Knowledge Centre for Investment Planning

- Why do we need to save money?

Saving for your future and present needs
Saving for any emergency
Saving for your kids’ education
Saving for wealth
Saving for Retirement.

- How much ideally to save every month?

ans - Ideally one should save 20% of your monthly earnings while using the other for your household and personal expenses.

- What is the best time to start saving and investing?

ans - There is old adage “The best time of Investment was 20 years before & the second best time is now”. People always try to time the market. Some people think that, the best time of Investment is when the market is down while some think that it is when the market is relatively stable and going in upward directiononly. No matter how up or how down the market is. No matter whether there is a recession or economic slowdown. The best time of starting an Investment is NOW.

- How to select investment avenues or instruments?

ans - There are lot of investment avenues and instruments available in the market, but one should first analyze his investment objective and risk tolerance limit before selecting instruments. Each instrument has different risk, return, tax benefits, marketability, liquidity, safety features.

- How long should I stay invested?

ans - Time horizon of investment depends on your life goals and objectives. If you have short term goals then invest in short term instruments otherwise in long tern instruments. Your investment will yield good returns in long term. So always make a habit of long term systematic saving and investing.

- What is the best method of investing?

ans - A specific amount should be invested for a continuous period at regular intervals under this plan.

SIP is similar to a regular saving scheme like a recurring deposit. It is a method of investing a fixed sum regularly in a mutual fund. The investor decides the amount and also the mutual fund scheme.

While the investor's investment remains the same, more number of units can be bought in a declining market and less number of units in a rising market.

The investor automatically participates in the market swings once the option for SIP is made.

SIP ensures averaging of rupee cost as consistent investment ensures that average cost per unit fits in the lower range of average market price.

Benefits of SIP Investing

Disciplined investment: The main rules of keeping your money funds safe are- invest regularly, keep concentration on your investments and keep discipline in your method of investment. Withdrawing a small amount regularly from your each monthly income will not make a big difference in it. It is better to save a few money each month instead of withdrawing lump amount for investment.
Power of Compounding:The power of compounding underlines the essence of making money work if only invested at an early age. The longer one delays in investing, the greater the financial burden to meet desired goals. Saving a small sum of money regularly at an early age makes money work with greater power of compounding with significant impact on wealth accumulation. To understand better, let’s take an example. A’ starts investing Rs 50,000 per year at the age of 25. ‘B’ starts investing the same amount every year at the age of 30 When they attain the age of 55, A’s corpus is Rs 61 lakhs while B’s corpus is Rs 40 lakhs @ 8% return pa. The difference of Rs 2.5 lakhs in the amount invested made a difference of Rs 21 lakhs to their wealth
Rupee cost averaging: This means as you are investing a particular amount every month at prevailing NAV you accumulate more number of units when NAV is low and more number of units when NAV is high. So this automatically brings down your unit cost by way of rupee cost averaging.
SIP Invest money in different-different sector:Another advantage of investing through mutual funds is that, even with just small amounts we are able to enjoy the benefits of diversification. Huge amounts would be required for an individual to achieve the desired diversification, which would not be possible for many of us. By investing through mutual fund one can get the benefit of investment in n number of stocks.

Invest and allocate your funds as per tenure of your goals

Goal	Risk	Investment Mix
2 - 3 m	Low	100% Debt
6 m to 1 yr – E.g. Down payment for Car	Very low	100% Debt
2 - 3 yrs – E.g. Down payment for Loan	Moderately low	15% Equity, 85% Debt
3 - 5 yrs – E.g. Marriage	Moderately low	20% Equity, 80% Debt
15 yrs or more – E.g. child education & wedding	High	85% Equity, 15% Debt
25 yrs of more – E.g. Retirement	Moderately high	80% Equity, 20% Debt