HDFC Equity and HDFC Prudence, your actual total investment in each would have been about Rs 21.1 lac (up to July 2017).

And the value of your investments would be…

….hold your breath….

Rs 1.74 crore in HDFC Top 200 Fund
Rs 1.86 crore in HDFC Equity Fund
Rs 1.63 crore in HDFC Prudence Fund

Read those figures again. 🙂

We often think it’s difficult to get rich. The above examples prove otherwise.

Investing in mutual fund SIPs can make you a SIP crorepati even with a normal income! No need for a rich father. 🙂

How to get Rs 1 crore in 20 years? The answer is to invest 10000 every month. How to get Rs 1 crore in 15 years? The answer is to invest Rs 20000 every month.

So now you have answers to your questions like how to become a crorepati by SIP. 🙂

But…

Don’t you feel something is odd in this discussion till now?

There is. And let me highlight it for you –

There is absolutely no need to keep investing just the originally decided amount of Rs 10000 per month for 20-30 years. Your income would increase every year. So your investments too should increase accordingly. Isn’t it?

A Rs 10000 per month investment for 17 years resulted in Rs 1.6-1.8 crore. Just imagine what would have happened if you had decided to go for a Step Up SIP? An SIP that increases every year in line with your income. So for example, it can be Rs 10000 in the first year, followed by 11,000 per month in next year, 12,000 per month in 3^rd year and so on…. (i.e., increasing SIP by Rs 1000 every year).

If you want to start a SIP, always keep in mind that you can create ‘more’ wealth if you are able to increase the SIP every year.

Model SIP Mutual Fund Portfolio

If you wish to create a portfolio of mutual funds by investing in a SIP of 10000 per month, it’s suggested not to have too many funds. Going for just 2-3 funds is more than enough.

Depending on one’s risk profile, some possible combinations are:

Rs 5000 each in two Large Cap funds
Rs 5000 Large Cap fund + Rs 5000 Balanced fund
Rs 7000 Large Cap fund + Rs 3000 Mid&Small Cap fund
Rs 5000 in Large Cap Fund + Rs 5000 in Flexi/Multi Cap Fund
Rs 5000 Large Cap fund + Rs 3000 Balanced fund + Rs 2000 Mid&Small Cap fund
Rs 5000 Balanced fund + Rs 3000 Mid&Small Cap fund + Rs 2000 Large cap fund
Rs 5000 Index Fund + Rs 5000 Balanced fund

There can be an infinite number of combinations. Suitability of SIP portfolio will differ from one investor to other. If you are not sure about where to invest or are looking for the best SIP for Rs 10000 per month, it’s better to take help of an investment advisor (you can contact me too).

Note – It’s assumed that if investing Rs 10000 in equity funds, you have already taken care of debt investments (via PF, PPF, etc.) in accordance with your asset allocation based investment plan. It is also assumed that you wish to invest for at least 5 years. Anything lower (like 2-3 years) and you should go for debt options or have a very small percentage in equities.

SIPs are really helpful when it comes to investing in equity without much effort or stress. But SIPs can be helpful when it comes to goal based investing too.

I have already written at length as to how setting goals can help better manage investments.

And why leave the biggest financial goal of them all?

Need Help?

Here is how to contact me:

Go through the Services Page to see how I create your financial plan and use the form (at the end of the page) to contact me
Contact me directly using this form

As you must have realized, just knowing where to invest Rs 10000 every month is not enough. You need to know how much to invest in SIP to achieve your financial goals and then, invest in a more structured goal-based manner to live a financially fulfilling life that takes care of all your financial goals.

I will end this post now.

Also please, don’t be under the impression that SIP is only for small investors. You can invest much more than just doing a SIP of 10000 per month.

You can go for (click links below for details):

Or if you want to know how much wealth you can create by investing lesser amounts, then use below links:

SIP of Rs 5000 per month in mutual funds

By investing regularly via SIP in best mutual funds for long term SIP investment, you can create a solid portfolio that earns inflation-beating returns without any hassles.

So…

Are you still thinking whether or not to start a SIP in equity mutual funds?

I would suggest you stop thinking and start acting now.

You have all the answers now… and don’t need to wonder what would happen if I invest 10000 a month in mutual funds.

You know exactly how much wealth your small regular systematic investments can create. So start investing if you still haven’t; or increase your SIP investments if you are already investing Rs 10000 per month in mutual fund SIP. Over long-term, you will do incredibly well.

Invest Rs 15000 per month SIP Mutual Funds

by Dev AshishSeptember 10, 2017 5 Comments

Do you wish to know where and how best to invest Rs 15000 per month?

Then you are at the right place.

Investing in mutual funds is one of the best ways to begin your wealth creation journey. And if you have already decided to invest 15000 per month in mutual fund SIP, then its all the more better.

Why do I say so?

Because it’s well proven; I have benefited from it greatly myself and also because I can share a real life proof of how one person used SIP investing to create a portfolio of multiple crores.

Once you have decided to invest a sum of Rs 15000 every month regularly, I am sure that you would be curious to know how much money you will have when you invest Rs 15000 a month in mutual funds for several years?

Right?

So let’s do some basic calculations:

Value of Rs 15000 per month SIP

Here is what a Rs 15000 per month SIP in mutual funds can do over the years:

5 year SIP of Rs 15000 monthly = Rs 12.8 lakh
10 year SIP of Rs 15000 monthly = Rs 35 lakh
15 year SIP of Rs 15000 monthly = Rs 75 lakh
20 year SIP of Rs 15000 monthly = Rs 1.4 crore
25 year SIP of Rs 15000 monthly = Rs 2.7 crore
30 year SIP of Rs 15000 monthly = Rs 4.8 crore

Wow!

Those are some big numbers…atleast towards the end. And the picture becomes clearer when you compare these figures with the actual investments made:

5 year = Rs 15,000 x 12 x 5 = Rs 9 lakh
10 year = Rs 15,000 x 12 x 10 = Rs 18 lakh
15 year = Rs 15,000 x 12 x 15 = Rs 27 lakh
20 year = Rs 15,000 x 12 x 20 = Rs 36 lakh
25 year = Rs 15,000 x 12 x 25 = Rs 45 lakh
30 year = Rs 15,000 x 12 x 30 = Rs 54 lakh

The route of SIP investing can create a lot of wealth for you.

And just notice this – If you invest Rs. 15,000 per month via SIP for 10 years, you are actually just investing about Rs 18 lakh. But return you are getting is around Rs 35-36 lakh. It is double of what you originally invested over the 10-year period. And the longer you keep investing, the better the returns get!

So just imagine the kind of wealth you can create if you start investing early on in your career (let’s say at age 25-30) and continue till 60. Your monthly investments of Rs 15,000 in equity funds can grow into Rs 4.8 crore in 30 years! This is the magic of compounding at play.

Compared with other options like fixed deposits, PF, etc. (where you won’t get more than 7-8% returns), equity funds are great for real inflation-beating wealth creation.

Real Example – SIP of Rs 15000 in Good Mutual Funds

So let’s use some real life SIP examples instead.

Let’s see what would have happened if you would have started investing Rs 15,000 every month via SIP in some good mutual funds years back:

Note – The choice of fund(s) or fund house is just for sharing the concept. It should not be construed as an investment recommendation.

Starting January 2000, if you had invested Rs 15,000 per month in HDFC Top 200, HDFC Equity and HDFC Prudence, your actual total investment in each would have been about Rs 31.6 lac (up to July 2017).

And the value of your investments would be…

….hold your breath….

Rs 2.61 crore in HDFC Top 200 Fund
Rs 2.79 crore in HDFC Equity Fund
Rs 2.44 crore in HDFC Prudence Fund

Read those figures again. 🙂

We often think it’s difficult to get rich. The above examples prove otherwise.

Investing in mutual fund SIPs can make you a SIP crorepati even with a normal income! No need for a rich father. J How to get Rs 1 crore in 20 years? The answer is to invest 10000 every month. How to get Rs 1 crore in 15 years? The answer is to invest Rs 20000 every month.

So now you have answers to your questions like how to become a crorepati by SIP. 🙂

But…

Don’t you feel something is odd in this discussion till now?

There is. And let me highlight it for you –

There is absolutely no need to keep investing just the originally decided amount of Rs 15,000 per month for 20-30 years. Your income would increase every year. So your investments too should increase accordingly. Isn’t it?

A Rs 15000 per month investment for 17 years resulted in Rs 2.4-2.8 crore. Just imagine what would have happened if you had decided to go for a Step Up SIP? An SIP that increases every year in line with your income. So for example, it can be Rs 15,000 in the first year, followed by 17,000 per month in next year, 19,000 per month in 3^rd year and so on…. (i.e., increasing SIP by Rs 2000 every year).

If you want to start a SIP, always keep in mind that you can create ‘more’ wealth if you are able to increase the SIP every year.

Model SIP Mutual Fund Portfolio

If you wish to create a portfolio of mutual funds by investing in a SIP of 15000 per month, it’s suggested not to have too many funds. Going for just 2-3 funds is more than enough.

Depending on one’s risk profile, some possible combinations are:

Rs 7500 each in two Large Cap funds
Rs 5000 Large Cap fund + Rs 10000 Balanced fund
Rs 10000 Large Cap fund + Rs 5000 Mid&Small Cap fund
Rs 7500 in Large Cap Fund + Rs 7500 in Flexi/Multi Cap Fund
Rs 7000 Large Cap fund + Rs 5000 Balanced fund + Rs 3000 Mid&Small Cap fund
Rs 5000 Balanced fund + Rs 5000 Mid&Small Cap fund + Rs 5000 Large cap fund
Rs 10000 Index Fund + Rs 5000 Balanced fund

There can be an infinite number of combinations. Suitability of SIP portfolio will differ from one investor to other. If you are not sure about where to invest or are looking for the best SIP for Rs 15000 per month, it’s better to take help of an investment advisor (you can contact me too).

Note – It’s assumed that if investing Rs 15000 in equity funds, you have already taken care of debt investments (via PF, PPF, etc.) in accordance with your asset allocation based investment plan. It is also assumed that you wish to invest for at least 5 years. Anything lower (like 2-3 years) and you should go for debt options or have a very small percentage in equities.

SIPs are really helpful when it comes to investing in equity without much effort or stress. But SIPs can be helpful when it comes to goal based investing too.

I have already written at length as to how setting goals can help better manage investments.

And why leave the biggest financial goal of them all?

Need Help?

Here is how to contact me:

Go through the Services Page to see how I create your financial plan and use the form (at the end of the page) to contact me
Contact me directly using this form

As you must have realized, just knowing where to invest Rs 15,000 every month is not enough. You need to know how much to invest in SIP to achieve your financial goals and then, invest in a more structured goal-based manner to live a financially fulfilling life that takes care of all your financial goals.

I will end this post now.

Also please, don’t be under the impression that SIP is only for small investors. You can invest much more than just doing a SIP of 15,000 per month.

You can go for (click links below for details):

Or if you wish to invest a smaller amount, you can even check the below link:

By investing regularly via SIP in best mutual funds for long term SIP investment, you can create a solid portfolio that earns inflation-beating returns without any hassles.

So…

Are you still thinking whether or not to start a SIP in equity mutual funds?

I would suggest you stop thinking and start acting now.

You have all the answers now… and don’t need to wonder what would happen if I invest 15000 a month in mutual funds.

You know exactly how much wealth your small regular systematic investments can create. So start investing if you still haven’t; or increase your SIP investments if you are already investing Rs 15000 per month in mutual fund SIP. Over long-term, you will do incredibly well.

Invest Rs 20000 per month in SIP Mutual Fund

by Dev AshishSeptember 10, 2017 Leave a comment

Are you planning to invest Rs 20000 per month? Or for that matter, you have already decided to invest 20000 per month in mutual fund SIP?

If yes, then please read on.

Investing Rs 20000 every month means different things to different people. For those with a salary of Rs 50,000, it means a lot (40% of salary). But for someone with Rs 3 lac monthly income, it’s next to nothing (~7% of income)!

In any case, investing in mutual fund SIP is a good decision and you will create a lot of wealth.

Why do I say so?

Because it’s well proven; I have benefited from it greatly myself and also because there are several real life proofs for this (like this one where one person used SIP to create a portfolio of multiple crores).

SIP or Systematic Investment Plan is simple – Invest a fixed sum in mutual funds at a regular frequency (mostly monthly). Since most people are incapable of making big lump sum investments, SIP makes it easy for these people to make small and regular investments every month using their monthly salaries.

Now once you have decided to go ahead with your investment plan, my guess is that your main concern would be to know how much you will have if you invest Rs 20000 every month for several years?

Right?

So let’s do some basic calculations:

Value of Rs 20000 per month Mutual Fund SIP

If you check the historical SIP returns of good mutual funds, you will find that returns have been in the range of 12 to 18%. But let’s be conservative and assume that the average SIP returns in 10, 15 or 20 years will be about 12% per annum.

So here is what a Rs 20000 monthly Systematic Investment Plan can do over the years:

5 year SIP of Rs 20000 monthly = Rs 17 lakh
10 year SIP of Rs 20000 monthly = Rs 47 lakh
15 year SIP of Rs 20000 monthly = Rs 1 crore
20 year SIP of Rs 20000 monthly = Rs 1.9 crore
25 year SIP of Rs 20000 monthly = Rs 3.5 crore
30 year SIP of Rs 20000 monthly = Rs 6.4 crore

Wow!

Those are some big numbers…at least towards the end.

And the picture becomes clearer when you compare these numbers with the actual investments made:

5 year = Rs 20,000 x 12 x 5 = Rs 12 lakh
10 year = Rs 20,000 x 12 x 10 = Rs 24 lakh
15 year = Rs 20,000 x 12 x 15 = Rs 36 lakh
20 year = Rs 20,000 x 12 x 20 = Rs 48 lakh
25 year = Rs 20,000 x 12 x 25 = Rs 60 lakh
30 year = Rs 20,000 x 12 x 30 = Rs 72 lakh

Stunning! Isn’t it?

The route of SIP investing can create a lot of wealth for you.

And just notice that if you invest Rs. 20,000 per month via SIP for 10 years, you are actually investing about Rs 24 lakh. But in return, you are getting around Rs 47-48 lakh. It is double of what you originally invested over the 10-year period.

So just imagine the kind of wealth you can create if you start investing early on in your career (let’s say at age 25-30) and continue till 60. Your monthly investments of Rs 20,000 in equity funds can grow into Rs 6.4 crore in 30 years! This is the magic of compounding at play.

Compared with other options like fixed deposits, PF, etc. (where you won’t get more than 7-8% returns), equity funds are great for real inflation-beating wealth creation.

And at the cost of sounding repetitive, I would say that starting early is unimaginably important. Here is a detailed post that I did to highlight the huge cost of delay in investing. It’s about two friends who start investing at different ages of 25 and 35. You will be shocked to see the difference in the final corpus they create. Do read it!

Real Example – SIP of Rs 20000 in Good Mutual Funds

The calculations above were done using simple SIP calculator (assuming 12% average returns). But in reality, neither stock markets nor mutual fund NAVs move in straight lines. The returns fluctuate and don’t follow straight lines.

So here are some real life SIP examples to show how much you would have if you had started investing Rs 20,000 a month via SIP in good funds years back:

Note – The choice of fund(s) or fund house is just for sharing the concept. It should not be construed as an investment recommendation.

Starting from January 2000, if you had invested Rs 20,000 per month in HDFC Top 200, HDFC Equity and HDFC Prudence, your actual total investment in each would have been about Rs 42.2 lac (up to July 2017).

And the value of your investments would be…

….hold your breath….

Rs 3.48 crore in HDFC Top 200 Fund
Rs 3.72 crore in HDFC Equity Fund
Rs 3.26 crore in HDFC Prudence Fund

Read those figures again. 🙂

These have been achieved in little over 17 years!

We often think it’s difficult to get rich. But the above examples prove otherwise.

Investing in mutual fund SIPs can make you a SIP crorepati even with a normal income. How to get Rs 1 crore in 15 years? The answer is to invest Rs 20000 every month. Can’t invest that much? No worries. If you invest Rs 10000 every month, you can still get to Rs 1 crore in 20 years. So if you were looking for an answer to how to become crorepati by SIP, I assume you have your answers now. 🙂

But…

Don’t you feel something is odd in this discussion till now?

There is. And let me highlight it for you –

There is absolutely no need to keep investing just the originally decided amount of Rs 20000 per month for 20-30 years. Your income would increase every year. So your investments should increase too. Isn’t it? Now a Rs 20000 per month investment for 17 years resulted in Rs 3.2-3.8 crore. Just imagine what would have happened if you had decided to go for a Step Up SIP? An SIP that increases every year in line with your income. So for example, it can be Rs 20000 in the first year, followed by SIP of 25,000 per month in next year, SIP of 30,000 per month in 3^rd year and so on…. (i.e., increasing SIP by Rs 5000 every year).

I hope you get the picture. 🙂

If you are planning to start a SIP, just remember that you can create ‘more’ wealth if you are able to increase the SIP amount every year.

Now ofcourse I have chosen funds that help me prove my point. And there would be several other bad funds too where a systematic investment strategy would have resulted in much lower SIP returns.

But I am trying to highlight the potential of serious wealth creation here. And if you believe in the power of equity, then for most common people, the best way to invest regularly in equity is to do via mutual fund SIPs.

Model SIP Mutual Fund Portfolio

If you wish to create a portfolio of mutual funds by doing a SIP of 20000 per month, it’s suggested not to have too many funds. Going for just 2-4 funds is more than enough.

Depending on one’s risk profile, some possible combinations are:

Rs 10000 each in two Large Cap funds
Rs 10000 Large Cap fund + Rs 10000 Balanced fund
Rs 7500 each in two Large Cap funds + Rs 5000 Mid&Small Cap fund
Rs 10000 in Large Cap Fund + Rs 10000 in Flexi/Multi Cap Fund
Rs 10000 Large Cap fund + Rs 5000 Balanced fund + Rs 5000 Mid&Small Cap fund
Rs 10000 Balanced fund + Rs 6000 Mid&Small Cap fund + Rs 4000 Large cap fund
Rs 10000 Index Fund + Rs 10000 Balanced fund

There can be an infinite number of combinations. Suitability of SIP portfolio will differ from one investor to other.

If you are not sure about where to invest or looking for the best SIP for Rs 20000 per month, it’s better to take help of an investment advisor.

Note – It’s assumed that if investing Rs 20000 in equity funds, you have already taken care of debt investments (via PF, PPF, debt funds, etc.) in accordance with your asset allocation based investment plan. It is also assumed that you wish to invest for at least 5 years. Anything lower (like 2-3 years) and you should go for debt options or have a very small percentage in equities.

SIPs are really helpful when it comes to investing in equity without much effort or stress. But SIPs can be helpful when it comes to goal based investing too.

I have already written at length as to how setting goals can help better manage investments.

In fact, it’s the basis of how the remarkably powerful and useful goal based financial planning works.

You can easily use SIPs to plan for all your goals (download free financial goal worksheet here) and then invest regularly to achieve them. Goals like saving for children’s education, children’s marriage, saving for your house purchase, foreign trips, etc. can be done easily and efficiently through systematic investment plans of mutual funds.

And why leave the biggest goal of them all?

You can even do your retirement planning or early retirement planning using mutual funds. In addition to the mandatory savings you do for your retirement (via EPF or PPF), you can use SIPs to create a good retirement mutual fund portfolio too. Investing in mutual funds for retirement is a no-brainer if you don’t want to run out of money before you die.

Need Help?

Here is how to contact me:

Go through the Services Page to see how I create your financial plan and use the form (at the end of the page) to contact me
Contact Me Directly using this form

As you must have realized by now, just knowing where to invest Rs 20000 every month is not enough. You need to invest according to your financial goals to actually live a financially fulfilling life.

I will end this post now.

But before I do, let me tell you something important – SIP is no magic that will solve all your financial worries. Also, it does not guarantee high positive returns. But in order to earn high returns offered by equity and that too on a limited monthly income that most people have, taking the SIP route is the best bet.

And please, don’t be under the impression that SIP is only for small investors. You can invest much more than just doing a SIP of 20000 per month. 🙂 You can go for (click links below for details):

Or if you want to know how much wealth you can create by investing lesser amounts, then use below links:

By investing regularly via SIP in the best mutual funds for long term SIP investment, you can create a solid portfolio that earns inflation-beating returns without any hassles.

So…

Are you still thinking whether or not to start a SIP in equity mutual funds?

I would suggest you stop thinking and start acting now.

You have all the answers now and don’t need to wonder what would happen if I invest 20000 a month in mutual funds. You know exactly how much wealth your small regular systematic investments can create. So start investing if you still haven’t; or increase your SIP investments if you are already investing 20000 monthly in mutual fund SIP. Over long-term, you will do incredibly well.