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

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Posts Tagged ‘SIP’

Rare one

Posted by Muthu on February 19, 2015

As per CAMS database there are only 7 million mutual fund investors (unique PAN) in India. Source: https://twitter.com/NagpalManoj . We can add maximum 1 more million as some old cases would be without PAN, UTI (coming under Karvy database) is likely to have some unique investors etc.

So we may have around 8 million mutual fund investors in India.

Also according to Manoj Nagpal, the SIP book size of the fund industry is 67 lakhs SIPs with an average ticket size Rs.2800. This is a few months old data. Assuming a person would have at least 2 SIPs, there would be around 3 million SIP investors in India.

There are 13.6 million demat accounts in NSDL and 9.4 million demat accounts with CDSL. We do not know how many of these are active. Also many stock investors I know has more than one demat account. So my understanding is that there would be around 10 million shareholders in the country.

Many who invests in stocks also invests in mutual funds and vice versa.

So the total equity investor base in India would be around 10 million to 15 million.

Out of the population of 1250 million, this is 1%.

However we’ve to understand one thing. Not everyone can be an investor.

In my opinion, one needs to earn at least Rs.15,000 a month to be capable of investing a small sum every month; after taking care of expenses and premium for risk covers. This is roughly 50 million people; based on NSSO (National Sample Survey Organisation) statistics.

So only 4% of India’s population is capable of investing. Out of which 25%; (i.e.) 1% population is already investing.

So you are one of 4% who have been blessed with the ability to invest.

You are one of the 1% who has understood the opportunities available and is investing in equity.

You’re one of the 0.2% (3 million out of 1250 million), who has understood the power of investing regularly through SIPs.

You’re a rare one. Be aware of the same and don’t let go of this opportunity.

Posted in General, Muthu's Musings, Stock Market | Tagged: , | Leave a Comment »

Graham on SIP

Posted by Muthu on January 4, 2015

For those of you who may not be aware, SIP (Systematic Investment Plan) is commonly known as ‘Dollar Cost Averaging’ in United States.

Benjamin Graham who is considered as father of value investing and security analysis and is also the mentor of Warren Buffet once mentioned:

“A suggestion I can make is that if you were sure that you could follow a dollar-averaging program, you could start [investing] right away. Dollar averaging is a method of investment under which you set aside regularly a fixed amount of money and invest it in common stocks generally, either in a single common stock or preferably in a group investment through investment-company shares (mutual funds). By investing the same amount of money at regular intervals – say, every three months, you get two advantages.

One is that over the years your investment reflects the average market price rather than the high market levels – which is where you are likely to buy if you follow the crowd. Secondly, the arithmetic of dollar averaging gives you more shares at the lower prices than at the higher prices, so that your average cost is lower than the arithmetic average. If you are putting $1,000 in one kind of stock and the price is $10, you’d get 100 shares. If later it’s $20, you’d get 50 shares. You bought more stock at the $10 basis than at $20. Consequently your average price would be less than $15.”

What Benjamin Graham has said about investing regularly for a long term works well for a portfolio of stocks like mutual funds or index than an individual stock. By doing this, we are able to avoid one of most fundamental and costly errors in investing; investing money only when the markets are high and redeeming or not investing further when the markets are low.

Not only that we get average prices instead of higher prices over the long term, the average price is lesser than arithmetical average because we buy lot more when markets are low and lot less when the markets are high.

Warren Buffett has also mentioned for an ordinary investor (like you and me) the best way to build wealth is to invest regularly over a long period of time. To quote Buffett:

“If you buy equities across the board [through index funds] and you do it over time so you don’t put all your money in at the wrong time … that’s probably the best investment most people can make.

Charlie Munger, the right hand man of Buffett, vice chairman of Berkshire Hathaway, was once asked by a young man how to get rich. Munger responded by saying “If you consistently spend less than you earn and invest it in index funds, dollar-cost average,” because you’re putting in money every pay check, he said, “that in, what, 20, 30, or 40 years, you can’t help but be rich. It’s just bound to happen.”

Rakesh Jhunjhunwala, about whom we’ve discussed earlier, who has made billions from stock markets, has the following advice for investors:

“You should invest every month. Do take SIPs. India is a long-term bull market and predicting the market time to time is difficult. You should invest periodically regardless of the index situation. Then I hope people will earn 15%-24% return on a compounded basis.

SIP is such a simple and effective tool. It is so effective and so simple that many great investors across the world have endorsed it as the best way for building wealth.

Assuming an 18% annualised return, every 10K invested a month, for a period of 20 years, would fetch you Rs.2.34 crores at the end of 20 years.

Based on your contribution, you can calculate the wealth potential in front of you.

As per a report given by CRISIL, published in October 2014, equity funds in the past 17.5 years have given annualised return of 22.6%. They have generated 10% additional returns when compared to the 13% given by the CNX Nifty.

I’m confident that for next 2 decades, the future would be equal if not better than past. Rakesh Jhujhunwala has mentioned that Nifty which has grown 10 times in last 15 years; from 850 to 8500 is now capable of growing 15 times in next 15 years (around 20% annualised returns).

As he has mentioned above, in the long run, we can expect around 15% to 24% from Indian markets. I’m confident that we can earn around 18%.

All we’ve to do is to stay the course with our SIPs and keep increasing the contribution periodically.

All the best.

Posted in Mutual Funds, SIP, Wealth | Tagged: , , | 2 Comments »

9th year

Posted by Muthu on January 1, 2015

Wishing you and your family a wonderful 2015.

We’ve completed eight years in this profession and entering the 9th year today.

Just to refresh; I got relieved from my employment on December 12th 2006 and formally started our organisation on January 1’st 2007.

I would like to take this opportunity to convey my gratitude for helping us grow by placing your trust on us.

Thanks a lot.

In Chennai, among the IFA (Independent Financial Advisors) category, we’ve the largest SIP book. We are maintaining this position for the last 4 years. We also understand from industry sources that even for entire Tamilnadu, among the IFA category, our SIP book size is the largest. We are proud of this as we believe that every SIP makes a meaningful change in someone’s life. Many of you who have been investing for last few years or in some cases for even last 7 or 8 years through SIPs have already started experiencing its benefits.

On this occasion, as always, we request you to stay the course with your SIPs and investments. SIP is a very good habit for wealth building. Focus on strengthening this habit in 2015. Keep increasing your SIP contribution at least once in 2 years and continue maintaining the long term orientation.

We became active on social media (Twitter) last year and now have 1041 followers. We get around 40,000+ views every month.

I’ve been writing regularly to our clients, friends and some fellow professionals for many years. As of now, the mail goes to around 400 people. I’m thankful to some of you who asked me to start posting these mails as blog posts. This has ensured that our mails are being shared with many outside this group of clients and friends. Many visitors have mentioned that they find our posts useful and inspire them to have long term orientation, develop patience and to stay the course. The blog has also helped us to get professional visibility and has even brought new clients. Starting the blog to post the emails was your idea and I’m thankful to you for the same.

This would be the 405th post in our blog. We now get around 10,000 to 12,000 views every month. At the time of writing this piece, we have a total of 2,39,417 views. The page which has got maximum number of views is ‘SIP Crorepathi’; with 18,519 views and counting. It’s no coincidence that we passionately focus and promote SIPs.

Sensex as on December 31’st 2013- 21170

Sensex as on December 31’st 2014- 27499

Sensex has provided a return of 29.89% for the calendar year 2014. Last year has been very good. As we repeatedly mention, we are in a secular growth story and would continue to make many new highs in the years and decades to come.

We believe that the ‘personal’ component in ‘personal finance’ is very important; basically working on one’s behaviour and approach towards money, savings, spending, investing, risk etc. I focus more on this in our professional relationship.

The more we help you shape your behaviour the better would be your success rate.

We want our clients to be amongst the minority who create huge wealth from equity by having strong long term orientation, high conviction, enormous patience and staying the course ignoring ups and downs.

You’ve done extremely well so far and we would continue to reinforce and assist you in shaping your attitude and behaviour towards investing and over all personal finance.

Thanks again.

Wishing you the very best for 2015.

Posted in General, Muthu's Musings | Tagged: , | 4 Comments »