Saturday, April 17, 2010

Invest In ICICI Dynamic fund through SIP Route with Minimum 4-5 year Horizon

ICICI Prudential Dynamic Plan, has the ability to adjust to changing market conditions. The fund has the flexibility to take a stance of "Attack" or "Defense" as per the market condition. This helps in our aim to give the best to our customers in today's market scenario.
Key benefits:
While equity markets are cheap, the fund will have a higher equity allocation to capture potential upside opportunities in the market. Incase, equity markets get into an over-valued zone, the fund will make active and efficient use of cash and derivatives to limit the downside.
The fund has the flexibility to choose across sectors, market capitalization and themes. It balances between value and growth stocks, and thus, makes it a truly diversified portfolio to harness various opportunities.
Invest in this fund, if you:
Are a relatively low risk taking equity investor.
Are seeking long-term capital appreciation from a well-diversified equity portfolio.
Performance as on March 31, 2010 - Growth Option:
The following table shows the performance comparison of ICICI Prudential Dynamic Plan vis-a-vis benchmark index S&P CNX Nifty.

Thursday, April 15, 2010

7 good reasons to invest in SIPs

7 good reasons to invest in SIPs
Fact No. 1: Over a long term horizon, equity investments have given returns which far exceed those from the debt based instruments. They are probably the only investment option, which can build large wealth. Fact No. 2: In short term, equities exhibit very sharp volatilities, which many of us find difficult to stomach. Fact No. 3: Equities carry lot of risk even to the extent of loosing ones entire corpus. Fact No. 4: Investment in equities require one to be in constant touch with the market. Fact No. 5: Equity investment requires a lot of research. Fact No. 6: Buying good scrips require one to invest fairly large amounts.

Systematic Investing in a Mutual Fund is the answer to preventing the pitfalls of equity investment and still enjoying the high returns. And it makes all the more sense today when the stock markets are booming. (Also Read - 5 corners of a sound Investing Strategy)

1. It’s an expert’s field – Let’s leave it to them
Management of the fund by the professionals or experts is one of the key advantages of investing through a mutual fund. They regularly carry out extensive research - on the company, the industry and the economy – thus ensuring informed investment. Secondly, they regularly track the market. Thus for many of us who do not have the desired expertise and are too busy with our vocation to devote sufficient time and effort to investing in equity, mutual funds offer an attractive alternative. (Read more - The Investors biggest Dilemma)

2. Putting eggs in different baskets
Another advantage of investing through mutual funds is that even with 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. Diversification reduces the overall impact on the returns from a portfolio, on account of a loss in a particular company/sector.

3. It’s all transparent & well regulated
The Mutual Fund industry is well regulated both by SEBI and AMFI. They have, over the years, introduced regulations, which ensure smooth and transparent functioning of the mutual funds industry. This makes it safer and convenient for investors to invest through the mutual funds. (Check out - Foolproof strategies to maximize your profits)

4. Market timing becomes irrelevant
One of the biggest difficulties in equity investing is WHEN to invest, apart from the other big question WHERE to invest. While, investing in a mutual fund solves the issue of ‘where’ to invest, SIP helps us to overcome the problem of ‘when’. SIP is a disciplined investing irrespective of the state of the market. It thus makes the market timing totally irrelevant. And today when the markets are high, it may not be prudent to commit large sums at one go. With the next 2-3 years looking good from Indian Economy point of view, one can expect handsome returns thru’ regular investing.

5. Does not strain our day-to-day finances
Mutual Funds allow us to invest very small amounts (Rs 500 – Rs 1000) in SIP, as against larger one-time investment required, if we were to buy directly from the market. This makes investing easier as it does not strain our monthly finances. It, therefore, becomes an ideal investment option for a small-time investor, who would otherwise not be able to enjoy the benefits of investing in the equity market.

6. Reduces the average cost
In SIP we are investing a fixed amount regularly. Therefore, we end up buying more number of units when the markets are down and NAV is low and less number of units when the markets are up and the NAV is high. This is called rupee-cost averaging. Generally, we would stay away from buying when the markets are down. We generally tend to invest when the markets are rising. SIP works as a good discipline as it forces us to buy even when the markets are low, which actually is the best time to buy. (Read more - Invest wisely and get rich with equity MFs)

7. Helps to fulfill our dreams
The investments we make are ultimately for some objectives such as to buy a house, children’s education, marriage etc. And many of them require a huge one-time investment. As it would usually not be possible raise such large amounts at short notice, we need to build the corpus over a longer period of time, through small but regular investments. This is what SIP is all about. Small investments, over a period of time, result in large wealth and help fulfill our dreams & aspirations
-Sanjay Matai

Start planning early for your retirement

Start planning early for your retirement
Retirement planning is a process of establishing retirement goals and working out allocation of finances to achieve these goals. This process, if properly followed, can go a long way in ensuring the right level of preparedness required for a dream retired life.

While it is a well known fact that we need to save to build a retirement nest egg, many of us fail to do so. No wonder, we often get overwhelmed by the thought of retirement and end up wondering how we will ever generate the huge amount of money required to lead a happy retired life.

Many of us face this dilemma because we consider retirement planning as a single event rather than considering it as a life long process. If we save and invest regularly over the years, even a small sum of money can suffice for this purpose. The key, however, is to start investing early as the real power of compounding comes with time. Unfortunately, few young people look that far ahead.

Another challenging aspect of retirement planning is to calculate how much we will need to support ourselves and our dependants. As a thumb rule, one requires around 75- 80% of one’s current income to maintain the similar standard of living. Of course, this amount will increase with inflation. Though it is a proven fact that starting early is an important aspect of retirement planning, it is extremely difficult to decide how much one will need after retirement. A professional advisor can make things easy and hence it is always prudent to go for professional advice to ensure success in the process of retirement planning.

One can also enhance the chances of success by making retirement planning an integral part of overall investment planning. Hence, it is crucial to examine one’s current situation and the attitude towards risk. Remember, investing without a clear picture can be too risky. The key to success is to adopt a disciplined savings programme as well as have the flexibility of multi-stage approach to investing.

The road to success for this all important and a long-term goal can at times be bumpy. Therefore, having patience and discipline can go a long way in achieving the desired results. While it is impossible to anticipate every obstacle, knowing some of the common mistakes can help in avoiding them. The important ones are not having a plan as well as a backup plan in place, making frequent changes in the portfolio and investing too conservatively.

Investing to beat inflation is an important aspect of retirement planning. To understand as to how inflation can impact our future requirements, let us take an example of someone who is 30 years away from retirement. If we assume a 5% inflation rate, the Rs. 100,000 annual expenditure will increase to over Rs. 435,000 by the time he retires. Therefore, if he plans for Rs. 100,000 per annum for his retirement, he would be having less than 25% of what he would really require.

Therefore, a retirement plan and the strategy to implement it should cover the following:

• Begin investing early
• Invest to beat inflation
• Invest regularly
• Know your risk tolerance
• Evaluate your insurance and investment needs
• Follow a “buy and hold” strategy
• Invest in tax efficient instruments like mutual funds.

Investing regularly is another key ingredient of retirement planning. Broadly speaking, we need to save a certain percentage of our annual income and invest in instruments that have the potential to give the desired results over different time horizons. The following can act as a guideline:

Ages: 25 to 40- Depending on the age, 15 to 25% of the annual income should be saved. The portfolio should be dominated by equities and/or equity funds. These should comprise 70 to 80 percent of the investments. To balance out the portfolio, one could rely on stable yet tax efficient investments such as PF, PPF and debt and debt-oriented mutual funds.

Ages 41 to 50- In this age group, one should save around 25 to 35% of the annual income. As the time horizon to retirement is still long enough, equity and/or equity funds should continue to be a crucial part of the portfolio i.e. around 60% or more. The balance can be invested in PF, PPF and other debt and debt related mutual funds.

Ages 51 to 60- At this stage of one’s life, the time horizon for retirement starts shrinking. Therefore, the prudent thing to do would be to follow a slightly conservative approach. However, it is important to remember that it may only be a few years before one retires, but one may need to depend on retirement funds for many more years. Therefore, the key is to maintain a portfolio that will continue to grow for many years after one retires. Equity and/or equity funds should still be a part of the portfolio, though in a moderate percentage.

If you haven’t started planning for your retirement yet, you need to do it now. Remember, for every 10 years of delay in the process, you will need to save three times as much each month to catch up for the lost time.

-Hemant Rustagi..