Scooter vs Hatchback - Investing for Students

31 MARCH, 2022

The earlier you start investing, the more time you give your money to multiply.

Swapnil Naik, 20, is a computer science student at Mumbai University. He made good use of the summer vacation this year and interned for a couple of start-ups. He earned a stipend of Rs. 30,000/- in four months. Apart from this, he also gets pocket money of Rs. 4,000 every month. He hasn’t spent any of his earnings or his pocket money in the last eight months and is sitting on a good chunk of money. His parents have been encouraging him to invest in a Mutual Fund. And, when he saw all his favourite cricketers in the IPL come on the ‘Mutual Funds sahi hain’ ads, he took it a lot more seriously. However, he doesn’t know where to begin. What should he do?

There might be a lot of students like Swapnil who have cash in hand. More often than not, it is likely that they simply let this money lie in their Savings Account or spend it on items that give them short-term gratification. This might not be the most prudent financial decision they make. A little bit of guidance on the financial side might just get students started on a journey to create wealth for the long-term.

Scooter vs Hatchback

A young student like Swapnil, aged 20 or so, generally has short-to-medium term financial goals. For example: Buying a car by the age of 25. If he starts investing smartly, there is a high chance that he might be able to buy a car all on his own as compared to his peers who might not be able to afford one.

A student like Swapnil has the ability to invest Rs. 2,000 every month easily. A smart thing for him to do would be to visit a finance professional at his bank and understand the world of Mutual Funds. If he can start investing in SIP (Systematic Investment Plan) and is disciplined enough to continue his investment for five years, he might be able to realise his dream of owning a car when he is 25.

There are Mutual Funds that have delivered excellent returns since their inception. Below is a table of Mutual Funds recommended by Kotak for SIP and the returns they have given since then. If we extrapolate the data for five years, we can get a fair idea of the wealth corpus that can be built.

We assume an investment of Rs. 2,000 in SIP every month for this exercise:

SCHEME NAME

Inception Year

Return Since Inception

2,000 monthly SIP for 5 Years (₹)

Corpus After 5 Years (₹)

Axis Bluechip Fund

2010

14.62%

1,20,000

1,60,604

Axis Focused 25 Fund

2012

15.61%

1,20,000

1,63,783

DSP Midcap Fund

2006

16.63%

1,20,000

1,67,120

Franklin India Feeder - Franklin U.S. Opportunities Fund

2012

16.63%

1,20,000

1,67,120

HDFC Flexi Cap Fund

1995

20.84%

1,20,000

1,81,571

Invesco India Growth Opportunities Fund

2007

14.05%

1,20,000

1,58,800

Kotak Emerging Equity Fund

2007

17.84%

1,20,000

1,71,160

Kotak Equity Opportunities Fund

2004

15.30%

1,20,000

1,62,781

Kotak Flexicap Fund

2009

15.09%

1,20,000

1,62,106

Kotak Small Cap Fund

2005

18.06%

1,20,000

1,71,904

Mirae Asset Large Cap Fund

2008

16.79%

1,20,000

1,67,649

UTI Flexi Cap Fund

1992

15.00%

1,20,000

1,61,817

Source: MFI Explorer | Data as on 31st March, 2022

At the age of 25, Swapnil has the ability to build a corpus of Rs. 1.7 lakh by doing nothing more than investing 2,000 every month. He can now use this corpus to fund any of his goals. At a time when his friends might be thinking of buying a scooter because that is all they can afford, Swapnil can make a down payment on a hatchback and drive around in luxury and comfort. Alternatively, he might even choose to take a holiday abroad. Rs. 1.7 lakh can buy him a good holiday in Europe for a week.

There you have it. Planning and starting your investments early can help one get a solid head-start in life. It teaches discipline and the rewards that one can earn with steady investments. Call up your Relationship Manager and fix up a meeting to understand which Mutual Fund is best suited to your needs.

Click here to invest now.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.

Kotak Mahindra Bank Limited, AMFI Registered Mutual Fund Distributor. AMFI Registration Number (ARN) 1390.

Click here to read the detailed disclaimer.

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Disclaimer: This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank make no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.