3 years ago I started a monthly SIP (Sytematic Investment Plan) with SBI Mutual Fund's Magnum Tax Gain'93.
I started it not because of my prudence
but because of
a) repeated edging by one Mr.Vijay (a real gentleman financial advisor whom I now trust utmost) and
b) the reason that I wanted to save some tax under section 80C but in a way which gives more return than traditional life insurance
(I believe that one should buy term insurance for life insurance and mutual fund with or without SIP for savings!) (the above mentioned fund gives 80C benefit besides market investment returns)
Frankly speaking, when i started the SIP with a small monthly contribution I was least excited!
Reason?
"It will take ages before the monthly systematic investment will becaome a fortune!" I thought.
Still, I did start with the SIP and gave 12 cheques to Vijay.
Every month it was an irritant to part with the instalment.
Many times I decided to stop the SIP after the committed 12 instalments.
But after around 8 months, one day I was pleasantly surprised to receive a dividend cheque from the MF.
It was a decent amount but it appeared many times bigger due to the surprise element!
Besides, my corpus had grown!
So, I continued with the MF after the first year as well.
Here, I wish to share that I started the SIP when the Sensex was above 20000 just before the crash!
But because of it being monthly SIP, my instalments kept entering the market at every stair in the staircase.
My SIP instalment went into the market at 20000 as well as 7500, 15000 as well as 9000, 12000 as well as 10000......
....and it is still continuing........
The annual dividends I get fund my kids annual fees automatically! Alternately, it leaves me with a handsome amount to do anything I wish to! Last year we had a grand annual family vacation in Kullu & Manali!
And the beauty is that the corpus is growing.....
.....in compounded fashion just like the prize money in Kaun Banega Karorpati (Who wants to be Millionaire).......
What was an irritant every month is today a monthly reminder of the assured and growing prosperity!
Every month I thank Vijay hearts of hearts for somehow forcing me into this equity-linked savings.
Jokingly, I have been playing a race between my savings in this MF and the growth in my self-trading earnings.
I have no hesitation in admitting that I have been left gasping behind the MF especially after this recent bull spurt!
Why I shared this story with you?
Two reasons.
First, to recommend SIP based Mutual Fund investing to everyone!
Second, to share a strange phenomenon mentioned below.
I have
never ever
never ever
never ever
thought of selling my SIP savings!
I just think of investing more and more......
I just think of topping it up whenever market is in oversold state!
whereas I rarely survive the itch to book profit in my trades!!!
What fantastic paradoxical opposite faces of my same self!!!
One is willing to not only hold all investments forever but keep adding to it! (The fund manager keeps rotating the investment into sectors and stocks as per the situation)
The other is dying to run away with the pennies after every round!
One full of stress!
One full of pleasure!!
I have least doubt who will win this race.
It will surely be the tortoise this time as well!
Showing posts with label Dividend. Show all posts
Showing posts with label Dividend. Show all posts
Tuesday, November 9, 2010
Wednesday, August 18, 2010
To eat or not to eat the cake!
If you had the power that the cake in front of you
- will always stay fresh
- and if you did not eat it, it will keep growing (till you eat it!)
what would you do?
Similarly, would u like the company (whose stock u have invested in)
to pay out their surplus cash as dividend
or
plough back the surplus cash into the business to grow it?
If they infuse it into the business as capital
they are doing good by keeping the debt down and hence interest costs also!
Besides, they are growing the business and thus ensuring bigger profits and better dividend promise in future besides ensuring safety from competition by increasing the market share!
As an investor, you may want the company to grow and capture market share
and thus unlock the hidden potential of the business
besides zooming the share value of the company!
While dividend is instant gratification of the share holder's taste buds
share price rise is the sweetest thing for the investor.
In these days of Mergers and Acquisitions, companies need cash "warchest" to acquire the target companies. This cash can come from the surplus or from fresh debt.
Investors are generally less comfortable with debt.
(Ofcourse, investors will not be too happy if the company is debt-free, as this indicates that either company has no or weak future plans or is not taking the benefit of the loan facility available. Share holders don't want too many share holders around to share the dividend. So they want the company to take loan for short term requirements. Once these loans are repayed, the original share-holders are happy to be alone in the ownership space!)
When I entered stock market world many years back I had heard that majority people trade for share price rise rather than for dividend.
However, if you are lucky you can get both as in case of Sesa Goa, Hero Honda, Yes Bank etc.
On the other hand, there is a big segment of investors including FIIs and retail investors (directly or thru specific Mutual Funds etc.) which invest in anticipation of regular income in the form of dividends!
To book profit generated due to share price rise, you have to sell the share, but for dividend you don't have to sell the shares. Investors can thus stay with the company in its growth journey while having regular cashflow as well.
Also, dividend is a feel-good factor for investing public. Good and growing companies which are not paying dividend are looked at with synicism by a segment of the public. Dividend is seen as an incentive for the investor to wait for the ultimate reward - share price bloom!!! However, too much of dividend payout is also not a good indicator of companies state of affairs.
Every company wants funds for future growth. Fresh equity floating is a cheap and easy way out. Companies want to keep retail investors as well as Dividend Mutual Fund Managers happy so that they are ready to invest next time company needs their money.
To eat or keep the cake (which always remain fresh) is a tempting question depending upon the appetite of teh investor.
- will always stay fresh
- and if you did not eat it, it will keep growing (till you eat it!)
what would you do?
Similarly, would u like the company (whose stock u have invested in)
to pay out their surplus cash as dividend
or
plough back the surplus cash into the business to grow it?
If they infuse it into the business as capital
they are doing good by keeping the debt down and hence interest costs also!
Besides, they are growing the business and thus ensuring bigger profits and better dividend promise in future besides ensuring safety from competition by increasing the market share!
As an investor, you may want the company to grow and capture market share
and thus unlock the hidden potential of the business
besides zooming the share value of the company!
While dividend is instant gratification of the share holder's taste buds
share price rise is the sweetest thing for the investor.
In these days of Mergers and Acquisitions, companies need cash "warchest" to acquire the target companies. This cash can come from the surplus or from fresh debt.
Investors are generally less comfortable with debt.
(Ofcourse, investors will not be too happy if the company is debt-free, as this indicates that either company has no or weak future plans or is not taking the benefit of the loan facility available. Share holders don't want too many share holders around to share the dividend. So they want the company to take loan for short term requirements. Once these loans are repayed, the original share-holders are happy to be alone in the ownership space!)
When I entered stock market world many years back I had heard that majority people trade for share price rise rather than for dividend.
However, if you are lucky you can get both as in case of Sesa Goa, Hero Honda, Yes Bank etc.
On the other hand, there is a big segment of investors including FIIs and retail investors (directly or thru specific Mutual Funds etc.) which invest in anticipation of regular income in the form of dividends!
To book profit generated due to share price rise, you have to sell the share, but for dividend you don't have to sell the shares. Investors can thus stay with the company in its growth journey while having regular cashflow as well.
Also, dividend is a feel-good factor for investing public. Good and growing companies which are not paying dividend are looked at with synicism by a segment of the public. Dividend is seen as an incentive for the investor to wait for the ultimate reward - share price bloom!!! However, too much of dividend payout is also not a good indicator of companies state of affairs.
Every company wants funds for future growth. Fresh equity floating is a cheap and easy way out. Companies want to keep retail investors as well as Dividend Mutual Fund Managers happy so that they are ready to invest next time company needs their money.
To eat or keep the cake (which always remain fresh) is a tempting question depending upon the appetite of teh investor.
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