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Reinvent your investing wheel

Reinvent your investing wheel

Why you need to reinvent your investing wheel?

“Change is the only constant”

As the saying goes, you need to adapt to the changes or else you will wither away. In career, life, business etc., you always need to adapt to the constant changes. The best reference is Yahoo and Kodak. They were the pioneers in their respective field and both of them didn’t look at the potential changes happening in their field. Now both became obsolete in their business.

In life too, changes are eminent. Before 20 years, no one used mobile and now it is part of everyone’s life. Even our parents and grandparents who once said that they will not use smart phones had got adapted and adopted to these changes.

From the 1960s to 2010s interest rate has moved and stayed higher. This is the time where we did not have any new technological advancement and not much to spend. So, the majority of the earnings were saved and deposited in banks, post offices and in the form of Insurance.

Bank interest rate of India in the last 10 years has come down considerably. As of now it is staying around 5%

As inflation stays around 4-6%, this interest may also not move higher. Every developing country would like to keep this inflation rate at this level and even lesser than this. Developed nations like US, some of the European countries, Japan etc., are all having negative interest rate or around 1%.

Consequences of Lower Interest Rates:

India has always been a country looking to invest in Real estate and Gold. Next to these asset classes people believed in Insurance as an assured fixed income product. Traditional Insurance was also aimed at providing Insurance cover with little savings. India’s interest rate regime also aided bigger returns with traditional insurance products. As the interest rates was ranging in double digits, it was easy to get more than double the invested money in 15- or 20-years’ timeline.

Now with reduced interest rates, the returns from these products had gone down to 5 - 6% range which is lesser than inflation rates.

In the last 20 years, many things have changed. People are getting bigger pay packages just getting out of college itself. They were able to earn what their parents had earned in their lifetime in just 5-10 years.

Lifestyle also had changed a lot in the same time. Smart phones costs from the minimum rate of 10,000 and the cost of living has increased. Washing machine, Television, Fridge, AC & other gadgets had become essential from being a luxury product. Another point is you need to change all these frequently, say once in every 3-4 years.

In 2021, you need to fight inflation, Lifestyle changes/costs & biggest threat of life which is Retirement planning. If you save and invest NOW, it will help you in your late 60s or else you may need to work till you die.

As you got adapted to the lifestyle changes, even your investments also need to be adapted to the current lifestyle. 

5 Steps to reinvent your investing wheel:

  1. List down your financial goals
  2. Prioritize goals 
  3. Start investing through SIP/Mutual funds
  4. Increase your investments every year
  5. Achieve your goals

SIP can help you to accumulate money for your long-term goals as well as to plan for your short-term needs. SIP or Mutual funds are highly regulated. AMFI under SEBI over looks all the Asset management companies and all these companies needs to be compliant with AMFI.

Mutual fund may be one product, but you can invest in Equity market, Debt products, Hybrid varieties, Gold, Real Estate etc.  

Above all, the benchmark returns from mutual funds is 12% and some of the top equity funds have given more than 20%. Considering even 12-15% returns is higher than returns from all other asset classes. Average returns from Gold is around 8-9% in last 40+ years. Even in Real estate it is around 9% in the same time period.  

Risk Factor:

Risk is there in all investment products. Interest rate has gone down in bank deposits, post offices and Insurance so it has interest rate risk as well as inflation risk. As returns from these products are going to be lesser than inflation rates it can be considered as inflation risk.

Gold is considered as inflation hedging product, so this will appreciate your money just equal to inflation. Average inflation in India is around 6% in last 10 years and Gold also returned only less than 7%.

Mutual fund as a product has performed not just in last 10 years and also in last 20+ years. As stock market keeps going higher, this mutual fund product also keeps moving higher.

Nippon India Growth fund which earlier known as Reliance Growth fund was started in 1996 at NAV (Net Asset Value) of 10. Now the NAV have crossed 2000 in 25 years which is more than 200X returns till now.

Only with mutual funds you may be able to achieve all your financial goals.

Are you ready to reinvent your investing wheel?

About the Author

Ganesan Thiru is an Author, Stock Market Profit coach, Research Analyst who has trained more than 10,000+ people in stock market investments & had done 90+ webinars in the last 15+ months He has 1800+ people in his Private Facebook group “Unlimited Wealth” & active in social media. His mission is to inspire one million people in getting financial freedom.