Investing is much like driving a car. You start with driving lessons on an old car and then graduate from a simple car to a high end car. And you don’t need to be an automobile engineer to drive a car.
And the driving lessons are not rocket science too. You just need to figure out the controls, assess the roads & traffic and keep on upgrading your car.
So investing is basic common sense driving and it’s a good idea to take some investing lessons before you start driving on the highway. The investing lessons are simple. It’s about learning the simple concepts of Pay Yourself First, Power of compounding, Rupee Cost Averaging, Risk Analysis,Asset Allocation and Financial Planning.
And once you have taken those investing lessons, it’s time to get started. Often young people spend their time finding the “best” investments instead of just getting started. Some people get bogged down by the information overload or get confused with the multiple choice and options and get into a “decision paralysis”.
Instead of making the absolute 100% best decision, make a “good enough” decision. For example, we have compared insurance as a parachute sometime back. You don’t need the best parachute, a working parachute is good enough!
Here’s an attempt to simplify and get you started with a good enough decision on creating your financial system..
There are more than 1000 Mutual Fund schemes, 1000 of insurance schemes, 5000+ stock scrips to choose from. Then there are 100+ deposit schemes with Banks, Corporates and the Government itself.
To set up your investments, we have shortlisted a set of 20 odd products out of 5000+ financial products. Even if they are not the “best”, they are “good enough” to get you started. This group of 20 products is the best in class and stands validated through a reasonable thought process.
Advantages of the recommendations
It tunes out the noise of the market place which is worse than the fish market.
It takes care of Diversification, Rupee Cost Averaging, Asset Allocation principles, Magic of Compounding and all principles and theory of investing. It also gets you real bang for every Rupee at a very low cost.
Disadvantages: It is not 100% right. It’s boring and non-happening. More like a Cricket Test match when it’s the age of Twenty-20.
But the question is, do you need an audience for your finances? Or do you need to perform in front/for the benefit of others? Remember, its “personal” finance.
And once you set it up, you can forget about it and focus your life on more happening things!
The following points give you a set of 20 products to choose from for your investments.
Before we go on to investing our money, it’s a good idea to take a bit of cover. Let’s start with the emergency fund.
- Emergency Fund:Keep an amount of three times your monthly expenses in your Bank in a Savings Account.
- Life Insurance/Health Insurance: Buy a term plan and a health insurance plan with LIC, Aviva,ICICI or any other Insurance company. Don’t get bogged down with buying the best. Choose the agent who appears to be the most trustworthy to you.
- ETFs: Nifty Index ETFs which benchmark the Nifty that are available in India are NiftyBEES, KotakNifty, UTISunder, Nifty
- Equity Diversified/ Balanced Mutual FundsAt a young age, you can take more risks and I will not ask you to invest in debt funds. A few Equity funds that I like are Quantum Long term equity fund, PPFAS Long Term Equity, Franklin India BlueChip, Sundaram Select and SBI Magnum Global fund. But to get a bit of diversification in your portfolio, I will recommend investing in a few balanced funds. Balanced funds have exposure to both equity and debt and their fund managers take a call on when to focus on equity or debt. HDFC Prudence, DSP Blackrock Balanced, Birla Sunlife 96 (G), Tata Balanced are balanced funds which have done well. In fact some of them are at par with Equity Funds!
- Gold ETF:Gold has been outperforming the equities for the last decade! For diversification purpose, investing 5-10% of your money in Gold ETF isn’t a bad idea. Gold ETF is seeing the highest turnover these days and there are 11 (as on date) players which are offering Gold ETF these days.
All Gold ETFs that are in the market give similar returns since all of them depend on the same gold prices. The popular Gold ETFs in the market are SBI Gold ETF, Religare Gold, Kotak Gold, Quantum Gold and UTI Gold ETF.
That’s it. This is a good enough article to get you started. Yes, it’s not the “best” article written on the subject in India. But good enough! 🙂
What do you say?