SIP Investment - Earlier the Better
Sunday, January 20, 2008
Here is a case study on why should you start saving money by investing in mutual fund SIP as early as possible in your life.
Shankar, a reader of your column is 30 years old. He wants to retire at the age of 55 with atleast 8.0 crore [$2 Million by today's rates] in his mutual fund kitty. Taking base case view of the Indian economic growth, we advise Shankar to start investing Rs 25,000 every month for the next 25 years and assume he gets a compounded returns @ 15% to meet his investment goal ~ Rs 8.2 crore.
Investment Pattern -2:
However, Shankar cannot invest Rs 25,000 every month today and he tells us that he can invest just Rs 15,000 / month and wants to add Rs 5,000 for SIP every 5 years.
SIP of Rs 15,000 / Month from 2007-2012 + Holding period from 2012 to 2032. All yields at 15% - Rs 2.20 crore in 2032
SIP of Rs 20,000 / Month from 2012-2017 + Holding period from 2017 to 2032. All yields at 15% - Rs 1.45 crore in 2032
SIP of Rs 25,000 / Month from 2017-2022 + Holding period from 2022 to 2032. All yields at 15% - Rs 0.90 crore in 2032
SIP of Rs 30,000 / Month from 2022-2027 + Holding period from 2027 to 2032. All yields at 15% - Rs 0.54 crore in 2032
SIP of Rs 35,000 / Month from 2027-2032. All yields at 15% - Rs 0.31 crore in 2032
So at the age of 55, Shankar would have just Rs 5.4 crore
The method of averages don't work here. You are seeing the obvious difference. So set your own goals for retirement and before spending on your Nautica or Nike in the Mall, invest in your SIP and whatever remains just blow it as you like it :-)
Questions and comments can be sent to feedback @ dalalstreet dot biz
Published by DalalStreet Business @ 12:12 PM
HDFC Infratsructure Fund
Tuesday, January 15, 2008
HDFC has also joined the bandwagon to launch an infrastructure fund like other AMCs. Everybody is painting a rosy picture of Indian infrastructure. However, their is no master plan and it is a haphazard growth story with various governments coming to power scrapping previous regimes work / projects and rampant corruption in awarding tenders.HDFC Infrastructure Fund - Features
- Closed Ended Fund - 3 years Will be converted into open ended after 3 years
- To seek long term capital appreciation by investing predominantly in equity and equity related securities of companies engaged in or expected to benefit from the growth and development of infrastructure
- Minimum Rs. 5,000 and in multiples of Rs. 100 thereafter per application
- Till conversion of the scheme into an open-ended scheme, the scheme will offer for redemption / switch-out of units on an ongoing basis at monthly intervals at NAV based prices. The redemption / switch-out of units will be available only during the specified redemption period i.e. the first two business days of each calendar month
HDFC is charging an initial issue expense of 6% amortoised over a period of 3 years.
Published by DalalStreet Business @ 11:46 AM
Utilities, Real Estate Overvalued - HDFC AMC
Sunday, January 06, 2008
In an interview to the Press, Prashant Jain CIO of HDFC AMC said that Refineries, Utilities and Realty Stocks are the Most Expensive in today's market.
Prsahant said,
I think there are better choices of label than the utility space at the current valuations and if one looks at the largest utility in the country and if one puts it along side the largest bank in the country both businesses are similar in terms of RoE what they earn. Both earn or give or take around 15 to 17% RoE.So investors of Reliance Power Ltd be ready to cash in on listing as Anil Ambani has 25% free float which is not locked in and you know what the ambanis can do :-)
So, whether the utilities may or may not fall they may actually drag over time for a number of years. But when two very similar businesses with similar ROEs and with similar growth prospects, the gap in valuations is 100% and to my mind it is not sustainable.
On Refinery Stocks,
Today refineries are somewhat like what Cement was like one year back. The refineries are a cyclical business, and currently the refining margins are very high. But I don't think they will sustain beyond 1-2 years. And when one starts valuing cyclicals at peak cycles of 2X-4X replacement costs, I think the upside over the long-term is really not there.Book some profits if you are in these sectors - suggestion for medium to long term investors.
Published by DalalStreet Business @ 12:03 AM
Reliance Natural Resources Fund
Wednesday, January 02, 2008
Reliance Capital operated AMC, Reliance Mutual Fund of ADAG has launched the first Natural Resources Fund in India. As obtained from the AMC, the objective of the fund is to invest 65-100% in Indian Equities and/or upto 35% in Foreign Equities. The sectors in which the fund is planning to take exposure are as follows,- Minerals & Commodities - Copper, Iron-ore, Zinc
- Precious Metals - Gold, Silver, Diamonds
- Energy Resources - Coal, Oil, Natural Gas, Uranium, Lignite
- Non-conventional resources - Air, Water, Solar
- Agricultural Products - Cotton, Wheat, Corn, Rice, Sugarcane, Bio-Fuels
- Ancillaries to the above - Component suppliers, Equipment suppliers
Published by DalalStreet Business @ 11:20 AM
No Entry Load - New Year Bonanza
Tuesday, January 01, 2008
The SEBI has finally tackled the cartel of AMCs which included ICICI, Reliance, HDFC, HSBC and other Mutual Fund houses which came together in June-06 and started charging entry loads of 2.25% on open ended mutual fund investment schemes. Our Analyst had written to SEBI, Finance Ministry and AMFI complaining the same. [PDF] We are releasing the Copy of the Letter.
SEBI has now directed Mutual Fund houses that starting from Jan-4th all Direct investments [internet submitted to the AMC, collection centre or investor service centre] in Mutual Funds will have no entry load.
Published by DalalStreet Business @ 9:48 AM
