It has been seen quite often people from all walks of life, whether employed, professionals, businessmen give least priority to their financial goals. Is this due to lack of proper knowledge to identify goals or if the goals are defined, is there lack of proper execution ??
As per the data below, Indians deployed 69% of Household savings in Physical Assets, in anticipation that it will give fantastic returns, but question is .... Can it be liquidated it when one is in need of funds?? How long will it take to liquidate a Physical Asset. If one needs a Physical Asset for end use, there is always a good time, but if one wants to invest in Physical Asset for decent returns as we saw in between 2008-2012 period, please give a second thought. Since last 3 years Real Estate has been going through a tough period. It is a very good saying :: "Don't put all your eggs in one basket". What all options do we have which is liquid, which has historically given best returns.....It is Equities markets in India which has given CAGR returns of 17% in last 30 years.
The BSE Sensex has a base of 100 for the year 1979. The Sensex first touched 10,000 in February 2006, i.e. 100x in 27 years (almost 19% CAGR). As of March 2014, the Sensex stood at 22,400 levels. It was at 224-levels in 1984, i.e. 100x in 30 years (CAGR of 17%).Source ::.Economic Times edition 10/01/2015.
Just 2.5%-3% of Indian population has been investing in Equities. I don't know why people are afraid of Equities when it has beaten all the asset classes in terms of returns. Is it the fear to lose capital, patience, knowledge or guidance ??
Those who are exposed to this asset class do not like to invest in other Saving instruments such as FDs,/ Debt Funds/ Gold etc. They feel that sooner or later Equity, as an asset class, will give the best returns .
If one doesn't have the knowledge, please invest through Equity Schemes of Mutual Funds. Equity Mutual Funds are the funds managed by Fund Managers who have experience in this field. If one has lumpsum amount, he/she can invest at one go. If one hasn't and want to build capital over a period of time and achieve goals, best way is SIP (Systematic Investment Plan). In SIP a monthly predecided amount is deducted from bank account and is invested via Mutual Funds in the Markets.
SIP averages out the highs and lows of the market and give decent returns over a period of time. Ensure, that SIP is for medium term to long term (5 years and above) to actually view the returns generated by the fund.
If still scary about Equity markets, one can invest in Balanced Schemes of Mutual Funds wherein investment in Equity Funds are 65% - 75% and Debt Funds 25%-35%.
The last but not the least :: All Equities/ Equity Mutual Funds/ Balanced Mutual Funds fall under 15% short term capital gain if gains are booked in less than 1 year. Above 1 year of investments, these gains fall under long term which stands NIL as on date.
Happy Investing !!!
As per the data below, Indians deployed 69% of Household savings in Physical Assets, in anticipation that it will give fantastic returns, but question is .... Can it be liquidated it when one is in need of funds?? How long will it take to liquidate a Physical Asset. If one needs a Physical Asset for end use, there is always a good time, but if one wants to invest in Physical Asset for decent returns as we saw in between 2008-2012 period, please give a second thought. Since last 3 years Real Estate has been going through a tough period. It is a very good saying :: "Don't put all your eggs in one basket". What all options do we have which is liquid, which has historically given best returns.....It is Equities markets in India which has given CAGR returns of 17% in last 30 years.
The BSE Sensex has a base of 100 for the year 1979. The Sensex first touched 10,000 in February 2006, i.e. 100x in 27 years (almost 19% CAGR). As of March 2014, the Sensex stood at 22,400 levels. It was at 224-levels in 1984, i.e. 100x in 30 years (CAGR of 17%).Source ::.Economic Times edition 10/01/2015.
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Chart 1: Distribution of Household Savings
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(%)
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Financial Savings
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Physical savings
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FY01
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46.4
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53.6
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|
|
FY02
|
45.4
|
54.6
|
|
|
FY03
|
44.9
|
55.1
|
|
|
FY04
|
47.6
|
52.4
|
|
|
FY05
|
42.9
|
57.1
|
|
|
FY06
|
50.4
|
49.6
|
|
|
FY07
|
48.7
|
51.3
|
|
|
FY08
|
51.9
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48.1
|
|
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FY09
|
42.9
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57.1
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|
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FY10
|
47.5
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52.5
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FY11
|
43.0
|
57.0
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|
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FY12
|
30.8
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69.2
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FY13
|
32.4
|
67.6
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Just 2.5%-3% of Indian population has been investing in Equities. I don't know why people are afraid of Equities when it has beaten all the asset classes in terms of returns. Is it the fear to lose capital, patience, knowledge or guidance ??
Those who are exposed to this asset class do not like to invest in other Saving instruments such as FDs,/ Debt Funds/ Gold etc. They feel that sooner or later Equity, as an asset class, will give the best returns .
SIP averages out the highs and lows of the market and give decent returns over a period of time. Ensure, that SIP is for medium term to long term (5 years and above) to actually view the returns generated by the fund.
If still scary about Equity markets, one can invest in Balanced Schemes of Mutual Funds wherein investment in Equity Funds are 65% - 75% and Debt Funds 25%-35%.
The last but not the least :: All Equities/ Equity Mutual Funds/ Balanced Mutual Funds fall under 15% short term capital gain if gains are booked in less than 1 year. Above 1 year of investments, these gains fall under long term which stands NIL as on date.
Happy Investing !!!
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