Investing in Low Cost Sensex & Nifty ETF with the right amount at the right time will provide you the necessary capital to see you through Retirement. You can systematically withdraw on a monthly basis, which will allow you capital to grow as well. Income is tax free as there is no long term capital gains on equity
If you are reading this, you will be knowing India’s barometer of Economic and Corporate Health, The BSE Sensex and NSE Nifty. You would also know that if Sensex and Nifty are rising, India’s economic and corporate health are looking up and if the Sensex and Nifty are down, India’s economic and corporate health are going down.
Sensex comprises of 30 of India’s largest companies and Nifty comprises of 50 of India’s largest companies. Read our tutorial of Sensex and Nifty to know more about the Indices. You can create enough wealth to secure your financial future post retirement by just investing in Sensex and Nifty when they are rising and by not investing or taking profits when they are falling. After all when India’s economic and corporate health are looking up its time to invest and when they are looking down its time not to invest.
You can invest in the Sensex & Nifty through ETF’s, which are low cost securities that trade on the stock exchanges or through Index Funds floated by Mutual Funds. Read our tutorials on ETF’s and Index Funds.
Once you invest in ETF’s or Index Funds, say you have invested Rs 100/-, all you need to check is if Sensex or Nifty is rising or falling. For example if Sensex and Nifty rise by 2%, your Rs 100 investment will be Rs 102 (marginally lower due to fund expenses) and if it falls by 2%, your Rs 100 investment will be Rs 98. Simple.
Now to Catch Rise and Falls in Sensex & Nifty
Over the last 17 years, Sensex and Nifty have fallen sharply in five periods, 2008, 2000-01, 2004, 2006 and 2011. Sharpest and most worrying falls were in 2008 and 2001-02. Here is such types of falls where you should look to cash in or stay away from Sensex & Nifty. Past is no indication of future but we will give you the forward analysis required to gauge the health of Indian economy and corporate sector.
The Sensex and the Nifty have returned 443% and 467% since January 2000 till date. The movement of the index has not been smooth and steady for all these years as some years have seen a sharp rise while some have witnessed drastic falls. There have been scenarios where the benchmark indices – Sensex and Nifty have corrected sharply on a daily basis as well as on a monthly basis. The graphs below show the movement of the Sensex and the Nifty since January 2000 and the tables below gives the data about drastic falls of more than 10% for the benchmark indices on a monthly basis.
According to the data given in the table the Sensex and Nifty have corrected sharply (a fall greater than 10%) on a monthly basis by ten times since January 2000.
The sharpest fall was witnessed in the month of October 2008 where the Sensex and the Nifty corrected 24% and 26% respectively due to the Subprime crisis in the US. The month of June 2008 also witnessed a correction in the benchmark indices to the tune of 17% on a monthly basis.
Another instance of a major correction was during the period 2000-2001 where the Sensex and the Nifty corrected 15% each in the month of March 2001 as the dot come bubble burst during that time.
The month of May 2004 saw a correction of more than 15% for the Sensex and the Nifty. The reason for the fall was the change in government at the centre, with the Congress coming back to power with outside support from the Left. The opposition of the Left to reforms led to panic selling on fears that foreign institutional investors would pull out of India.
The other major corrections which witnessed a fall of greater than 10% but lower than 15% for the benchmark indices were in the year 2006 and 2011. The concern during May 2006 was a resurgence of inflation and a series of monetary tightening measures by central banks across the world, including a surprise increase in the policy rate by the RBI.
Sensex at 40K in 2019
The next two years is likely to see Indian equity markets cross many peaks as both the global economy and Indian economy are seeing signs of coming out of a long slump post 2008 financial crisis. India’s political climate too looks strong with the Modi led BJP government sweeping state polls in key states such as UP. We expect the Sensex to touch 40,000 in 2019. Click here for our presentation, Sensex at 40k in 2019.
We believe that in order to secure your financial future post retirement you would require to be smart about your savings. You would need to build a good corpus when equity markets are expected to do well and then protect your capital when returns fall.
We bring you low cost investment strategy for your mutual fund investments based on Warrant Buffett’s principles.
Warren Buffett is the Richest Investor in the World and to get there and stay there he has obviously done something right, consistently over a long period of time.
We apply his Principles to your MF Portfolio and you can reap the benefits of his wisdom.
Two primary principles of Warren Buffett that we follow for advising you on your MF Investments are
1. Active investment management by professionals – in aggregate – would over a period of years underperform the returns achieved by rank amateurs who simply sat still. The massive fees levied by a variety of “helpers” would leave their clients – again in aggregate – worse off than if the amateurs simply invested in an unmanaged low-cost index fund.
2. Sell when others are buying and buy when others are selling.
Based on these two Principles of Buffett, we will construct a simple mutual fund portfolio that carries low cost, which can be as low as just 0.05%. We will also distribute your investments between Equity Funds, primarily Index Funds or ETF’s that mirror the performance of Sensex or Nifty Index, and Fixed Income Funds. Depending on your understanding and risk appetite we will also selectively suggest active funds that do not carry high costs..
Not only we will give you the MF portfolio, we will give you the tutorials required to understand your investments.
Your MF investments will then gain when Sensex and Nifty are rising and will be protected when they fall sharply and stay low for long periods of time. When Sensex and Nifty are rising and looking to rise for longer periods of time, we will construct your portfolio in such a way that you gain maximum benefit from the rise. However when markets are at peaks and looking to fall, your portfolio will be exposed only to Fixed Income, that protects capital and provides stable returns .
Moreover, we will keep updating you on our analysis of Markets, Economies and Businesses, which will give you a good knowledge of outlook for equity and fixed income markets, which in turn will determine your MF portfolio.
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Do you know that part of your Provident Fund investments (5%) are in Sensex and Nifty as EPFO invests in the indices and if you have subscribed to NPS, a good part of your investments are in Sensex and Nifty, depending on the plan you have chosen.