Saluting most amazing Creation of God

Happy Women's day!!!

4 financial lessons world learnt from you

1) Creator - You taught us how from just a seed a whole new life can be created... *Power of compunding*

2) Securing what's achieved - You taught us how to create balance in family so that each one of us is happy and secured - *Power of asset allocation*

3) Keep growing - Being a mother you took care of us to help us grow and  to be a better human being - *Power of Investing*

4) Sharing is caring - You always taught us since our childhood to share whatever little we have with others - *Charity - to take care of less privileged*

*Saluting most amazing Creation of God.*

Be wealthy like Warren Buffet by investing just 220 buck per month !!!

We all dream to be wealthy like Warren buffet, rather fact is most of us would have never ever dreamt of being as wealthy as him. But is it that difficult to be as rich as warren buffet.

I tried to evaluate and did certain calculation of what actually made warren buffet one of the wealthiest person in the world.

1) Long term : He never invested money looking at short term. Warren Buffet says -

“I never attempt to make money on the stock market. I buy on the assumption that they could close the market the next day and not reopen it for ten years.”

2) Start Early : He made his first investment at the age of 11 and still regrets that he started late.

3) Discipline : He has been an investor since he made his first investment.

4) Power of compounding : His biggest friend in wealth creation is power of compounding he compounded his wealth @22% per annum. It is very easy to get return of 50% or may be 100% once in your lifetime, but is very difficult to get return of 22% every year for almost 75 years.

5) Expenses : He still lives in 3 bed room house in omaha bought 57 years back . He drives his own car.Although he owns worlds largest jet company but never flies by a private jet.He also doesn't carry a cell phone. He believes :

" If today you buy things you do not need, soon you will have to sell things you need".

With all the above qualities, let's understand how any of us can create wealth like Mr.Buffet.

Date of Birth : 30/08/1930 

Age : 85 Years 

Started investing : 11 Years 

Investing since : 75 Years 

Present Wealth : 67 Billion US$

Compounded : @22% 

Increase in rate of Investment : @10%

Investment in first year : USD.2682.00

That means if someone starts at age of 11 with just USD.220 per month increasing it 10% every year and compounding it @22% can accumulate such wealth. Is it that difficult?

The toughest task here is to compound your investment@22%/p.a. for such a long period. 

But luckily we have some of the Equity Mutual fund which gave return @24% annualised, during last 20 years of its existence. So even if you are not having stock picking knowledge of Warren Buffet, you have easier way available to be wealthy like him.

Will conclude with one of his best words of wisdom : 

"If you are luckiest 1 percent of humanity, you owe it to the rest of the humanity to think about the other 99%.

You would be surprised to note that his children will not inherit a significant proportion of his wealth, he has pledged 99% of his wealth to charity and already donated US$25.5 Billion.

What is Systematic Invetment Plan - SIP

Systematic Investment Plan (SIP) is not an asset class in itself, it is an option that will help you to accumulate money. In simpler terms you may say it is an recurring deposit in mutual fund.

What is a Systematic Investment Plan?

A Systematic Investment Plan or SIP is a smart and hassle free mode for investing money in mutual funds. SIP allows you to invest a certain pre-determined amount at a regular interval (weekly, monthly, quarterly, etc.). A SIP is a planned approach towards investments and helps you inculcate the habit of saving and building wealth for the future.

How does it work?

A SIP is a flexible and easy investment plan. Your money is auto-debited from your bank account and invested into a specific mutual fund scheme.You are allocated certain number of units based on the ongoing market rate (called NAV or net asset value) for the day.

Every time you invest money, additional units of the scheme are purchased at the market rate and added to your account. Hence, units are bought at different rates and investors benefit from Rupee-Cost Averaging and the Power of Compounding.

Rupee-Cost Averaging

With volatile markets, most investors remain skeptical about the best time to invest and try to 'time' their entry into the market. Rupee-cost averaging allows you to opt out of the guessing game. Since you are a regular investor,your money fetches more units when the price is low and lesser when the price is high. During volatile period, it may allow you to achieve a lower average cost per unit.

Power of Compounding

Albert Einstein once said, "Compound interest is the eighth wonder of the world. He who understands it, earns it... he who doesn't... pays it." The rule for compounding is simple - the sooner you start investing, the more time your money has to grow.

Example

If you started investing Rs. 10000 a month on your 40th birthday, in 20 years time you would have put aside Rs. 24 lakhs. If that investment grew by an average of 7% a year, it would be worth Rs. 52.4 lakhs when you reach 60.

However, if you started investing 10 years earlier, your Rs. 10000 each month would add up to Rs. 36 lakh over 30 years. Assuming the same average annual growth of 7%, you would have Rs. 1.22 Cr on your 60th birthday - more than double the amount you would have received if you had started ten years later!

Other Benefits of Systematic Investment Plans

· Disciplined Saving - Discipline is the key to successful investments. When you invest through SIP, you commit yourself to save regularly. Every investment is a step towards attaining your financial objectives.

· Flexibility - While it is advisable to continue SIP investments with a long-term perspective, there is no compulsion. Investors can discontinue the plan at any time. One can also increase/ decrease the amount being invested.

· Long-Term Gains - Due to rupee-cost averaging and the power of compounding SIPs have the potential to deliver attractive returns over a long investment horizon.

· Convenience - SIP is a hassle-free mode of investment. You can issue a standing instruction to your bank to facilitate auto-debits from your bank account.

SIPs have proved to be an ideal mode of investment for retail investors who do not have the resources to pursue active investments. Specially in equity funds as investors tend to stop fresh investment during bearish phase but SIP helps you to overcome that emotion as it is getting deducted every month directly from your account irrespective of market conditions.

So keep SIPing it will create a big wealth for you in long term.