An Investment Sunday With Mr. Ajay Gautam

By | June 19, 2017

It was a Sunday morning a couple of weeks back when Mr Ajay Gautam called to know about some regular monthly saving and investment plans, and also about all other available option for long-term investment. And to start with, he is willing to put an amount regularly out of his saving every month and may continue the same until his retirement.

Mr Gautam is just 25 years old and has a long 35 years to his retirement.

Last year, Mr Gautam joined as scientists at a premier research institute at Shillong. He has started to love his job and the handsome salary that comes with it every month!  During the initial few months, his monthly expenditure goes on to some basic necessities of life,  like food, clothing and housing (shelter) and to fulfil some of his innate desires on what can be termed as few “objects-of-desires”.  He purchased a big screen LCD TV, a three-door refrigerator, a 6GB smart-mobile handset, besides few branded clothing that suits his tastes. All these years, he has been a studious boy, and his requirements were all limited and basic. He also has to buy a ‘great-selfie” mobile handset for his college-going sister, and a  DSLR camera for his brother. 

With all these expenditures over, Mr Gautam has started to think how best he can put his monthly saved money to grow for his best use in future.

Saving is income not spent, or deferred consumption; Methods of saving include putting money aside in a deposit account, a pension account, or as cash. In Personal Finance, saving generally specifies low-risk preservation of money.

Investment generally refers to an endeavour with the expectation of obtaining an additional income or profit.

Legendary investor Warren Buffett defines investing as “… the process of laying out money now to receive more money in the future.” The goal of investing is to put your money to work in one or more types of investment vehicles in the hopes of growing your money over time

Thinking of how best he can grow his monthly/regular saving, he wants me to take him through some of the best available ‘investment’ options.

I patiently listened to this young man and asked him few questions about his likes and dislikes, his risk-taking ability, his present liability in any form – be it education loan, or a car loan or even a housing loan. I also enquired about his interests and knowledge of different Small Saving Schemes, and their rate of interest, and how the different interest rates could affect his returns over a period of time.

Mr Gautam said that for next 10-15 years, he would like to like to build a fund for himself and is open to the idea of simultaneously building his retirement fund.

Having all the inputs from my “young enthusiastic investor’, I started with an overview of Small Saving schemes like PPF, Post office Recurring Deposit Scheme and Recurring Deposit with Banks.

To give a better perspective, I made an attempt to explain with few comparatives:

Monthly deposit of Rs.1000/- in Post office Recurring Deposit for 5 years at 7.20% (interest calculated quarterly) would give you a maturity value of Rs.72,314 /-

Monthly deposit Rs.1000/-   in PPF (Public Provident fund) for 15 years would grow at present rate of 7.90% (interest calculated annually) with approximate maturity value of Rs.3.50 Lakhs

Bank Recurring Deposit of Rs.1000 for 10 Years [at present rate of 6.25% (interest calculated annually) ] would have a maturity value of Rs. 1,66,671 /-

I further explained: And if you invest by doing a SIP in a Mutual Fund Scheme, you can earn even higher returns and maturity value”.

He asked – “What is SIP and how much more can I earn in, say in a time horizon of 15 years?”

I went on to explain him few details on how Mutual Funds work –

Systematic Investment Plan (SIP) is generally referred to monthly/regular investment into a Mutual Fund Scheme.  SIP is a financial planning tool that helps you to create wealth, by investing small sums of money every month, over a period of time. A Systematic Investment Plan or SIP is a method of investment offered by Mutual Funds to help investors invest regularly in a disciplined manner.  

SIP can be monthly, weekly, quarterly, or even daily

A monthly SIP of Rs. 1000/- with an Equity oriented growth schemes of a mutual fund, at CAGR of 12 %  (CAGR = Compound Average Growth Rate) can give you Rs. 5,04,576 /-  in 15 years time!

He added- “What if I keep increasing the monthly SIP by Rs. 500 /-  every year till 15th year?”

 

I said, “Well, in that case, your wealth creation corpus, at CAGR of 12% would be Rs. 17,36,300 /- “

He puts another questioned- “ And if I keep investing only Rs. 1000/- till my retirement?”

I answered:   

“Your invested amount of Rs. 4.20 Lakhs would then become Rs. 64.95 Lakhs in 35 years“

“That’s Amazing! ’ he replied with astonishment. “When can I start ?”

With calm and ease, I answered – “Today !….  because every day is  good day to start a long-term investment journey “

And The Financial Journey Begins …

18 thoughts on “An Investment Sunday With Mr. Ajay Gautam

  1. Dhiraj Kr Yadav

    Nice and lovely content.I was thinking to invest in sip but was in deep fear due to unstability of market,may be i can get valuable suggestions from your end too.Keep it up.

    Reply
  2. Suvajit Kanungoe

    The advise given is the best one considering his young age which makes it easier for him to invest for a long period and earn the cream out of it towards his mid to retirement age.

    It is always better to start early.

    Reply
  3. Sandeep walia

    Nice post…. impressed
    I think i’ll follow all the advice and tricks

    good luck.

    Reply
  4. Ehsanur Rohman

    Nice and simple way of presenting the message. Liked the attempt to keep it simple, free from any financial jargon which is actually required for a new investor. The bottom line is he is bothered on what he gets.

    Reply
  5. Manash Jyoti Dutta

    Nice post, well explained… Think Investment, Think Mutual Funds.

    Reply
  6. Vaibhav Sahni

    Simple and easy to understand content. This article will give lot of confidence to investors who are looking forward to start their savings journey with Mutual Funds…

    Reply
    1. Anuja Bhuyan

      Nice Mridu..quite informative…although I have few SIPs,never did i calculate that I would grow rich one day…

      Reply
  7. Pallav J Sarmah

    Very true and useful Blogg. Every young man should have SIP in his investment portfolio as without which is difficult to beat inflation. In today’s investment parlance one cannot avoid share market in his journey towards wealth creation. Therefore the best way to enter the same is through SIP in Mutual Fund…. specially for common man like us. Excellent information…

    Reply
  8. Basudev Sharma

    Nicely Drafted to show the variation of Savings and Investment, well explained the long term prospect of Investment !! Good Job.
    MF Sahi Hai.

    Reply
  9. Akan Kumar Das

    Useful information, Gradually I believe the same.
    I hope I shall be able to invest more into SIP in near future.

    Reply
  10. Ritun Bardalaye

    indeed a nice and useful blog for new investors.even a layman would be attracted as it is jargon free and possibly the simplest way of understanding investment planning.incorporation of potential risk factors of mutual fund/ security market may make the new investors more beneficial
    in the long run.

    Reply
  11. rahul dutta

    Being from the same domain background (finance), i blv you have hit the bulls eye..what a post ..it is a story which is extremely well written and one can visualize the entire conservation..SIP is most probably the safest bet in our industry and each and every one needs to invest as soon and early …as u rightly said”Today !…. because every day is good day to start a long-term investment journey “…just brilliant

    Reply
  12. Mainu

    Very nice Mr. Mridu Malai Borah Daa…..u made it so simple to understand….:-) Looking forward to read more……

    Reply
  13. Manick

    Good article!

    One suggestion though. You have used different time horizon for the different schemes, as listed below:
    (1) 05 years for Post office RD
    (2) 15 years for PPF
    (3) 10 years for bank RD and
    (4) 15 years for SIP
    A similar time horizon for all the schemes, say 15 years, would help to compare and see how well SIP can perform.

    Reply
    1. Mridu Malai Post author

      I thank you for the observation you made here…
      In this piece of article, I made an attempt to showcase to a novice or first-time investor the various investment options and that each option comes with a different time schedule.

      Please stay tuned for more such ‘eye-opener’ article on investment avenues, health insurance and Risk Management that affects our PERSONAL FINANCE life.
      Stay tuned to FinvestGuru.com

      Reply
      1. Manick

        Thanks. Awaiting further articles from you. Would love to hear also your opinion on Lump sum vs SIPs.

        Reply
  14. Parikshit Bhardwaj

    Mridu da … its indeed an eye-opening article on investment avenues

    Looking forward to more articles in FinvestGuru.com

    Reply
    1. Mridu Malai Post author

      Thanks … I love to share some of the best practices into Investment Planning …
      Shall keep updated

      Reply

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