Prateek Singh’s Post

Transcript

Baby chick. Kawasaki, congratulations. Save it. I have some extra money ESL PDF. Pinterest Milja paisa paisa paisa Sarah time. Huh. You've not replied to my e-mail? Base. The base. The base there. What are you, Sir? Me how many dog go? What the hell is happening? Do. Meri shadi mere pasai. Sip Mathur. Hawaii. Yeah, Market Garden. You. Abhishek, And I'm telling you, I'm telling it. What the hell? What are you doing? Are you, Sir, like doing something really important? Wait, Sir, the markets are down. I have to sell my mutual funds. Sell your mutual funds, Sir. How this works. That's how this works. This is the problem. You spend all this time selecting a mutual fund, carefully doing your disciplined investing, and then one thing happens when you start selling. That's not how you should think about it. Today, we'll do an activity, and through this activity, we'll understand why do people sell. And because of that, you'll understand that sometimes selling is. Even more important than buying. So let's understand how selling or exiting a mutual fund works. Here we have a group of 13 investors who started their Sips in the Nifty 50 index starting January 2015. They come from different backgrounds and age group and they started investing for different reasons. Let the games begin December 2015. Nifty fell by 4.06%. So if you had invested ���1000, it would have become 950. Even a small drop like this can Causeway panic. And you can see one investor right there. He saw his returns in red and sold his funds. July 2016, two investors who were friends decided to get married. Marriage is an important event in anyone's life, so let's not forget it requires some money. And thanks to those ever so modest fat weddings, we need the cash. The couple redeemed their marriage funds to cover their wedding expenses and they're out. November 2016 Something thrilling happened on on November 8th ���500 and ���1000 Currency. Courts will no longer be legal tender. We all scramble to check our wallets to figure out how many notes need to be exchanged. And amidst all this chaos, some people faced a cash crunch in their businesses. Also, the market was taking a nap. A few investors thought redeeming their mutual funds was the perfect solution. These guys out of the race. January 2018, two of our investors reached retirement age. The time to finally relax and enjoy the fruits of your labor. Congratulations. Now they want to shift their equity funds to debt funds to keep their investments safer, and these guys are out. They also exit March 2020. Then comes the fear. An announcement was made. See some poor desh Mein sampoorna lockdown honey jara garance bahar nikal nipar Puri Tara pavan knocked down on March 23rd to protect ourselves. Masks became our new normal and sanitizers were everywhere. What happened to the markets? They took a really hard hit, falling about 13% in a single day. An investor from our group tested positive for COVID and he needed money for treatment. So he sold his mutual funds. It is also a time for financial distress. Some people lost their jobs and had no income. They had to sell their investments. These guys are out too. December 2023, one of our investors achieved financial freedom. Wow. He saved and invested for this day and the day is finally come. Celebrate July 2024. Finally too far. Investors held on to their investments for 9 1/2. Does they invested one Lac which grew to about 2.95 Lac. That's almost three times of what they invested. This shows why staying invested for a long time is often said to be the most powerful thing in investing. So I hope you get the point. And this was useful yes. But pileup Shashi though though, no. While you guys were doing that activity, I have noted down a couple of important points. OK, very important. Check this out. So over here you've written green flag achievement of goal. That means you can sell it. Okay. Portfolio has to be rebalanced. That is selling good, not bad. Red flag metallic here. I'm sure it's wrong. Selling out of panic. Yeah, correct. To get quick cash, you don't get rich quick. That's a red flag. No, you don't sell mutual funds. I say so proud of you. You missed too. So if you look at the green flag, we talked about this last time, funds underperformance. We talked about this in the last conversation, so you should watch that video. So let me add this. Funds under performance and the red flag ignoring costs. This is something that we covered. In this episode, remember we talked about it the Guardiola episode, Yes, the Guardiola episode. So make sure to take that into account as well. But this looks good Sir. OK, I have one question. OK, I have 4 mutual funds, 4 sips basically with different objectives. So one is for my marriage, one is for my kids education. A home loan and my retirement fund. Not bad, Hannah. Now imagine a situation you remember COVID, Mayweather. The market fell down 13% on one single day. Yeah. So what if something like this happens? I I'll continue investing, no. Good Hoga to Natasha fund call. If something like that happens, I'll continue investing. Let's paint a picture. OK, OK, I know what you're saying. Let's paint a picture. Let's suppose something happens and the market falls 10% and another 10% and another 20%. It falls total 50%. So all the money you created over the last few years, it will become half. Half what? Half. It will fall by 50%. Fifty Watt. I mean, it's no Shadi. Sandra Pachon. Impounding. OK. So what you're saying is you invest it for so long and then 50% market fell, What's the point of compounding? So it may have to zoom out. Compounding happens over a long period of time. Will the market fall 20, thirty, 40% in the future? Yes. Then no one knows. Let me give you an easy way to do this. Are all of you a little panicked, a little scared, just like him. And I can guarantee the market will fall in the future. And I'm not talking about India, every market because markets fall, it's in their nature. You have to be prepared and patient and I'll give you a simple way. OK, perfect. So imagine this is your marriage fund and this is, let's suppose ���20,00,000. Now you're going to get married tomorrow. No, Sir, you will know in advance, right? One year. Now what you can do is instead of withdrawing the entire amount in one shot and saying chacha, you would draw it in parts or withdraw it systematically. Kalia. So this systematic withdrawal is what you can do and is the opposite of a systematic investment plan, which is the SIP, which is what you're doing right now. Ask me why. Why? OK, we don't know whether the market will go up or down or sideways, correct? Correct. But we do know over a long period of time the market will go up, correct, Correct. So if the market is going up, we don't know how much it will go up. If the market is going down, we know how much it will go down. So a good buffer is you just spread. Their investment over a long period of time. For example, if the market is falling and you invest every single month, you've also invested at the top. You've also invested at the bottom and your average entries in the center, the average right so that's a pretty good entry price then the market reverses again, you're averaging your entry. So your average entry is here as the market is going up and down so you don't have to worry about timing the market correct Now the same thing could be true for your withdrawal. Let's suppose the market crashes and then you have to draw. The entire amount. This is not 20 lakes anymore, it's only 10. That's a problem, right? Correct. So. Instead of timing the market to exit, what you should do is one year in advance, start withdrawing equal to 12 months Arama Ramsey. That way you will average the exit. But Sir, I will spend that much. So imagine if I'm getting married 12 months from now. I start the SWP plan from now, from this month itself. I will be spending that money maybe after 10 months or maybe after nine months. Now, if I'm withdrawing this fund, I'll, I'll, I know myself, I'll spend it somewhere else. So I'm losing my marriage for no. So I think there's one thing, if it's one year in advance, you can plan your expenses. So you can plan that's our marriage cards hobby here. Nine months before I'll do the hall booking, eight months before I'll book tickets and hotel, etcetera, etcetera. And you can spread your expenses. But the advantage is not about spending. The advantage is, let's suppose the market falls like this and you exit here because you're getting married. And then the market goes up. You will feel so much of regret. No, I withdrew next month, market went up and the bull run happened. But we can't predict this. So a good way is as the market is falling, you're withdrawing every single month because you're going to achieve your goal. Your average exit will be average. It will not be on either end. Same thing if the markets moving up, you will not get the topmost price. You will get somewhere in the middle because you were drawing every month. So this helps you mentally and also mathematically to average out your exit if your. Averaging in with an SIP, why can't you average out with the SWP or the systematic withdrawal plan? Does that make sense? That's right, Sir. Can I apply this funder on my other goals as well, like for my kids education or my home loan? Is that possible? Of course it is. Any goal which you have a long time you're invested in and then you start with drawing it and it's planned. It reduces stress in your life. So it's the same thing. Corpus bangiya, corpus may you removing something over a period of time. Achieve your goal. This is fine. The only problem is you can't do this on a one year time frame or a two year time frame. It should ideally be as long as possible, but let me show you a super short time frame of three years. So actually I made this for myself, but I'll show this to you. Basically, there's an initial investment. And then there's a ���25,000 per month SIP. OK. And this goes on for three years. Now you can just copy paste this and turn this into seven years or 10 years, whatever you like. I've made three years because just easier, OK. And by the third year it's reached 17.67 lakhs. This For which goal? Any goal. So I don't know what the goal is. You can decide what your goal is. OK, The car. OK, the car. Now this assumes index returns. It assumes the market is normal and nothing like a 2008 thing. Right, yeah, Now at this point, you know that OK, one year from now my marriage is happening or have to buy my car or something. Whatever your goal is, you get 17.67 lakh divided into 12 months. You get a number, you start with drawing that every month towards your goal. So right here you can see that this ends right here after 12 months. And you can use this calculator to basically calculate any amount for any time period for yourself. But to do this and to get. This calculator, you will have to do a 01 mission. A 01 mission is a simple way for the community, you guys, to get involved and take control of your finances. Go to the link in the description, click on it, complete it, and while you play this game that we call a mission, you'll be able to figure this part of your life out. So you'll have another question, which is how do you do an SWP? What website do you go to? Yes, yes, yes, yes I do. But please tell me Sir, I'll tell everyone. How do you do an IT? Mutual fund and it either auto debits every month or you invest it every month, correct? Correct. All mutual funds also offer an SWP. All you need to do is get in touch with the person you're speaking to. If it's an advisor, if it's an app, figure it out on your app and it's just a different mode and you can start doing it. So Sir, big question, what's the checklist? What's the checklist? One, don't exit when the market falls a lot. You're not supposed to. Second, maybe we could say if you want to. Exit, do it in a planned way, have a corpus, have a target, then do an SWP. It's a smarter way. Also when you do this exercise you understand what can you actually afford and it actually hurts your ego but it tells you and saves you from bankruptcy in the future. Do you really want to be a 40 year old who doesn't have any money? Do you really? No, no right? So it's fine. It helps you understand yourself and where you are right now. Sir, I want to be millionaire in my 40s. Maybe you could if you watched all these. Episodes say that like and subscribe and see you in the next one. No Shadi. No, but check. There we go. I tell her, huh? Said Hopkins. I think my brother Ethan. Compounding the challenge. Like SAD Subscribe.