The year 2018 was not a golden year for investors in terms of percentage returns. The S&P BSE Sensex rose by about 6 percent while the Nifty50 rallied a little over 3 percent.
2018 could be termed as a volatile year for investors, but as we move into 2019, is there a way investors can grow their wealth?
Well, yes, if investors stick to a disciplined approach to investing via mutual funds — the goal to become a crorepati is quite achievable with minimum risk, suggest experts.
Systematic Investment Plan, or SIP, is an investment plan (methodology) offered by Mutual Funds wherein one could invest a fixed amount in a mutual fund scheme periodically at fixed intervals — say once a month instead of making a lump-sum investment.
The SIP installment amount could be as small as Rs 500 per month; the amount depends on your financial goals.
SIP has been gaining popularity among Indian MF investors, as it helps in Rupee Cost Averaging and also for investing in a disciplined manner without worrying about market volatility and timing the market, said AMFI.
AMFI data shows that the MF industry added about 9.74 lakh SIP accounts each month on an average during the FY18-19, with an average SIP size of about Rs 3,200 per SIP account. The total amount collected through SIP during November 2018 was Rs 7,985 crore.
Assuming investors in the age bracket of 30-40 years, investors could start with a SIP of Rs 10,000 per month.
“To grow the lump-sum investment of Rs 10 lakh to Rs 1 crore, it will take approx 20 years assuming an average portfolio return of 12 percent,” Rahul Jain, Head, Personal Wealth Advisory, Edelweiss told Moneycontrol.
Equities should be a major part of your portfolio if you are looking to create wealth over a longer time horizon, followed by some amount in debt. Large-cap stocks will be a better choice as compared to mid or small-caps stocks that saw a major correction in 2018.
The big carnage was seen in the broader market that witnessed double-digit cuts in 2018. Remember, the S&P BSE Midcap and the Smallcap index recorded over 160 stocks that rose more than 100 percent in 2017.
“Assuming an investor is 35 years of age with a moderate risk profile and considering the investment horizon of 5 years, he/she should allocate 50% to equity and 50% to debt. Within equity, a larger allocation should be towards large-cap stocks/funds. On the debt side, one should consider short-term debt funds and high-quality bonds and non-convertible debentures,” said Jain.
Anupam Singhi, CEO, William O'Neil India is of the view that portfolio allocation should be 40-50% equity markets 25- 35% -bonds/debt market and rest as 10-15% in real estate and 10-15% in cash/gold.
“If investors are looking to build a portfolio worth a crore then for 10x returns (investment 10,00,000) in 15-20 years implies 13-17% CAGR over the period. Most global markets are flat to down this year,” he said.
Singhi further added that in the near-term capital preservation might be a better strategy. Small investors should always approach staggered or pyramiding style.
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