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Sunday, 22 March 2015

Building Wealth One SIP at a time

The bulk of my financial investments are in equity markets, since I believe that is the best way to create and build wealth.  However, I suck at picking stocks, since I have little formal education in how to analyze companies, balance sheets, and business models.  Instead I rely on Mutual Funds to do all the hard work for me, and pick the right stocks.  

The cornerstone of my MF investment strategy has been HDFC PRUDENCE fund.  This is a hybrid or balanced fund, that invests upto 70% of its assets in equities and the remaining 30% in debt instruments.  You can look up websites like valueresearchonline.com to analyze fund performance, stock holdings, etc.  The bulk of the wealth creation for me over the last 10 years has been through HDFC PRUDENCE.

If you go by the SIP return calculator at valueresearch a 10 year SIP from March 2005, to Feb 2015, of Rs 1000 per month, would result in a current value of Rs 3,17,278.  In 10 years of monthly SIP you would have invested Rs 1,20,000, meaning in absolute terms your money would have multiplied 2.64 times.  The annual percentage return for this period would have to be calculated using the IRR method, and as per the website, the annual return has been 18.33%.  This is a phenomenal rate of return by any means and certainly well appreciated by investors like myself!


Over a 20 year SIP in HDFC PRUDENCE (wish I had the foresight to invest in the equity markets for 2 decades!) from March 1995, to Feb 2015 at Rs 1000 per month, you would have invested a total of Rs 2,40,000 and amassed a fortune worth Rs 35,16,307 today, which is an astonishing  14.6 times your invested amount, at a yearly return of 22.81%  

Now isnt that something to think about!  A simple SIP of Rs 1000, can result in massive wealth creation if invested in the right MF, and for the right period of time.  The moral of the story here is that for long term wealth creation, like for retirement, the only way to go is through MF investments for the layman investor.

1 comment:

  1. Thanks for posting this Building wealth one SIP at a time..keep updating Sip Return Calculator

    ReplyDelete