Amit, who lives with his wife, mother and a son, was not sure who he could trust. “I asked my friends, is it good to invest in mutual funds? Some said, it’s not a very good idea. Some said you can’t make any money, and so on,” said Amit.
All this soon changed.
investment journey: “One day, I met a college friend who introduced me to Rachit Chawla, SEBI-registered investment advisor and founder and CEO of Finway FSC,” said Amit. “My friend told me that she had helped him with useful investment tips, after which he has been enjoying a lucrative investment portfolio for years,” he said.
During Chawla’s first visit to office in 2018, the latter’s first question was, “What do you want to do?” Amit replied that he wanted to invest some money in a safe and profitable option, but he was unsure where and how to invest in excess.
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After listening to Amit, Chawla advised him to start systematic investment plans (SIP) for better results. And Chawla emphasized on long term plans to get better return on investment (ROI).
investment plan: After giving his consent to Chawla’s suggestion for long term SIP, Amit requested Chawla to guide him as to which fund would be best suited for him and how much he should invest in his first attempt. Chawla asked Amit to start with 5,000 SIP in Nifty 50 Index Fund under Direct Option with UTI AMC as it had lowest management fee.
Chawla notes Amit’s long-term goals, including his son’s education, marriage and retirement planning. , 5,000 per month was not a big deal for me, and I could do it very easily. I started investing in mutual funds as per Chawla’s suggestion,” Amit said.
COVID Era: The year 2020 started on a promising note; The fund was performing extremely well, and Amit was amazed to see the growth of his investments in just two years. However, after a few weeks in 2020, India witnessed the outbreak of Covid-19. Things turned upside down, the market fell into a slump and stocks started falling. The investments made by Amit were no exception and saw a steep decline.
It was initially shocking to Amit, but he remembered Chawla’s words that he had to wait at least five years before taking a safe bet in equities. Further, Chawla assured Amit that instead of worrying about the slowdown, he should invest more as it was the best time to do some big deals.
“Are you scared about the market? No need to panic. Be relaxed as you have invested in a balanced plan. Don’t worry at all. Trust me, and don’t even think about it,” Chawla told Amit Said to.
Chawla further said that the SIPs he continued during the pandemic gave returns of over 100% (the UTI Nifty 50 Index Fund Growth Invested in 2020 has grown by 100%).
“In a few months, Amit accepted that if the market crashes, he should get stocks of similar quality at lower prices. They are confident that in the long run, fair value of the shares will be discovered,” Chawla said.
Further, Chawla encouraged them to create an emergency fund to meet future unforeseen expenses. He asked Amit to keep the expenses of about 12 months in the emergency fund. Chawla further suggested him that whatever liquid money is there, it should be invested immediately (during the pandemic).
Hence, Amit followed Chawla’s optimistic advice instead of thinking of discontinuing or breaking the SIP; This time, he invested in debt/liquid funds after maintaining his emergency fund. Thus, after a few months in 2020, Amit again inquired about more options that could further increase his passive income. Chawla helped him in a similar SIP 5,000
Figuring out how Amit could achieve his financial goals for his child, Chawla decided that Amit could do the same with monthly investments. 5,000, as this amount has been invested monthly over 20 years, so that he would get approx. 75 lakhs if it grows at the rate of 15% annually.
Chawla further said, “India’s GDP grows at 7% per annum, and inflation at an average rate of 6% per annum and 2% dividend can achieve a return of 15% over the long term from the reinvested Nifty 50 MF. “
“I have also suggested that Amit invest 50% of his investments in debt funds including UTI Liquid Fund or HDFC Liquid. We have considered these debt funds as Amit can withdraw them immediately if needed.”
current ballpark value: Amit’s portfolio has 50% equity and 50% debt investments. His 2018 SIP has now increased 3.6 lakh, and the second, started in 2020, has reached 1.8 lakhs. Amit said that he is happy with the current growth in his portfolio and expects him to achieve all his financial goals with ease.
Amit also has a traditional life insurance policy which he had bought a long time back. He does not have any term plan. He does have a health insurance policy, however – a family floater policy.
Chalva says that volatility is a part of stock markets, and one should invest with a long-term objective.
Essential Tips by the Planner: You should assess your risk profile and financial needs before investing in Mutual Funds.
One can take advice from SEBI registered financial advisor and avail the same. Invest for the long term, especially if you are investing in equities. Investing through SIP reduces volatility.
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