20th anniversary of 9/11
Current Affairs
On Tuesday, 11th September 2001, the world watched as Al-Qaeda - the Islamic terrorist organisation, launched 4 attacks on prominent US sites.
American Airlines flight 11 hit the World Trade Center’s north tower,
United Airlines flight 175 crashed into the World Trade Center's south tower,
American Airlines flight 77 crashed into Pentagon’s west side and,
United Airlines flight 93 flew in Washington DC’s direction but missed out on its target. The ultimate target of this flight is still unknown.
The 9/11 attacks killed 2,977 people from 93 nations; 2,753 people were killed in New York, 184 people were killed at the Pentagon, and 40 people were killed on Flight 93. Of the 2,753 in New York, only 1,644 (60%) victims have been identified and reported to date.
Why did the WTC collapse?
The World Trade Centre, located in Lower Manhattan, was built to withstand the impact of a Boeing-707 at landing approach speed.
The planes that hit WTC were 767s - with twice the weight, twice the speed and twice the fuel. The heat produced in the collision, ~1300 degrees, melted the steel foundation causing the towers to collapse on themselves.
The 9/11 cancer
9/11 first responders were found to be at an elevated risk of certain cancers, including a roughly 25% increased risk of prostate cancer, 100% increased risk of thyroid cancer and 41% increased risk of leukaemia compared to the general population. This occurred as a result of the exposure to the combustion and pulverization of the two buildings.
“The radio came on and interrupted and said that there had been reports of a plane going into the Trade Center. I remember making it through the cloud, and I remember walking, trying to walk through this—the amount of debris—it's unfathomable. And I remember drawing a line in the middle of my brain and putting those that I thought were dead on one side and those that I thought had a chance on the other.” - Firefighter Adrienne Walsh, 9/11 First Responder
The Muslim backlash
9/11 started a seismic wave of Arab, Muslim, Sikh, and South-Asian American discrimination, echoes of which are heard to this date.
“If we learn nothing else from this tragedy, we learn that life is short and there is no time for hate.” - Sandy Dahl, wife of Flight 93 pilot Jason Dahl.
May all innocent lives lost in 9/11 Rest in Peace.
Systematic Investment Plan (SIP)
Investing
Systematic Investment Plan (SIP), as the words suggest is just that.
SIP is automated regular investments of your preferred amount in your preferred mutual fund scheme. It is a very convenient way to invest in the financial markets in a regular and disciplined manner. You stagger your investments by investing a fixed amount at regular intervals, these intervals can be weekly, monthly, quarterly or bi-annually. The most common ones are monthly.
Lump sum vs SIP
There are basically two ways you can invest in mutual funds, lump sum or SIP.
Advantage of rupee cost averaging
During a market crash or bearish cycle, most investments see a fall in price, mutual funds are not immune to this since they invest in the market itself.
Most people cancel out their SIPs when NAV of the fund is falling, thinking their investments will go down. When you close your SIP when the NAV is falling, you are basically not buying something when it's available at a cheaper price.
Example
Let’s say you decide to start an SIP of Rs 2000 each month in January when NAV of the fund you have invested in is Rs 80. The NAV is rising at an average of 5% but then in May, the average NAV crashes by 10% due to market crash for two months before rising again:
So basically, when you continue your SIP even when NAV is falling, you get more units with the same investment amount. This brings down the overall NAV of your investments and thus increases your overall return.
Benefits of SIP
Start as low as you want: Most mutual funds allow you to have an SIP amount as low as INR 500.
Disciplined Investments: Since most Mutual Fund houses offer automated payments for SIPs, you become more disciplined in your investments. This instills the habit of saving first, spending later.
Higher return: SIP gives you the benefit of rupee cost averaging which a lump sum investment doesn’t, this means in the long run, you get much higher returns from SIP than lump sum investments.
Emergency fund
One can stop their SIP at any point without any charge. You can redeem your investments when needed. Most funds have an exit load (small % based charge) when investments are redeemed before a specific time, called the lock-in period. After the lock-in period is over, there are no charges.
Thus, you are regularly creating an emergency fund.
Before you start an SIP...
Before making any investment decision, be sure of three things:
Investment Goal
Investment Horizon
Risk tolerance
When you are clear on these three-pointers, you can look for mutual fund schemes that match your criteria and decide on the scheme you invest in and start your SIP.
The list of mutual fund houses in India is available on the Association of Mutual Funds in India (amfiindia.com). AMFI will be a good portal to go through if you are new to investing in Mutual Funds.
SIP for stocks
While SIPs are mostly famous for mutual fund investments, you can set up an SIP for investing in stocks or a portfolio of stocks as well. A lot of brokers provide this option these days. The same benefit of rupee cost of averaging can be availed while investing directly in stocks as well.
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