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D.Muthukrishnan (Muthu), Certified Financial Planner- Personal Financial Advisor

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3 Points

Posted by Muthu on September 27, 2012

1) Despite Sensex SIP IRR of only 7.5% in the last 5 years, many good equity funds have given over 15% annualized return, through SIP mode, during the same period. Beating the popular benchmark twice is no small achievement. This is as per the article published in ET yesterday. The article also mentions “SIPs eliminate the human bias. It encourages investments at all times, irrespective of the market levels. Investors will pocket good gains if they invest in SIP of funds with a good track record.” 

So please continue your SIPs under any circumstances and completely ignore the markets. You do well financially if you follow this alone.

2) ‘Little book that builds wealth’ by Pat Dorsey is one of the good investment books I’ve read recently. I understood properly what the term ‘moat’, frequently mentioned by Buffett means in investing. Some of my assumptions about moat were wrong. I realized this only after reading the above book. It talks about switching cost which creates moat.

The book says banks and financial services have big moat and people would not switch so easily. For example, in advisory firm like us, people may stick long not only because they like us but also because of the uncertainty which comes from exploring the new relationship. Whether our profession have moat or not (i.e.) whether we have sticky relationships or fluid ones? Your response would be appreciated for this point. I would know first hand whether we have moat or not. I’m not going to publish the result:-)

3) Many tell me that they would like to have Rs.1 lakh per month (at current prices) for rest of their life. This means financial independence for them. Assuming you are forty today, with future inflation @ 6%, expected return around 9%, you can have 1L per month duly adjusted for inflation (i.e. 1L would be 1.35L after 5 years, 1.8L after 10 years and so on) for next 40 years, if you’ve Rs.3 crore with you now. 

With the above numbers, the corpus required at 50 is Rs.2.5 crores and for 60 it is Rs.2 crore.  I’m not giving for 30 because, you’re not supposed to retire so early:-)

2 Responses to “3 Points”

  1. Vijayan said

    Dear sir,
    I’ve read an article from the above link.
    Is gold is better than sensex…..?
    Would you please explain sir…….?
    THANK YOU…..

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