GROW your portfolio using these 5 SIMPLE SIP strategies | Akshat Shrivastava

Summary

This video educates viewers on smart stock selection for Systematic Investment Plans (SIPs), especially in high market scenarios. It emphasizes the importance of minimizing commissions, which can significantly erode wealth. The presenter advocates for investing in Nifty 50 Index funds over large-cap actively managed funds due to lower expense ratios. Additionally, the video advises creating a SIP basket of stocks with zero commission and selecting stable, profit-oriented industries with moderate PE ratios showing EPS growth. It also suggests having a risk mitigation strategy and not fully investing SIP money in an all-time high market.

Takeaways

• 📈 SIPs should be invested in stocks that are expected to provide stable returns, especially when the market is at an all-time high.
• 💰 High commission fees on SIPs can significantly reduce wealth accumulation over time, so it's crucial to minimize these costs.
• 📊 The impact of a 1% commission on SIPs can be substantial, potentially reducing the final portfolio value by 30% compared to a no-commission scenario.
• 🧐 Investors should aim to keep their SIP commissions as low as possible, and consider investing in index funds like Nifty 50, which typically have lower expense ratios.
• 🤔 Expense ratio is a critical factor to consider, as it represents the commission taken by mutual funds, which can range from 1-2% and significantly affect returns.
• 📉 Actively managed funds often underperform compared to index funds, with 85% of fund managers unable to beat the benchmark return.
• 🚫 Avoid investing in high PE ratio stocks for SIPs, as they are more susceptible to market corrections and can lead to significant losses.
• 🏦 Focus on stable industries for SIP investments, such as banking, which is heavily regulated and less prone to volatility.
• 📈 Choose industries that grow faster than the country's GDP for SIP investments to ensure long-term growth potential.
• 📉 Select profit-oriented companies for SIPs, avoiding loss-making businesses that may offer high risk with uncertain returns.
• 📋 Investors should create a basket of stocks for SIPs to diversify risk and potentially reduce commission costs to zero.

Q & A

What is the main focus of the video script?

The video script focuses on explaining the right approach to Systematic Investment Plans (SIPs) in the stock market, particularly emphasizing the importance of choosing the right type of stocks and minimizing commission costs.

Why is it crucial to be careful with stock selection for SIPs when the market is at an all-time high?

Being careful with stock selection is crucial at market highs to avoid overpaying for stocks and to ensure that the investments have the potential for growth, thus safeguarding and enhancing wealth over time.

What is the impact of high commissions on SIPs according to the video?

High commissions, even at 1%, can significantly reduce the overall returns on SIPs. The video illustrates that a 1% commission can lead to a substantial decrease in the final corpus value, highlighting the importance of minimizing such costs.

What is the significance of the expense ratio in mutual funds?

The expense ratio signifies the commission taken by the mutual fund manager or the mutual fund house. It can range between 1-2% and directly impacts the net returns on investments, making it a critical factor to consider when choosing funds for SIPs.

Why should investors consider Nifty 50 Index funds over large-cap actively managed funds?

Nifty 50 Index funds are recommended over large-cap actively managed funds because they typically have lower expense ratios and historical data suggests that a majority of fund managers are unable to beat the index returns.

What is the advantage of creating a basket of stocks for SIPs?

Creating a basket of stocks for SIPs allows investors to avoid commissions entirely, as opposed to investing through mutual funds which usually incur commission fees of 1-2%.

What are the five key points to consider when selecting stocks for SIPs?

The five key points are: 1) Choose stocks from stable industries, 2) Pick industries that grow faster than the country's GDP, 3) Opt for profit-oriented stocks, 4) Avoid large-cap stocks with very high PE ratios, and 5) Select companies with moderate PE ratios and EPS expansion.

Why are high PE ratio stocks risky for SIP investments?

High PE ratio stocks are risky for SIPs because they imply high market expectations for growth. If the growth rate slows down even slightly, the PE can correct significantly, leading to potential large losses for investors.

What is the role of cash hedging in SIP investments?

Cash hedging serves as a risk mitigation strategy in SIP investments. It involves holding a portion of the investment in cash or cash equivalents, which can be used to take advantage of market dips or to reduce exposure during periods of high market valuations.

Why is it important for investors to have a risk mitigation strategy for their SIPs?

A risk mitigation strategy is important to manage and reduce potential losses during market downturns. It ensures that investors do not put all their SIP money into the market at once, especially when the market is at an all-time high, thus avoiding the risk of catching a 'slowly falling knife'.

What does the video suggest for investors interested in SIP-oriented stocks?

The video suggests that investors should consider joining the speaker's community for more fundamental information, updates, and to learn about SIP-oriented stocks that the speaker is currently investing in.

Outlines

00:00

📈 Importance of SIP Stock Selection and Commission Impact

The speaker emphasizes the significance of choosing the right stocks for Systematic Investment Plans (SIPs), especially when the market is at a peak. They highlight the potential wealth loss due to high commission fees, using an example of a 25,000 monthly SIP in index funds with a 12% return expectation. The example illustrates how a 1% commission can significantly reduce the portfolio value, suggesting that reducing commissions is crucial for long-term wealth accumulation. The video promises to address common SIP mistakes and strategies to minimize costs and maximize returns.

05:05

💼 Selecting Stable and Profit-Oriented Stocks for SIPs

This paragraph discusses the criteria for selecting stocks suitable for SIPs. The speaker advises against investing in volatile industries like gaming and instead suggests focusing on stable, well-regulated industries such as banking. They also stress the importance of choosing industries that grow faster than the country's GDP, using banks as an example again. The speaker further recommends selecting profit-oriented companies, contrasting Ola Electric's loss-making model with HeroMotorCorp's profit-making stability. They caution against investing in high PE large-cap stocks like Dmart due to the risk of significant PE correction and potential losses, advocating for moderate PE stocks with EPS growth as a better SIP strategy.

10:07

🏦 SIP Stock Picks and the Rationale Behind Them

The speaker shares their personal SIP stock picks, including Kotak Mahindra Bank and TCS, explaining the rationale behind each choice. They mention Kotak Mahindra Bank's moderate PE ratio and consistent EPS growth, making it a good SIP option. For TCS, they predict a positive performance due to sector rotation in IT stocks and expect it to peak with a potential US interest rate cut. They also discuss PVR Inox as a stable business with a history of reflecting blockbuster movie releases in its revenues, and Bajaj Finance for its low fees and high EPS. The speaker encourages community membership for more frequent updates on SIP stocks and emphasizes the importance of a risk mitigation strategy in investment.

15:10

🚨 Market Highs and the Need for Risk Mitigation in SIPs

In the final paragraph, the speaker addresses the current high market situation and the importance of not investing all SIP funds at once. They introduce the concept of 'cash hedging' as a risk mitigation strategy, suggesting that investors should maintain some cash reserves. The speaker also stresses the individual responsibility of risk management, as fund managers or mutual funds will not provide this service. They offer to create more content on SIP-oriented stocks if there is interest and encourage viewers to like, subscribe, and join their community for a more profound understanding of investment strategies.

Keywords

💡SIP (Systematic Investment Plan)

SIP, or Systematic Investment Plan, is a method of investing in which a fixed amount is invested in a particular financial instrument at regular intervals. In the context of the video, SIPs are used to invest in stocks or mutual funds with the aim of building wealth over time. The video emphasizes the importance of being cautious with SIPs, especially when the market is at an all-time high, to avoid overpaying in commissions and to ensure that the investments are made in stable and growing industries.

💡Commissions

Commissions refer to the fees or charges paid for services rendered, particularly in the context of buying or selling financial instruments. In the video, the speaker warns about the high costs of commissions on SIPs, which can significantly reduce the overall returns on investment. The video provides an example where a 1% commission can lead to a substantial decrease in the portfolio's value, illustrating the importance of keeping SIP commissions as low as possible.

💡Expense Ratio

The expense ratio is the annual fee that all investors in a fund pay for the fund's operating expenses. This includes management fees, administrative costs, and all other asset-based costs incurred by the fund. The video discusses how high expense ratios, typically ranging between 1-2%, can eat into the returns of mutual funds, which is why the speaker suggests investing in index funds with lower expense ratios for better SIP returns.

💡Index Funds

Index funds are a type of mutual fund with a portfolio constructed to match or track the components of a financial market index, such as the S&P 500. The video suggests investing in index funds like the Nifty 50 Index as a better SIP instrument compared to actively managed large-cap funds, due to their lower expense ratios and the historical inability of many fund managers to beat the index returns.

💡Large-Cap Funds

Large-cap funds are mutual funds that invest primarily in large-capitalization companies, which are typically well-established and have a market capitalization of $10 billion or more. The video contrasts large-cap funds with index funds, suggesting that the latter may be a more cost-effective option for SIP investments due to the high expense ratios often associated with actively managed large-cap funds.

💡Basket of Stocks

A basket of stocks refers to a collection of stocks chosen by an investor for investment purposes. The video introduces the concept of creating a personalized basket of stocks for SIP investments, which can potentially eliminate commission costs. The speaker advises selecting a diverse set of stocks that meet certain criteria, such as being from stable industries and having moderate PE ratios with EPS expansion.

💡GDP Growth

Gross Domestic Product (GDP) growth is a measure of the economic growth of a country and is the market value of all the finished goods and services produced within the borders of a country. The video uses GDP growth as a benchmark to evaluate the growth potential of industries for SIP investments, recommending that investors choose industries that grow faster than the GDP of the country.

💡Profit-Oriented Stocks

Profit-oriented stocks are shares in companies that are profitable and have a history of generating income. The video emphasizes the importance of investing in profit-oriented stocks for SIPs, as opposed to loss-making companies, which are considered riskier and less suitable for the steady, long-term investment approach that SIPs entail.

💡PE Ratio (Price-to-Earnings Ratio)

The PE ratio is a valuation ratio of a company's current share price compared to its per-share earnings. It is used to determine if a company's stock is overvalued or undervalued. The video advises avoiding stocks with high PE ratios for SIP investments, as they may be overvalued and could experience significant price corrections if growth expectations are not met.

💡EPS Expansion

EPS (Earnings Per Share) expansion refers to the increase in a company's earnings per share over time. The video suggests that investors should look for companies with moderate PE ratios and a history of EPS expansion, as these are indicators of stable growth and potential for healthy returns on SIP investments.

💡Risk Mitigation

Risk mitigation involves the identification, assessment, and prioritization of risks followed by coordinated and economical application of resources to minimize, monitor, and control the probability and impact of unfortunate events. In the context of the video, the speaker advises SIP investors to have a risk mitigation strategy, such as maintaining a cash hedge, to protect their portfolios from market volatility, especially when the market is at an all-time high.

Highlights

The importance of choosing the right type of stocks for SIP investments, especially when the market is at an all-time high.

The significant impact of commissions on SIPs, which can reduce wealth substantially.

The mathematical illustration of how a 1% commission can lead to a 30% difference in portfolio value over time.

The recommendation to keep SIP commissions as low as possible to maximize wealth accumulation.

The advantage of investing in Nifty50 Index over large-cap actively managed mutual funds due to lower expense ratios.

The fact that 85% of actively managed fund managers are unable to beat the benchmark return.

The suggestion to invest in a basket of stocks to avoid commissions entirely.

The criteria for selecting stocks for a SIP basket, emphasizing stable and growing industries.

The preference for profit-oriented stocks over those that are loss-making or highly speculative.

The warning against investing in large-cap stocks with very high PE ratios due to their volatility and risk.

The strategy to pick companies with moderate PE ratios and EPS expansion for SIP investments.

Examples of stocks recommended for SIP, including Kotak Mahindra Bank and TCS, based on their stability and growth potential.

The rationale behind choosing PVR Inox and Bajaj Finance for SIP investments, citing their industry stability and financial health.

The importance of having a risk mitigation strategy for SIP investments, especially in a high market.

The concept of cash hedging as a risk mitigation technique in SIP investments.

The offer to join the speaker's community for more in-depth information and updates on SIP-oriented stocks.

The final emphasis on understanding and applying the discussed points to become a better investor.

Transcripts

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So on today's video, I'm going to help you understand what type of stocks you should

SIP your money, especially now because the market is at an all-time high.

So it is important for us to be careful as to what type of stocks we

are picking to do SIPs on. This is one.

Second key point is that whenever we are running our SIPs, we end up spending

crazy amount of money on commissions.

In fact, that people pay a lot of commission and even 1% commissions

on your SIPs can kill your wealth.

Let me explain that point first very, very quickly.

For example, let's say here is the entire mathematics calculation.

If you're running a monthly SIP of 25,000, and if you're doing it in index funds.

Index funds typically give 12% returns.

If you are 20 years old, 30 years old, then you might be active in the stock

market till 70 years, and you might be running your SIPs.

The total corpus value comes out to be 30 crores.

Now, let us change one data point on this entire calculation, and let's

bring the expected return from 12% to 11%.

Now, why have I taken 11%?

Because for many funds, the expense ratio is 1%.

And how much did your portfolio go down by?

So this is like how much drop.

If you keep 21, then this is like a 30% difference just based on commissions.

This is how much money people are losing in terms of running SIPs.

On this video, I'm going to help you understand some of the critical mistakes

that people are making in terms of running their SIPs, especially around commissions,

how to save lads and crocs, honestly, in your entire investing career, just by

having a little bit of sense as to how to curate your SIPs.

The first key point is that you should keep your SIP commissions

low or as low as possible.

I had already given you an example, but at a asset class level, for example, many

people, what they do is that they prefer large-cap funds, large-cap They

are actively managed funds. Now,.

There is something called as expense ratio.

Expense ratio.

Expense ratio simply means that how much commission is that mutual fund manager

taking or that mutual fund taking from you.

This can easily range between 1-2%, and this is very high.

I had already shown you the computation.

What should you do?

In case you are investing in large-cap funds, so safe-safe, what should you do?

You should go and invest your money in Nifty50 Index.

This is much, much better SIP instrument.

So please identify good SIP instruments to begin with.

If you are doing it at a fund level or mutual funds, then it's better to do Nifty

50 compared to large cap, actively managed mutual funds.

Data tells us that almost 85% of these fund managers are unable

to beat the index..

Macro data is telling us that 85% of the fund managers, actively managed fund

managers, are unable to beat the benchmark return.

This is not my data, this is what the data tells us, macro data tells us.

So on that note, one very simple thing to do in terms of running your SIP, which can

literally save you crores, is that please do Nifty 50 on index funds.

And if you are doing it on index funds, please check that the commissions

or expense ratio is lowest possible.

For example,, these are the expense ratio that is there for access funds.

You can go and check it every other mutual fund house that is offering these type

services and pick the one where the expense ratio is the least.

This is literally step one, the easiest change that you can make right now in

order to generate very good alpha on your portfolio.

Now, the second key point is that you can also do SIPs on basket of stocks.

Now, what are basket of stocks?

For example, this is a basket that you have created.

You put 10 stocks in it.

And this is like August of 2024, and you are making a salary of 1 lakh , and 40,

000 you are investing on monthly basis.

So you have selected 10 stocks on which you will keep on doing SIPs.

Now, how much commissions are you paying if you are creating this basket of stocks?

The short answer is zero %.

But if you are doing it via the mutual fund route, small-cap actively managed, or

mid-cap actively managed, or small cases, how much commissions are you paying there?

Well, again, one to two % easily you are paying.

So you have to be careful.

I'm not saying that these instruments are bad, the small case, I'm just helping

you understand things, logically.

Hopefully, you'll understand it.

Now, in case you are interested in doing this and saving crores and crores

of commission, what can you do?

Well, you can educate yourself better about the stock market, which brings me to

point number 3, that, okay, what type of stocks should I create a basket of?

Yes, 100%.

There is a funda logic behind this, and there are five key points

that you should understand.

First key point is that if you are doing SIP-oriented

stocks, then the industry that you pick, that should be a stable industry, and

it should not be a high-risk industry.

Let me give you a couple of examples.

For example, let's say gaming.

This is a slightly dangerous.

We don't know whether we want to grow this industry or not grow this industry.

Why is it a dangerous industry?. So this is an evolving industry.

Is this a good industry to invest? Yes.

But in SIP mode, does it make sense? Maybe, maybe not.

So this is dangerous.

Most of your SIP money should go to stable industry.

Now, what is a stable industry? For example, banks.

Here, banks, it's almost 100% regulated.

It's not as if that there is anything more left to regulate.

Whatever new products come, they will also get regulated.

Even private sector banks are regulated heavily by RBI in terms

of recapitalization,.

When the MD CEO of a private bank in India gets changed, then it has

to take permission from RBI.

Bunch of other regulations are there.

So this is a stable industry.

Stability of regulation is there.

You are 100% clear that bank is 100% regulated in India.

So don't go with super fancy industries. This is point one.

On top of that, the second key point that you need to remember in terms of doing

your SIP or selecting stocks for SIP is very simple.

That you need to pick industry which is growing faster

than the GDP of the country.

Now in India, our GDP grows at roughly 7-8%.

Now many industries grow slower than 7-8%, many industries grow faster than 7-8%.

Banks, for example, grow faster than GDP, typically speaking.

This has happened for the last 20 odd years, and it is likely to

happen in the next 20 years also.

On the flip side, sugar industry stocks, do they grow faster than the GDP?

No.

Many agricultural-oriented stocks, they don't go faster than the GDP.

So they are legards.

So this is point number two that you should know.

Third key point that you should know is for doing SIP, they should

be profit-oriented stocks.

So here, the easiest example I can give you is the difference between

Ola Electric and HeroMotorCop. Heromotorcop,.

It's not as if it's dynamic growth or something

of that sort, but it's growing up I mean, that's the bottom line.

It's a profit-making company, all that stuff.

Ola Electric, what is it? It's a loss-making company..

I don't know.

I mean, some other random thing might happen with Ola Group.

Very, very complicated business.

You are taking a chance.

Now, the chance can go that you might make crazy gains from Ola Electric, who knows?

But you are buying a narrative.

If you are doing SIP oriented investing, you are a low risk investor to begin with.

Kindly do not do SIPs on these type of stocks which are very, very volatile..

So this is the most important point that I can tell you regarding this.

Fourth key point that in case you're looking to do SIPs on stocks, please avoid

stocks which are large cap and have very high PE.

A classic case study would be that of Dmart.

How much people will get angry? How much have you said Dmart?

Please watch my video with an open mind.

I'm a I'm no one to tell you

what to do with your money.

But I'm just sharing my perspective because I'm also entitled

to share my perspective.

See, stock PE is 124.

What does a high stock PE mean?

It simply means that the market is expecting this company to keep on

growing at a very, very fast rate.

Now, what is that rate for Avenue Supermarkt?

Well, the market is expecting it to grow.

Now, that after two quarters, that instead of 20% growth, the growth falls to 15%.

What do you think is going to happen to the PE of the stock?

The PE of the stock will at least correct by 30%...

But if the growth rate slows down even one bit, then the PE itself will correct by

like 30, 35, 40%, and then you will be sitting at a massive loss.

So these type of stocks where you are already witnessing a very high PE on a

base, on a very high market cap base, these are dangerous What

is your next steps to SIP? Because this is slow death.

So please be clear.

And you will be doing SIP on the endpoints.

So what are you doing? So you're catching a slowly falling knife.

So please avoid this. Again, these are just my perspective.

I know many people get agitated with this. That's not the goal.

I'm just telling you whatever the facts are.

Same applies to a lot of stocks in India.

So you have to figure out what stocks to avoid doing PE on.

Fifth and final point, that please pick companies where the PE ratio is moderate,

and there is EPS expansion happening.

This is a very good recipe for picking the right type of stocks.

Now,.

For example, I will go back to some of my favorites right now.

There's a Kotak mahindra Bank.

For example, you'll see, PE ratio is very low to moderate.

What about the other thing? Eps growth.

Eps is my growth. Consistently,.

So this is a very good SIP stock from that perspective.

Then comes finally, can you share your perspective, which stocks

you are doing SIP on?

So As indicated earlier on the video, every month, I'm going to talk about some

SIP oriented stocks where I am trying to build more positions.

Every month, this basket might change. The reason being,.

Next month, there might be other set of stocks to SIP.

Yes, but you have to keep

renovating that basket also.

Now, what are the commissions that I'm charging on this?

Zero.

If you're a community member, you anyways get this for free.

For this month, let me speak about some of the stocks and explain you

the logic behind it also.

For example, Kotak Mahindra, this is a very good SIP stock.

What other stocks? For example, TCS.

I had already spoken on my community that it's a very good stock.

Since then, it has already given 15, 20% run up because a cycle is going on.

A sector rotation type of a thing is going on in IT stocks right now.

I feel that it will peak around interest rate.

So still a very good time to do a small set of SIPs on something like

TCS for the next six months.

Till the time a US interest rate cut is instituted, these stocks

are likely to do well. So this is already happening.

Since the time I had spoken about it on my community, this stock has at least given

20% run up, and it is likely to continue to do well, at least for a short while.

.

Most likely, interest rates are going to get cut in the US sometime in September.

So more money will be raised.

Firms like TCS are going to do well.

So This So this is a safe stock.

The stock grows faster than the economy in India.

It had already gone through a bad cycle.

Pe is not crazy right now.

So all those points are aligning well for TCS.

Now, PVR Inox is another stock that I had spoken about it earlier.

I feel that this is again in a good boat to do SIP on.

Business is stable, no new regulations are coming.

Ott war has already happened.

Nothing new is happening there.

Very good stock.

It had already given 10% run-up.

Not many people are talking about it.

Exactly, it again meets that criteria. For example,.

Now, SIP is also run in small-cap mid-cap type of stocks.

It's a segment industry leader.

Whenever blockbuster movies come, and you are not release it for one, two years, but

whenever he releases it, it will reflect in PVR's revenues.

So all those things are cyclical.

Our job is to pick good stock and stick by it.

If you're feeling uncomfortable with PVR Inox, much allows me.

Just do it with Large Cap.

Another large cap that I would speak about is Bajaj Finance.

So you will see that the stock is available at what fee?

So again, one of the lowest fees, it is available.

Any issues with the business? No.

The EPS, again, is one of the highest ever.

So there is no issue with these type of companies.

Now, when will Bajaj Finance go up?

Hdb Finance, which is an unlisted company.

I have my positions on it also.

I'm doing a SIP on HDB Finance also.

It is an unlisted space.

So I am building a portfolio there also. Bajaj Finance,..

It's already given that they will IPO next year.

That consumer lending, that consumer lending businesses are going to do

exceptionally well, all that stuff.

So these stocks are likely to do better.

Now, it's impossible for me to talk about all these stocks that I'm doing SIP on.

In case you need more fundamental information, please consider

joining my community.

There I get to give very quick updates, make any major changes that are happening,

talk about it in very quick fashion, because writing post is much easier

than releasing videos per se.

So try to join it for three in four months.

You yourself will see the results, the impact in terms of knowledge,

portfolio growth, etc.

So do give it a try.

It's a community of very serious investors.

Now comes the final point regarding the SIP game.

Let's see, guys, at any stage in our stock market journey, we have

to understand the risk.

Problem with SIP investor is, which is madness.

There is no risk mitigation strategy.

No.

So your fund manager is never going to come to you or your mutual It's

your job to do risk mitigation of your portfolio.

And this is a point or a problem that many retail investors face.

At this point in time, the market is at an all-time high.

Look at this Nifty 50 chart.

It is at its all-time high, almost at its all-time high.

So should you be putting 100% of your SIP money right now in SIP?

Sips. The short answer is no.

Have a little bit of cash hedge. What is cash hedging?

How to do it?

I've explained in some of my other videos also.

In case not, I will write more posts this week on my member community.

It will make you more fundamentally aware.

But my push is that at least have some risk mitigation strategy going.

If you apply these 6, 7 points that I've spoken about in terms of designing your

SIPs, hopefully it will make you a better investor.

If you want that I cover more SIP oriented stocks, specifically, then I

will make additional video.

But I hope that this video was useful.

If it did help you, do press the like button, subscribe to the

channel, and I'll see you soon.