Smart Investment – Have you Invested Smarter than this?

One of my friend has never been a fan of investing in mutual funds or equity but he was looking to do some investment few months back. I suggested him a good strategy to investing and he is now making 15% returns on his capital and that too without any risk of loosing the capital. You are amazed but it’s true and I termed it as Smart Investment.

Before I share I would like to give the credit to one of the reader of the blog Girish Arora.  He is also in the same situation as my friend few months back but there is a difference that my friend was not into mutual funds but he is very much looking to get into it. So instead of explaining him once again privately I thought I would share the same with all my reader to see and even follow it.

Let us take the example of Girish and his question was:

I need to invest Rs 10 lakh in mutual funds. Could you suggest which ones to invest in presently.I do not have any portfolio at the moment and am new to this .

Thanks for your feedback. I have gone through your ebook and found it to be very informative. Please advise should I buy 10 different funds as suggested in your ebook by investing say 1 lakh in each fund as lumpsum or is it a better idea to take an sip of say rs 5000 for each fund for a period of 3 years.( keeping in view that the mutual fund prices are quite high at the moment ). So is it a good time to invest lumpsum or SIP.

Now like Girish many people are looking to get into equity as an investment and the best option in current market situation should be to remain on the safer side because market is not giving any indication of either breaking up or breaking down.

Invest the total amount (10 lakh for Girish) in some Fixed Deposit of some bank and have the option of interest getting deposited month on month or quarter on quarter into your bank account. ICICI and HDFC Bank have such schemes. Now invest that interest amount into a SIP of a Mutual Fund.

Note: Fixed deposit should not be locking, which means your money should be liquid to do some more lump-sum investment in few days if you see signs of crack in the market.

Advantages

• Safety of capital
• Potential to earn better returns as SIP accumulates

Disadvantages

• You start very small amount in mutual fund’s and so start is very slow and laggard.

Alternative Approach

I have no idea about Girish risk profile or his likeness towards safe investment but like me if you are not a fan of Fixed Deposit you can have 25% of your investment as lump-sum investment into the best funds and follow the above procedure for 75% of your investment.

Further See – What should be your Investment Strategy?