Worried about volatility? All you need is Rs 5,000 per month to reach your crorepati dream

Rakesh Patil
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Technical View: Nifty forms a bearish candle ahead of US Fed outcome; tread with caution

Traders preferred to book profits ahead of the crucial US Fed outcome but the positive takeaway is that the index managed to close above 10,850 levels which was the intraday high recorded earlier this week on Monday.

Moneycontrol News

Worried about the recent volatility in the market? The Nifty which was touching record highs back in the month of January has now fallen 8 percent from its all-time high of 11,171. But, that didn’t stop equity investors pumping into equity markets via mutual funds.

Net inflows into pure-play equity mutual funds (MFs) excluding equity-linked savings schemes or ELSS increased 9.5 percent on a month-on-month (m-o-m) basis to Rs 14,683 crore in February, said a report.

Investors should be focused on attaining their goals with the help of equity investment either via direct equities or via mutual funds rather than looking at them from making a short-term gain, suggest experts.

“Correction are part of equity markets and investors should not focus too much on the noise. Rather than doing day-to-today management of your portfolio, one should start saving/investing money based on your financial goals with the help of a plethora of plans or products,” Swati Kulkarni is an Executive Vice President at UTI Asset Management Company (P) Ltd said in an exclusive interview with Moneycontrol.

On the occasion of international women’s day, Kulkarni said that women of the house have been managing money on their own since ages but the trend is now tilted towards investing in markets rather than keep money in the bins. The amount invested could be as low as 500 to Rs 10,000 every month.

Recent data suggest that inflows into funds increased by 5.7 percent on a MoM basis to Rs 16,268 crore on a net basis during the month for equity schemes (including ELSS), said a report quoting data from Association of Mutual Funds in India (AMFI) showed.

Even though the equity markets corrected by over 5 percent after the government introduced long-term capital gains (LTCG) tax on equities, flow into MFs remained strong. The S&P BSE Sensex fell 5.2 percent, while the broad-based Nifty declined 5 percent in February.

One major source of inflows into mutual funds and then towards markets is through SIPs (systematic investment plans). The growth in inflows comes despite the assets under management (AUM) of the MF industry declining 0.9 percent MoM to around Rs 22.2 lakh crore in February, added the report.

The discipline of setting aside some money especially with respect to women investors needs to be widely spread, highlights Kulkarni because the potential of wealth creation is huge especially with equity investment over a longer period of time.

SIP is a very convenient method of investing in mutual funds through standing instructions to debit your bank account every month, without the hassle of having to write out a cheque each time.

Typically, the younger you start, the possibility of building a huge corpus is possible, highlights Kulkarni. Investors can make a small payment once a month instead of making a lump-sum investment.

The SIP installment amount could be as small as Rs500 per month. SIP is similar to a recurring deposit where you deposit a small /fixed amount every month, as explained by AMFI.

AMFI data shows that the MF industry had added about 9.26 lacs SIP accounts each month on an average during the FY 2017-18, with an average SIP size of about Rs 3,300 per SIP account. The average monthly contribution coming from SIPs have grown to Rs6644 crore as of January 2018.

The month-wise amount collected during FY 17-18 is as mentioned below:

To make equities as your friend who comes in handy when you need it the most, Kulkarni suggests that investors should increase their allocation towards equities.

Now, how can you create wealth over a long term? Kulkarni advises investors to put aside Rs5000 or Rs10,000 in mutual fund schemes every month over a period of 25 years.

For simplicity, Kulkarni takes minimum 10% percent CAGR return for the next 25 years and the amount invested is both Rs5000 and Rs 10,000. Back of the envelope calculation suggest:

Aggressive Approach: Investment in SIPs Rs5000, rate of return 12%, Time period 25 years = Rs93.9 Lakh

Conservative Approach: Investment in SIPs Rs5,000, rate of return 10%, Time period 25 years = Rs66 lakhs