Markets in May.

Markets greeted our new Prime Minister Narendra Modi Modifollowed by a MODI-fied government with a thumping 7% gain for the month of May 2014. Normally in election periods, after the results markets would rest for a while, but this time the euphoria continued with robust strength.

On expectations of delivery, almost all the stocks rose to highs, even those that were fundamentally weak. For us the gains were about 6.84%, marginally lower than the broad market average, this was because of our positioning into the fundamentally strong stocks. We don’t invest in companies that do not have growth. Whereas, in the broad markets the rally was in the frontline stocks, which are mostly lagged on their balance sheets.

The tide has been slowly shifting from IT and Pharma to Agriculture based companies and Metal spacemetals along with Auto ancillaries’. We have been cutting down exposure to IT stocks as the price pattern show weakness. But, fundamentally these companies are still having good balance sheets. In the coming quarters things may change against them. With Mr. Rajan, committing that there would be no further hikes in the interest rates, the Rupee will only get more stronger, which will go against the companies that are dependent on exports. While those that have exposure to foreign currency loans will have a upper hand.

Most of the stocks that we have taken exposure in the recent months has gained more than 20%GREEN-GROWTH in a short span of 2 months and are likely to get stronger.

Our country has entered into one of its very strong growth phase. GDP is expected to inch up from the 4.70 levels to 5.5-6.0 in the next 12 months, and is likely to move above 7.0 very soon. For the next 10 years Equities will over shoot all other asset classes in gains. An investor needs to position himself well to cash in, into this once in a life time opportunity.

It would rather be too early to say that, India is in its last phase of 6-10% growth, though for the next 10 years India will rule the world in its economic prowess, we are not likely to witness such growth in the next decades to come. We will move up to be a developed nation in the next 10 years. Africa is going to be the next power house while we settle into the 3-4% growth rates along with developed nations.Developed1

So, it would be wise to be invested into Equities and cash in the boom. Allocate more of your savings into Equity investments, own companies that have strong growth potential, you are sure to break all records of earnings growth on your savings.

Happy investing.
 

Gift yourself a second home

Housing loans are like children begot with pleasure, but bought forth in pain. Buying a house is a joy, but, the time it really takes to own it, is a pain. Until the last EMI is paid, it is a loan house, not your own house. You can pay back your 20 year loan in 11 years. Paying off early gives an option to own a second home, which will support you with a rental income on your retirement.

By adding 20% of the EMI amount and saving the same as SIP’s in Equity based mutual funds will ensure that you have a corpus equal to the loan balance at the 11th year. Pay off your loan from this corpus and make your loan house your own house.

How this works?

If you have a housing loan of 25 Lakhs & your loan EMI is Rs. 25000 per month. Along with paying the EMI, add 20%, that is Rs. 5000 and save it though SIP’s in Equity Mutual funds. On the 134th month, that is., 11 years and 2 months into the tenure the loan balance will be Rs. 17.19 lakhs. On the same date your Mutual Fund SIP value will be Rs. 17.14 Lakhs. Redeem the investment and clear the loan.

What is the rate of return on your investment?

It has been calculated at 15.00% per annum. Following table will be a proof for the same.

CAGR Img

The compounded average growth rate for the SENSEX from the period of its inception (Mar-1979) till Dec- 2013 is 16.65%. Average returns will overtake the probability of loss on any investment that exceeds 7 years tenure. The probability of loss becomes zero from 10th year onward, while the returns show a constant increase.

In this 35 year period we have had 2 international wars (Iraq & Afganistan), 2 of our prime ministers assassinated (Indira & Rajiv Gandhi), 5 Stock Market Scams, 1 historic International terrorist attack (9/11) & an historic recession in 2008. In spite of all these disturbances and uncertainties, our economy has had the above growth.

If a plain vanilla investment into SENSEX can have a zero risk and 10.14% return on investment for a 10 year period, a little extra effort in identifying the Mutual Funds that have their investments in the best companies along with the Rupee Cost Averaging due to SIP’s will ensure 50% extra returns, which is above 15%.

The average returns of a Rs. 10000 SIP into one of the best known Mutual Fund Scheme (HDFC Top 200) from May 2004 to 2014 is as follows

HDFC Top 200 Fund (G)
Investment Period Jun 10, 2004 to May 10, 2014
No of Investments

120

Total Amount Invested (Rs)

1,200,000.00

Total Units Purchased

10,541.31

Investment Value as on May 10, 2014

2,870,989.30

Latest NAV 296.00800 (as on May 22, 2014)
SIP CAGR

16.87%

Bravisa Templetree’s research facility helps us in identifying the best performing Mutual Funds which assures returns that are far above the SENSEX average. We help channel your investments into the best performing funds. Hence, you not only pay your home loans early, you also have the opportunity to have a second home without much effort and have a regular rental income throughout your retirement years.

 

Similar kind of investments can be structured for life time goals like Retirement, Children’s education, wedding etc., By planning and beginning early you have all the possibility to live your life King Size.

Advantage India – Seize the opportunity

India has the right ingredients – skills, democracy, demographics, and institutions. We are now fortunate to have found the right catalyst in Narendra Modi. All Indians must believe in this opportunity and seize it, both for the common good of our country and for individual prosperity.

rakesh_investorRakesh JhunJhunwala – India’s Warren Buffet.

  1. India will be a world economic super for the next 10 years.
  2. An economy with highest growth.
  3. Has entered into the mother of all bull markets.

Be invested; take this opportunity to double your savings in the next 3 years. Own some of the best companies of our country and grow your savings to meet your financial goals. While our markets have been in a very high rally mood, there are some companies which support the rally with a high strength in their balance sheets. Having a portfolio of such high growth companies ensures above average return on investments as well as high safety to our capital. Even in the a down turn, these companies tend to buck the trend and not lose much.