Here is the definition of Wikipedia for Mutual Funds:
A mutual fund is a professionally managed investment pool that pools money from many investors to purchase securities. The term is typically used in the United States, Canada, and India, while similar structures across the globe include the SICAV in Europe (‘Investment Company with variable capital') and open-ended investment company (OEIC) in the UK.
Mutual funds are often classified by their principal investments: money market funds, bond or fixed income funds, stock or equity funds, or hybrid funds. Funds may also be categorized as index funds, which are passively managed funds that track the performance of an index, such as a stock market index or bond market index, or actively managed funds, which seek to outperform stock market indices but generally charge higher fees. The primary structures of mutual funds are open-end funds, closed-end funds, and unit investment trusts.
Open-end funds are purchased from or sold to the issuer at the net asset value of each share as of the close of the trading day in which the order was placed, as long as the order was placed within a specified period before the close of trading. They can be traded directly with the issuer.
Mutual funds have advantages and disadvantages compared to direct investing in individual securities. The advantages of mutual funds include economies of scale, diversification, liquidity, and professional management. However, these come with mutual fund fees and expenses.
Mutual funds are regulated by governmental bodies and are required to publish information, including performance, comparison of performance to benchmarks, fees charged, and securities held. A single mutual fund may have several share classes by which larger investors pay lower fees.
Now that we know what a mutual fund is, and there are more than 2500 schemes so let us take a few examples on how to select a scheme which is right for us
Mr Shah himself put his money into large cap mutual funds or special funds like HDFC, Nippon, SBI, Edelweiss, Tata, & Uti Large Cap funds. Mr Shah puts the funds of his children in Small cap or Medium cap funds, which gives a good return in the long run, even though the volatility is high, it is compensated over a long year of investment, and the minimum return you can expect is about 16 to 18% which means that your money doubled in more or less five years.
Mr Shah has lots of money in his business which he does not require everyday so he put that money into liquid mutual funds, Today the current account does not give any interest but if you shift your funds to liquid funds, it will get you from 3 to 7% per annum, the advantage here is you can park your funds on Friday night and withdraw it on Tuesday morning, and everything is done online and the funds are in your account in a few hours.
Mr Shah has made it a practice to give all his payments to his staff and to his suppliers during the first week of the month and the rest of 20 days he gets interest of 5% on his money considering he has about 10 lakh unutilized funds as his turnover is above 1 crore putting 10 lacs in liquid fund gives him a cool return of Rs 50000 rupees in a year he just has to transfer the funds every Friday evening to liquid funds during the first week of the month after he has cleared all his liabilities and from 10th to 30th every month money is lying in liquid funds his work is not affected at the same time he gets interest on his money very few people know about the scheme they usually take OD facility from the bank the biggest disadvantage of that is that we receive very less interest around three percent as the funds are parked only for less than 15 days in the OD facility and even on that interest money income tax is cut at source
Try this new method of investment of saving and I would love to have your feedback on the same.
Have you heard about loans on mutual fund?
This is a new concept which has been introduced so that people do not have to withdraw and close their investments or sell their mutual funds. In case of emergency they can withdraw and take a loan at a nominal interest of 7% and in most cases your investment continue getting returns at 12% on the investment as a result even after taking a loan and repaying the loan in regular EMI there is still a profit of 5% on the investment, This is a beautiful idea to tide over difficult periods Mr Shah used this when he has to get his daughter married.
Mr Shah always used to put all his money in bank fixed deposit till one day he came across a mutual fund agent like me who told him that he was losing a large amount of money by putting the money in bank fixed deposit and he could get much more in mutual fund than bank FD the difference between Bank Fixed Deposit and Mutual fund returns is more than 5 to 7% and the income from mutual funds is taken as a part of your income and not taxable at source after deducting the first 1Lakh which is tax-free and the rest is taxes as per your income tax slab you fall in. Just to give you a comparison, money in banks double after 10 to 11 years and money in mutual fund at 15% return doubles in 5 years.
Mr Shah also did not know that, the growth of money in mutual funds is exponential and not linear. There are instances where people have invested one lakh rupees and forgotten about it and their children after 20 or 30 years have got more than 10000000 of rupees how can this happen is a question many people wonder but it is very simple first is they are getting a return of 16 to 20% per year in addition to that share value is going up by a high amount and as a result a share bought a Rs10 by his grandfather has jumped to Rs 2000 at the end of 30 years, This is a complex calculation but we have seen so many companies give such good results which you can never expect in bank Fixed Deposit
Let us understand some past live examples and you can get many more if you google them now
Nippon India Growth fund started in 1995 at Rs10 and today it is Rs 2162 per share even if you take the track record of last 10 years the returns are 4 times so if you had deposited Rs 100000 and held it undisturbed for 10 years today value would be 440000 nearly 4 times.
To understand the power of compounding, let us take another example of
SBI Blue Chip Fund which started in 2006 at Rs 10 and today’s value is Rs 63 and if you consider the previous 10 years and invested Rs 100000 and forgot about it for 10 years the value would be 388000 which means the growth is about 4 times in 10 years compared to double in bank Fixed Deposits.
Most of you must be wondering where I can get Rs 100000 to put it in Mutual fund and reap huge profits. The answer has been planned by our expert’s long time ago and so you need not wait to get Rs 100000, but you can start with small amount starting from Rs 5000 to some mutual funds schemes which accept as low as Rs100 per month, this help even the small earner to save and grow big, a small wage earner can always set aside Rs 500 to Rs 1000 per month which will grow and would help him to live in peace and security.
If our children can set aside small amount from their pocket money and every month pay as a SIP (Systematic Investment Plan) then they will not have to take a loan for higher studies or marriage expenses, once they take a loan on the money they will get addicted to taking loans, and will never create a corpus for themselves. Any vice versa, once a corpus is created, they will not have to depend on loan, but that growing corpus will take care of their expenses and life for the further generations.
Now let us look at the formula to become rich as my book says YOUR CHILDREN CAN BECOME CROREPATIS surely it is you who has to plan and work with them so both become CROREPATI my simple formula is 15/15/15
Invest Rs 15000 for a period of 15 years and at a return of 15% your destination is very close.
You have to create a SIP for your children or for yourself in multiples of Rs 15000, and track its progress so that you reach your goal, during the first five years, your investment will be Rs 900000 (9 Lakhs) a very lucky number as per astrology, and you will get astronomic results, in these five years your money should grow to Rs 13 lakhs if you are on track then it is perfect but if your result do not match up sit down with a financial adviser like me or find a good sound adviser who will put you back on track.
During the next five years, your money investment with SIP of Rs 15000 per month should be Rs 18Lakhs, sure it was not very difficult, so slowly start saving a small amount and save it for your children, your funds at the end of 10 years have grown drastically and it should stand at Rs 39 to 40 Lakhs it should be double now, again if you are not on track talk to an advisor and streamline your progress so that our aim is fulfilled and reserves are created for our children.
Hoping everything is going as per plan we have to wait for the next 5 years, the investment after 15yrs from your side will be 27Lakhs and now we are very close to our magical number 92 lakhs and if you have regularly added money to your SIP, this is a matter of pride that your children are now CROREPATI, and you have showed your willingness, and determination to reach this near to impossible target, in 15 years.
Now let us look at the results. At the end of 16 years, you have invested only 28.8 lakhs and your corpus has grown to 1.08Cr. Do you realise that in one year you have only added 1.8L and your corpus has increased by 15Lakhs
No, this is not the end it is the beginning of your children becoming rich as after 20 years of investing your small investment of 36L, at only Rs15000 per month has become 2Cr to go further at the end of 30 years with an investment of 54Lakhs the corpus will reach a huge figure of 8.4Cr and after 40 years 34Cr and 50 years 140 Cr.
Two things have come out very clearly from this
ONE: DO NOT DELAY YOUR DREAMS START INVESTING TODAY
SECOND: ONCE A CROREPATI ALWAYS A CROREPATI
There is no looking back but do not do this alone, take the help of advisor, as only he can offer that 1 degree adjustment required to reach your goal, do you know that if a plane is flying and with a 1 degree error, it will land at the next airport and not at its destination if proper navigation is not received from the control tower.
If you need help, Ask for help, Even a mother does not feed the baby till it is hungry and starts crying, and so also your dreams will remain dreams till you are able to put it in words in front of your advisor.
And still if you are not convinced, to start investing from today talk to me, and I will get you in touch with the best adviser and sincere friend who will support you.
A point of caution that I would like to add is do not stop your SIP even if the stock market is down and trust on the past records and they will prove right over the next couple of years. In case of emergency remember to take a loan from a reputed agency and not leave the market, and last but not the least see that your advisor supports you and leads you to reach your target.
My advice to each and every father and grandfather is that at the birth of a baby in the house do not buy gold and have huge parties and celebration but put aside Rs 5000 every month for the first year, increase that amount to 6000 from next year, and so on. During the first 20 years the grandfather will add the money next 20 years the father will add and after that the child now a working adult will continue this path of financial freedom and a money plant will go on giving fruits for the generations to come and there will be no looking back and everybody will be happy and financially sufficient.
