Article

Ways to put your money to work

23 Jan 2020

The fundamental question lot of investors ask is whether they are saving enough. There are doubts as to whether they are earning enough to start saving. The answer is to put your money to work and that is only possible if you start today. This blog will help you understand how to put your money to work right away with a small corpus?

Start with an equity mutual fund SIP

There is no rocket science about an equity mutual fund SIP. You identify a good fund based on past performance and consistency and allocate a fixed sum each month. Don’t let your income levels be an impediment. You can do SIPs with amounts as small as Rs.500 per month. Of course, the onus is on you to stretch your savings to the maximum extent possible. The advantage of the SIP is that you don’t worry about timing the market. Rupee cost averaging ensures that you create wealth over the long term by keeping your cost of acquisition under control.

Open a trading account and think long term equities

An investment of Rs.10,000 in Wipro in 1980 would be worth Rs.550 crore today. Similarly, an investment of Rs.1 lakh in Havells in 1997 would be worth Rs.35 crore today. These are real life examples of stocks that have created incredible wealth. The best way to tap such opportunities is to open your trading account and start creating a portfolio of equities for the long term. Of course, you must diversify your portfolio but quality stocks have never disappointed investors over the long run. Ideally, use an online trading platform to keep it cost-effective and simple.

How about IPOs; most have done well

An IPO brings some unique advantages to an investor wanting to put money to work. In the last one year we have seen most IPOs doing extremely well as only selected IPOs have forayed in the market. Secondly, the IPO allotment process is structured in such a way as to ensure maximum allotment to applicants. Small applications stand a better chance of getting allotment. In the few years, IPO pricing has become less aggressive and that is also likely to work in favour of investors.

Look at alternatives like gold bonds and gold ETFs

As an investor you have a choice of buying as low as 1 gram of gold and holding them in investment form. No worries about conversion costs, storage, insurance etc. The quantity is guaranteed and the price is pegged to the domestic gold price. Gold bonds issued by RBI are backed by the government and also carry interest rate of 2.5% per annum. Of course, these are interval bond and if you are looking at gold investments on tap, then gold ETFs could be your answer. The point is, gold does very well in volatile times and adds stability to your investment portfolio.

Index ETFs are a good passive option to put money to work

Passive investing is about just buying into an index. That is exactly what an index ETF does. These exchange traded funds (ETFs) are mirrors of indices like the Nifty or the Sensex. Remember, the Sensex has given 17% annualized returns over the last 40 years. The added bonus is that the costs of an index ETF are nearly 150 bps lower than an active equity fund. Here again the basic investment is very low and with your trading and demat account in place, you put money to work right away.

Don’t fret that your corpus is small. It is never too small to put money to work.

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Beginner's Corner

Ways to put your money to work

23 Jan 2020

The fundamental question lot of investors ask is whether they are saving enough. There are doubts as to whether they are earning enough to start saving. The answer is to put your money to work and that is only possible if you start today. This blog will help you understand how to put your money to work right away with a small corpus?

Start with an equity mutual fund SIP

There is no rocket science about an equity mutual fund SIP. You identify a good fund based on past performance and consistency and allocate a fixed sum each month. Don’t let your income levels be an impediment. You can do SIPs with amounts as small as Rs.500 per month. Of course, the onus is on you to stretch your savings to the maximum extent possible. The advantage of the SIP is that you don’t worry about timing the market. Rupee cost averaging ensures that you create wealth over the long term by keeping your cost of acquisition under control.

Open a trading account and think long term equities

An investment of Rs.10,000 in Wipro in 1980 would be worth Rs.550 crore today. Similarly, an investment of Rs.1 lakh in Havells in 1997 would be worth Rs.35 crore today. These are real life examples of stocks that have created incredible wealth. The best way to tap such opportunities is to open your trading account and start creating a portfolio of equities for the long term. Of course, you must diversify your portfolio but quality stocks have never disappointed investors over the long run. Ideally, use an online trading platform to keep it cost-effective and simple.

How about IPOs; most have done well

An IPO brings some unique advantages to an investor wanting to put money to work. In the last one year we have seen most IPOs doing extremely well as only selected IPOs have forayed in the market. Secondly, the IPO allotment process is structured in such a way as to ensure maximum allotment to applicants. Small applications stand a better chance of getting allotment. In the few years, IPO pricing has become less aggressive and that is also likely to work in favour of investors.

Look at alternatives like gold bonds and gold ETFs

As an investor you have a choice of buying as low as 1 gram of gold and holding them in investment form. No worries about conversion costs, storage, insurance etc. The quantity is guaranteed and the price is pegged to the domestic gold price. Gold bonds issued by RBI are backed by the government and also carry interest rate of 2.5% per annum. Of course, these are interval bond and if you are looking at gold investments on tap, then gold ETFs could be your answer. The point is, gold does very well in volatile times and adds stability to your investment portfolio.

Index ETFs are a good passive option to put money to work

Passive investing is about just buying into an index. That is exactly what an index ETF does. These exchange traded funds (ETFs) are mirrors of indices like the Nifty or the Sensex. Remember, the Sensex has given 17% annualized returns over the last 40 years. The added bonus is that the costs of an index ETF are nearly 150 bps lower than an active equity fund. Here again the basic investment is very low and with your trading and demat account in place, you put money to work right away.

Don’t fret that your corpus is small. It is never too small to put money to work.