Thursday, August 14, 2008

Financial Freedom on Independence Day ! 15th August 2008

Happy Independence Day to all.

I still remember my days in K.V School when we used to go to school in white clothes for Flag Hoisting Ceremony. The special treat used to be Mooti Chur ke Laddoo !!

On this day I would like to bring an exiting topic. Which is Financial Freedom! I am not a Financial Adviser. I believe we can at least achieve financial freedom by taking small baby steps.

  • Stop signing up for more credit cards
  • Stop taking Promotional Offers on Financial Products in hurry
  • Stop taking personal loans if possible
  • Save and Invest : Remember that just saving is not enough. You must Invest in order to potentially increase your income and achieve financial freedom.
  • Invest in Low cost Mutual Funds : This is interesting as investing in low cost means two things. Either you find a fund which is having less management fees and expenses or Invest in Index Fund. Just now I read this article "The Lost World" on http://www.valueresearchonline.com. Excellent article which talks about Investing in Index Funds and how they are in India Vs USA. But before you jump look at these figures(taken from http://www.valueresearchonline.com) :

Open Ended - Equity: Index - one Year Return
Fund NAV (Date) Returns(%) Return as on
ICICI Prudential Index 41.37 (13-Aug) 5.44 8/13/2008
UTI Sunder 467.82 (13-Aug) 4.09 8/13/2008
Nifty Benchmark ETS 459.69 (13-Aug) 3.88 8/13/2008
Franklin India Index NSE Nifty 35.79 (13-Aug) 2.60 8/13/2008
Birla Sun Life Index 45.37 (13-Aug) 2.57 8/13/2008
Principal Index 31.80 (13-Aug) 2.20 8/13/2008
Franklin India Index BSE Sensex 42.56 (13-Aug) 1.91 8/13/2008
UTI Nifty Index 28.56 (13-Aug) 1.85 8/13/2008
Canara Robeco Nifty Index 23.93 (13-Aug) 1.61 8/13/2008
Tata Index Nifty A 27.45 (13-Aug) 1.58 8/13/2008

Note that with same benchmark of S&P CNX Nifty ICICI Pru Index gives 5.44% Yearly Return whereas Birla Sun Life Index Fund gives 2.57% :) This is what author Dhirendra Kumar of the article I linked above is trying to explain.

  • Generate Passive Income : Well this is something needs more thought and planning. It is easy to say but not so easy to implment. I follow this blog regularly and here is one interesting post on Passive Income
  • Start blogging your ideas: Its been more than 2 years I am blogging. It is good to put your ideas and thoughts on a blog. It helps you as well as others.
  • Invest in Stocks directly only if you know :)
  • Invest with Mutual Funds directly with AMCs: This step alone will start saving you 2.25% entry load :)
Enjoy Freedom and your holiday if you are in India !

3 comments:

Vidooshak said...

Good post. Nice to read some common sense tips listed in one place. I hope it will be most helpful to youngsters starting their lives with extravagant incomes-- and no clue what to do with all that money up until they end up in a debt trap.

I wonder how one invests direct with AMC? Is buying from their online portal going to save us 2.25%? Most do not have one. So is going physically to submit forms at their offices the only way to save 2.25%?

Happy I-day to all of us. Like all NRIs, you are starting to love India more once you are away from her. Haha... just kidding! Good to remember those canvas shoes, white dress days of Saluting the flag followed by a "treat". Wonder if KV follows the exact same routine even today?? It just might!

Sandeep said...

Thanks for the comments!..Well I do miss India on many occasions.

Wish Google and Blogger was there when I started job in 1997 and somebody posted similar content to help a person like me :)

I hope some youngster reads this and it helps him to at least plan his investments. The most important thing I missed in my early years of earning is Investment! ..

Yes unfortunately the only way is manual submissions to AMCs if one does not have a Internet account.

cheers
Sandeep

RaagVamdatt.com - Financial Planning Demystified said...

Hi Sandeep,

You have given some great pointers.

The absolute key point is: Start young. If you start planning and investing when you are young, you can achieve financial freedom with relatively little investment.

This is because the effect of compounding makes even small investments yield huge results over the long term.

BTW, I too am from a KV - all 12 years of schooling! It was great to see you mention the all-whites, and the ceremony, and the laddu treat!! Those were the days...

Happy investing, and happy I-Day!