Over the last several fortnights, we have covered a lot of ground in terms of our understanding of personal finance. If you have been following this column regularly, you have got the ducks in row by getting all the relevant documents for eKYC and you would have got your eKYC done by now. You are also likely to have a basic understanding of what the stock market is and why investing in the market is essential to secure your financial future. You have also learnt about mutual funds and the more diligent ones among you had checked out the websites of the top asset management companies (that manufacture and sell mutual funds).
A long way
We saw how you can bypass brokers, agents and other non value-adding intermediaries and directly invest in mutual funds through the “direct plans” of mutual funds. Along the way, we figured out that investing in index funds of large asset management companies is a solid way to open your investment innings. Wow, we have indeed come a long way.
Where do we go from here? Here is what you are going to do. You are going to start an SIP (systematic investment plan) in an index fund through the direct plan of one of the top four asset management companies of India. You can start an SIP with investments as low as ₹500 per month!
Read that again. And again, till you understand every word in that sentence.
This will answer the following questions automatically —
Where should I invest?
How should I invest?
When should I invest?
How much should I invest?
We saw earlier that investing is for the long haul. This would mean you are going to stay invested for at least five years, preferably 10 years. So, for now, let us forget about when we want to exit the market.
The SIP is a kind of EMI, which is good for you. In fact, it is the only kind of EMI that is good for you. Why?
It is because you are investing your savings here and not borrowing money. You are first saving money and using that money to build your nest egg. This is very different from borrowing to buy a house, where you think you have an asset, but in reality the property belongs to the bank till you fully pay off the loan.
As mentioned earlier, you can start your investment journey with mere ₹500 per month. This is the price of a pizza or a pair of movie tickets with popcorn. Just that when you invest, you are not consuming, but planting the seeds of your financial freedom.
Drop me an email if you had started your investment journey by starting your SIP. That will make me very happy.
The writer is an alumnus of IIM Bangalore and co-founder, Money Wizards. chari.venkatesh@gmail.com
