1. Markets are unpredictable and will always have periods when it will do well, periods when it will falter and periods of extreme volatility.
2. Therefore, there is never a good or bad time in investing for long-term goals, but just the right way to do so.
3. Systematic Investment Plan (SIP) investment in equity over all market cycles is the best way to proceed, with diversification within fund houses and types of funds.
4. If you are a first time investor, you should consider a balanced equity fund which will allow you to understand the mechanics of fund investing at low risks.
5. You should look at SIP as an optimizing tool which helps you manage anxiety, as it is nothing else but programmed investing that you do for a defined time frame.
6. The benefits of SIP are immense, but most importantly it does away with timing the market and averages the investments over time, which is desirable when investing in equity mutual funds.
7. There should be a balanced allocation of hard-earned resources, salary for most, among one's specific needs priorities, like for dependent old parents, child education and upbringing, own retirement corpus, health and life insurance, contingencies and emergencies fund, lifestyle and social needs, and of course a splurge fund.
8. For achieving them, each individual could have SIPs in different long-term funds, as long he is comfortable with the strategy, and investing only his net surplus money without any short-term withdrawals.
9. These funds should be 4/5 star rated in "Growth" option comprising of
a) An Equity-Linked Saving Scheme (ELSS) fund for tax-saving under Sec 80C (no need to open a Public Provident Fund (PPF) account; Employees Provident Fund (EPF) account is ok),
b) A Multicap fund for riding all market cycles, and
c) A Midcap fund for the futuristic economy.
10. A back-of-the-envelope calculation shows that a 25-year young earner's SIP investment of, say, Rs.2000 per month in each of them, during 35 years of earning life, will give a total corpus of nearly Rs. 4 crores at the age of 60.
11. At the age of 60, this 4 crore corpus can be invested into a 4/5 star Balanced equity fund, and a weekly Systematic Withdrawal Plan (SWP) of Rs.70,000 (or lesser as per need) could be activated from it for the next 30 years of retired life to meet different expenses.
12. Before venturing into long-term wealth creation, build and maintain a Liquid or Short-term Debt fund with a corpus of 6-8 months expenses for meeting contingencies and emergencies.
13. For medium-term goals within 15 years, withdrawals can be made from these funds, precondition being that SIP amounts should be increased proportionately before 5 years of their expected withdrawal year.
14. Before all of the above, ensure that an Online Term Insurance Plan for the maximum allowed period is in place covering at least 15 years of annual income, reviewing it to buy new ones if income increases, to run in tandem with the SIP investment.
15. Buy an Online Individual Basic Health Plan if single, or a Family Floater Plan if married or expecting to get married.
16. For older dependent parents, buy them a separate suitable health plan, or include them in the company's Group Health Plan if allowed by employer, instead of adding them in your Family Floater Plan.
17. As a thumb rule, the level of equity exposure should be 100 minus age, i.e. invest up to 40% of total investment corpus in equity funds at the age of 60, but lower thereafter.
18. However, other factors also need to be taken into account before deciding this, such as liabilities, dependents, past investments, and remaining goals.
19. A portfolio-mix suitable to one's own risk appetite should be maintained with annual reviews.
2. Therefore, there is never a good or bad time in investing for long-term goals, but just the right way to do so.
3. Systematic Investment Plan (SIP) investment in equity over all market cycles is the best way to proceed, with diversification within fund houses and types of funds.
4. If you are a first time investor, you should consider a balanced equity fund which will allow you to understand the mechanics of fund investing at low risks.
5. You should look at SIP as an optimizing tool which helps you manage anxiety, as it is nothing else but programmed investing that you do for a defined time frame.
6. The benefits of SIP are immense, but most importantly it does away with timing the market and averages the investments over time, which is desirable when investing in equity mutual funds.
7. There should be a balanced allocation of hard-earned resources, salary for most, among one's specific needs priorities, like for dependent old parents, child education and upbringing, own retirement corpus, health and life insurance, contingencies and emergencies fund, lifestyle and social needs, and of course a splurge fund.
8. For achieving them, each individual could have SIPs in different long-term funds, as long he is comfortable with the strategy, and investing only his net surplus money without any short-term withdrawals.
9. These funds should be 4/5 star rated in "Growth" option comprising of
a) An Equity-Linked Saving Scheme (ELSS) fund for tax-saving under Sec 80C (no need to open a Public Provident Fund (PPF) account; Employees Provident Fund (EPF) account is ok),
b) A Multicap fund for riding all market cycles, and
c) A Midcap fund for the futuristic economy.
10. A back-of-the-envelope calculation shows that a 25-year young earner's SIP investment of, say, Rs.2000 per month in each of them, during 35 years of earning life, will give a total corpus of nearly Rs. 4 crores at the age of 60.
11. At the age of 60, this 4 crore corpus can be invested into a 4/5 star Balanced equity fund, and a weekly Systematic Withdrawal Plan (SWP) of Rs.70,000 (or lesser as per need) could be activated from it for the next 30 years of retired life to meet different expenses.
12. Before venturing into long-term wealth creation, build and maintain a Liquid or Short-term Debt fund with a corpus of 6-8 months expenses for meeting contingencies and emergencies.
13. For medium-term goals within 15 years, withdrawals can be made from these funds, precondition being that SIP amounts should be increased proportionately before 5 years of their expected withdrawal year.
14. Before all of the above, ensure that an Online Term Insurance Plan for the maximum allowed period is in place covering at least 15 years of annual income, reviewing it to buy new ones if income increases, to run in tandem with the SIP investment.
15. Buy an Online Individual Basic Health Plan if single, or a Family Floater Plan if married or expecting to get married.
16. For older dependent parents, buy them a separate suitable health plan, or include them in the company's Group Health Plan if allowed by employer, instead of adding them in your Family Floater Plan.
17. As a thumb rule, the level of equity exposure should be 100 minus age, i.e. invest up to 40% of total investment corpus in equity funds at the age of 60, but lower thereafter.
18. However, other factors also need to be taken into account before deciding this, such as liabilities, dependents, past investments, and remaining goals.
19. A portfolio-mix suitable to one's own risk appetite should be maintained with annual reviews.