One of the reader of my blog posted me a query asking me What would be Top Three Investment Ideas this Diwali?
The said reader of my blog needs investment idea for this Diwali under the below mentioned constraint
1. Neither he has enough time to research and keep track of Equity / Company performance NOR enough knowledge to do value picks.
2. Wants to remain invested and put in regular sum, per month for next 10-15 years.
3. The amount he plans to invest every month is over and above his allocation for short to medium term goals
4. He want returns better than what Debt / Medium risk instruments provide.
5. Instrument Liquidity should be quiet reasonable.
6. Amount he plans to invest per month is Rs. 10000/-
The said reader of my blog needs investment idea for this Diwali under the below mentioned constraint
1. Neither he has enough time to research and keep track of Equity / Company performance NOR enough knowledge to do value picks.
2. Wants to remain invested and put in regular sum, per month for next 10-15 years.
3. The amount he plans to invest every month is over and above his allocation for short to medium term goals
4. He want returns better than what Debt / Medium risk instruments provide.
5. Instrument Liquidity should be quiet reasonable.
6. Amount he plans to invest per month is Rs. 10000/-
Well given the constraints I evaluated options; the only option that I could narrow down on was equity investment. Basically Equity investment provides high returns over 10+ years with fair amount of liquidity. Guess what? Yes you figured out this doesn't sound likely satisfying requirement of "lack of time to do research".
Yes it is true that Direct Equity Investment does need some knowledge of picking good value stocks and will also consume time for keeping track of the company performance. But there is a smart way to put your money to work without really investing time.
I am recommending following three Investment Ideas for this Diwali and many more Diwali's to come. The options provided below are good even for investments at regular intervals for long term goals.
I. Gold ETF:
Most of us (who can afford) do buy gold during Dushera / Diwali (Dhanteras) which apparently happens to be tomorrow. Gold as asset provides very good returns over long term and also acts as hedge against inflation. Please read my article on Gold ETF on this blog for more details. As you are / must be well aware there isn't any need to track gold prices and/or related performance criteria.
FinWin suggests allocating 15 - 20% of funds towards buying Gold ETF regularly every month.
II. Diversified Equity Mutual Fund
An indirect way of exposure to Equity Markets (Capital Markets) is through Mutual Fund schemes. This is simplest form of investment into equity where an investor doesn't really need to put in time. The advantage here is given fund has dedicated fund manager and skilled financial analyst to do research and identify good growth oriented companies with good fundamentals. For more please read article on Equity Oriented funds.
FinWin has short listed few funds to create a Systematic Investment Plan as per list below the list provided below isn't exhaustive, you can also see some good web site like easymf / valueresearchonline that provides ranking to mutual funds and select Diversified Equity fund with 4-5 star ratings
1. Reliance RSF Equity Growth Fund
2. Sundaram BNP Paribas Select Focus Growth
3. DSP Black ROck Top 100 - Growth option
4. HDFC Top 200 - Growth option
5. Birla Sun Life Fronline Equity - Growth option
Please note that in every fund I have proposed Growth option because that is what we need is growth over long term its unadvisable to take dividend option because overall cost and growth.
Select any three diversified equity funds create monthly SIP allocation of 20% to each fund’s over next 10 -15 years.
III. Index ETF
An indirect way of exposure to Equity Markets (Capital Markets) is through Mutual Fund schemes. This is simplest form of investment into equity where an investor doesn't really need to put in time. The advantage here is given fund has dedicated fund manager and skilled financial analyst to do research and identify good growth oriented companies with good fundamentals. For more please read article on Equity Oriented funds.
FinWin has short listed few funds to create a Systematic Investment Plan as per list below the list provided below isn't exhaustive, you can also see some good web site like easymf / valueresearchonline that provides ranking to mutual funds and select Diversified Equity fund with 4-5 star ratings
1. Reliance RSF Equity Growth Fund
2. Sundaram BNP Paribas Select Focus Growth
3. DSP Black ROck Top 100 - Growth option
4. HDFC Top 200 - Growth option
5. Birla Sun Life Fronline Equity - Growth option
Please note that in every fund I have proposed Growth option because that is what we need is growth over long term its unadvisable to take dividend option because overall cost and growth.
Select any three diversified equity funds create monthly SIP allocation of 20% to each fund’s over next 10 -15 years.
III. Index ETF
Index Exchange Traded Funds are essentially Index Funds that are listed and traded on capital markets (exchanges) like equities. An ETF is a basket of stocks that reflects the composition of an Index, like S&P CNX Nifty or BSE Sensex. The ETFs trading value is based on the net asset value of the underlying stocks that it represents. Think of it as a Mutual fund that you can buy and sell in real-time at a price that change throughout the day.
Index ETF doesn't need time to be invested in research of underlying stocks and as such is passively managed funds. They provide returns of 12-18% CAGR over long term. For more details read Index ETF article on this blog.
FinWin suggest allocating remaining 20-25% of the fund into Index ETF every month.
Index ETF doesn't need time to be invested in research of underlying stocks and as such is passively managed funds. They provide returns of 12-18% CAGR over long term. For more details read Index ETF article on this blog.
FinWin suggest allocating remaining 20-25% of the fund into Index ETF every month.
The above three ideas overcomes all the constraints of the reader and provides return comparable to returns provided by equity over long period of time without actually investing time. In short the idea is to put your money to work from Diwali to Diwali for years to come.
Happy Investing
1 comment:
Well said, Vivek. Good analysis written in simple language.
Good work. Keep it up.
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