CAPITAL PROTECTION COUPLED WITH GROWTH, AN ATTRACTIVE INVESTMENT STRATEGY.

Combination of Fixed Deposit and Systematic Investment Plans (SIP) in Equity Mutual Funds.

➡️ Concept:

Investors largely invest in Fixed Deposits (FDs) because they want safety of principal. What if, an investment offers safety of principal equivalent to FDs, but relatively higher returns than FDs? The following is the novel investment idea that gives capital protection and growth.

➡️ Three Step Investment Guide:

Step 1: Investment in FDs for 5 years.
Step 2: Choose the option of annual interest payout.
Step 3: Invest the interest income in equity funds every year by monthly SIP.

➡️ Example:

Step 1: Investment in FDs.

▪️ Investment in FDs: Rs. 5,00,000.
▪️ Annual Rate of interest: 6.8 per cent.
▪️ Duration of investment: 5 Years.
▪️ Investment Option: Annual Interest Payout.
▪️ Expected Interest Income Every Year: Rs. 34,000.

Step 2: Annual interest payout.

▪️ On the above FD, expected interest income every year would be Rs. 34,000.

Step 3: Investment of interest income in equity funds every year.

▪️ Invest Rs. 34,000 every year to Equity Mutual Fund – Growth Plan.

▪️ Ideally it can be investment of Rs. 2800 per month in Equity Mutual Fund by way of a SIP by adjusting the cash flow.

➡️ Value of Investment after 5 years:

▪️ Expected Value of Investment in Equity Mutual Fund: Rs. 2,30,962. (Returns assumed – 12 per cent).

▪️ FD Principal Repayment: Rs. 5,00,000.

▪️ Total Value of Investment at the end of 5 years: Rs. 7,30,962.

➡️ Benefits of Investment in Combination:

▪️ Ensures high Safety of Principal (i.e. risk-free investment).

▪️ Investment in Equity Market only through interest income.

▪️ Increased Expected Returns, with minimum risk.

➡️ Analysis:

▪️ INVESTMENT IN FD

Investment Amount: Rs. 5,00,000
Maturity Amount at the end of 5 years: Rs. 6,94,746
Annualized Returns: 6.80%

▪️ INVESTMENT IN COMBINATION

Investment Amount: Rs. 5,00,000
Maturity Amount at the end of 5 years: Rs. 7,30,962
Annualized Returns: 7.89%

▪️ BENEFIT OF INVESTMENT IN COMBINATION: Rs. 36,216

For further details feel free to contact us
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