Which Sip Is Best In India - In this article, I will publish my Top 10 SIP investments to invest in India in 2021 for my blog readers. If you are a long-time reader of my blog, then you know that I publish my Top 10 SIP funds to invest in India every year.
If you recall, last year I stayed away from active fund ideas and went for fixed income (index funds) and the reasons are below:-
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I would like to share my previous tweets in which I wrote and explained why I invest in index funds.
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I know there are very few guys (fund management) that can beat the index. I also know that it is impossible to find such rare species. That's why we take Index Fund.— (@) November 18, 2020
99% of financial transactions are made for SELLERS and the remaining 1% is for YOU. Learn the art of saying 99% NO. — (@) December 4, 2020
By investing in index funds, you eliminate the search for the BEST MUTUAL FUND COMPANY and the BEST FUND MANAGER. The only risk you cannot avoid is market risk, which you need to manage by properly allocating assets between assets and liabilities (I mean at the portfolio level).
However, investing in index funds requires a lot of patience. Because even if many say they are patient, they put a knee on the ground when the market collapses.
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The disadvantage of index funds is that there is no minimum security because the fund manager has to repeat the index. He can't make his phone calls and make sure he saves money during the market. Therefore, index funds will track the index.
At this point, many investors start comparing index funds to active funds (which may be better protected) that are derived from index funds.
However, if someone has divided the right wealth, debt, and money (internally) according to their goals, then we can prevent such a story-level collapse.
Paying more for active funds is only appropriate if the fund manager regularly makes more than 100% of the index funds. If that's not possible, then there's no reason to take working capital.
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It's a proven fact that no fund manager in the world can consistently beat the index. Therefore, a few years of underperformance can cost more than a few years of outperformance.
“The best way to invest is to own the entire stock market through an index fund and then do nothing. Just stay the course.” - John C. Bogle, The Little Book of Common Sense Investing "If I had to sum up my thoughts on investing it would be this: Every investor should choose the most difficult strategy to achieve their goals. And I think for the most part investors, the low cost of the dollar being a low cost fund offers the best chance of long-term success." - Morgan Housel, The Psychology of Money
It is a very difficult task for ME and YOU to find the RAREEST SPECIES of the RARE (FUND MANAGER) that can CONSTANTLY generate returns over 1% above BENCHMARK.
When you decide to invest in index funds, you just need to look at the three aspects of the fund and they are listed below.
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# Error Result:- It is nothing but the amount of money gone wrong based on the index return that was invested. Fewer tracking errors mean better revenue.
Now, before you jump into investing, you should have an idea of what the basics of investing are. I repeat this every year in my blog post. But receiving the same kind of questions from readers. So, to make it clear to you, I'm writing to you again.
Like me, before embarking on the world of finance, you have to know how to be well prepared for an emergency. Emergencies can include death, accident, hospitalization, or sudden loss of income or employment.
Therefore, protect yourself first with the right life insurance (term life insurance whose benefit must represent at least 15 to 20 times your annual income). Check out my article “Top 5 Best Online Insurance Plans in India 2020”. You must have your own health insurance (instead of relying on health insurance). Check out my article “Top 5 Best Health Insurance Plans in India 2020” and “Top 5 Best Health Insurance Plans in India 2020”. Buy around 15 to 20 times your monthly salary as accident insurance. Then create an emergency fund for 6-24 months of your monthly commitment.
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When this happens, consider investing. If your foundations aren't done well, any building you build can collapse at any time. Let's go ahead and understand the basics of investing.
I have noticed that many investors only invest in mutual funds because they have extra money. The second reason may be that one is led to believe that mutual funds are superior over time compared to stocks of FD, PPF, RD or LIC banks.
If you clearly understand why you are investing, when you need the money, and how much money you need at that time, you will better understand your investment decisions. So start by knowing your financial goals.
You need to know the current value of this goal. Along with this, you also need to know the inflation rate associated with this goal. Remember that each financial goal has its own inflation rate. For example, the cost of your child's education or marriage is a different rate of inflation than the amount of household expenses.
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By determining the present value, time horizon, and depreciation of that goal, you can easily determine the future value of that goal. The future value of this goal is the amount you want.
I wrote a separate article on how to set your financial goals. Read the same on "Financial Goals - How to Set Them Before Investing?"
The next step is to determine the allocation of resources. Whether it is a short-term goal or a long-term goal, a balanced financial allocation between credit and debt is necessary. I personally recommend distributing the articles below. Remember that this may vary from person to person. However, the most important consideration in asset allocation is protecting your investments and managing them to achieve your financial goals.
If the target is less than 5 years - Do not touch the product. Use the loans of your choice like FDs, RDs or loan funds.
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When choosing a loan product, make sure the product's term period matches your financial goals. For example, the PPF is the best loan. However, it must match your financial goals. If the maturity period of the PPF is 13 years and your target is 10 years, you will fail to achieve your financial goals.
The next step is to expect returns from each group of goods. On average, you can expect a return of 10% to 12%. For loans, you can expect a return of 6% to 7%.
When your expectations are set, there is less chance of deviation or knee-jerk reaction.
Once you understand how much you can expect from each financial group, the next step is to identify what you can expect from that category.
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Let's say you have defined the ratio of assets to debt as 40:60. The expected return on the loan is 6% and the interest rate is 10%, so the expected return on the portfolio is lower.
Once the goals are defined and the amount of money you want, the asset allocation is made, the expected return of each group of assets is defined, then the last step is to identify the amount of money you can spend each month.
There are two ways to do this. One is a fixed monthly payment for the duration of the plan. The second is to add a fixed percentage each year until the goal period. Choose what suits you.
How much money do we have? Is it 1, 3, 5 or more than 5? The answer is simple… you don't need more than 3-4 coins to make a full profit. Whether your income is Rs.1,000 per month or Rs.1 lakh per month. With 3-4 pieces, you can easily create a wallet of different brands.
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Having lots of money doesn't give you variety. In fact, in many cases, it can make your profile more cluttered and make you less efficient.
Remember that equity funds and debt funds are taxed differently. Therefore, you must understand the tax field before entering the business. I tried to explain the same in the image below.
I hope the tax section makes sense to you all. If you are still in doubt, refer to my recent article “Taxation of mutual funds FY 2020-21 (AY2021-22)”.
Now, let's go ahead and share with you my Top 10 SIP investments to invest in India in 2021.
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Last year, I recommended two Large Cap Index funds. I save the same money
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