Category
Mutual Fund
Good Day Investors!!!
I must confess I have bearish view on midcaps-smallcaps for quite some time now. I never take such calls in haste and I am aware that I am not in business of making predictions but in business of managing risk in my client's portfolios.
Whichever way I slice and dice it my data analysis along with technicals and fundamnentals telling me this is a bubble of epic proportion that will be remembered after long time. We are looking at extremely frustrating phase in coming years. It will be worst for novice traders/investors who want quick money and havn't seen any major downside. The happiest people would be those who do SIP for long term keeping in mind India's growth story intact with Zero loss of emotional capital.
**My call is based on 3 things:**
- Economy is reaching overheated phase and earnings growth will be lower than expected. PE derating + low EPS growth can be killer combination.
- Monetary conditions will remain tight. Rates are cut during recessions not when economy is doing well. Even if are there are odd cuts here and there the liquidity will remain poor. Two other reasons why I don't see big rate cuts are-they hurt savers and lower mortgage rates can create frenzy in real estate crowding out middle class population. I would be surprised if 10Y Gsec dip below 6.5% in next 2 yrs.
- Big ticket purchase(housing, cars, travel) will slow down due to uncertainty in the job market. Recent data of Car manufacturers shows that More care in Yard than showroom as of last month. One of the reasons for big boom in big ticket purchase was massive wage hikes in 2021-22. Similary, lilquidity is drying up and it will drag market more than expected. All the assets class have run up a lot in last few years and it definitely need a break and overhaulign of the system.
Valuations 1 year back were what they were at the top of 2018. So its only got more and more ridiculous as the market has gone up relentlessly and without any breaks. I've personally shifted from Mid and Small Cap to defensive funds a month back. My system says that profit which is not booked is not a profit. My Long Term targets of Indian market remains the same for 2030 and beyond but current level looks like a bubble where new clients want to onboard every now and then and bus seems to be over crowded.
Stay Safe, control on greed and take a pause to run farther in long run.
Regards,
GYC by Dinesh Aneja
Read More →
Category
Mutual Fund
Ever wondered how your daily choices shape India's economy? From the smartphone in your hand for groceries you buy, your decisions fuel a consumption revolution. Today I want to share why the Consumption Fund is a unique investment opportunity.
India is transforming rapidly, it's now the fifth largest consumption market in the world and with the country's per capita income crossing $2,000, we are witnessing a significant surge in consumption spending.
But what's fusing this transformation? Let's take a closer look. India's consumption story is booming. With rising incomes, more people are spending on a better lifestyle. As the largest young population in the world, with a median age of 28, India is driving a shift towards diverse product preferences.
By 2031, India will comprise 25% of the world's working population. This is leading to rapid urbanization as a large young workforce migrates to cities for better job opportunities and higher living standards. The burgeoning urban middle class is driving a consumption revolution, trading up to premium products and experiences.
E-commerce and digital payments are enabling this spending spree, catering to evolving preferences while easy access to credit is bolstering spending power. This consumption surge presents substantial investment opportunities. That's where the Consumption Fund comes in.
The fund's strategic investing sector poised to benefit the most from these trends, including autos, FMCG, healthcare, retail, power, and e-commerce. The fund focuses on quality companies with strong growth potential and actively manages a diversified portfolio to balance risks and results. The New Fund offers you a chance to be part of India's dynamic road story.
So, join us in harnessing the potential of one of the fastest growing economies and be a part of phenomenal Growtw by investing in the fund which can create wealth for you in long run.
Thanks
Read More →
Category
Mutual Fund
**How IDCW (earlier known as mutual fund dividend) is different from stock dividend?**
When we receive a dividend from a stock we hold, it is sharing of profit earned by the respective company. When a company declares dividend on its stock, it does not bring down the stock price anyway. In layman’s term, we can refer receiving dividend from stocks as ‘extra income’ which is over and above the unrealized or realized gains we receive from holding that stock.
But in case of mutual fund, ‘dividend’ is compulsorily to be paid out from realized gains by the fund manager. So, paying out such ‘dividend’ of course results in a drop of its unit value or NAV as it is distributing income to certain unit holders (who opted for it) by withdrawing from its capital – thus the apt name for this activity is Income Distribution cum Capital Withdrawal.
**What is SWP (Systematic Withdrawal Plan) then?**
In case of SWP, fund manager has no role to play. Instead, you are at the driver’s seat. It is nothing but you are redeeming your units, irrespective of whether that means realizing gain or loss. In case of IDCW, it must come from realizing gains, no exception there. Also, declaring ‘dividend’ from a mutual fund scheme depends solely on the fund manager. It is up to him or her to decide, both the ‘dividend’ amount and frequency.
**How are SWWP and IDCW taxed?**
IDCW or ‘dividend’ income received from a mutual fund scheme adds to a unit holder’s income (under ‘income from other sources’) and therefore taxed accordingly. So, if you are in 30% tax bracket, you are then taxed accordingly. In case of SWP, it comes to you as ‘capital gain’ (short-term or long-term) and not as income for you. Now, we all know that short-term gain from equity mutual fund is taxed at 15% and long-term gain from equity mutual fund is taxed at 10% (beyond Rs. 1 lakh gain from equity holding in a financial year). So taxing of SWP income has nothing to do with what tax bracket you fall into.
**Conclusion**
If you want to receive regular income from your mutual fund holdings at your preferred terms – that is frequency and amount of income are decided by you – then go for SWP. The added benefit here is SWP’s tax efficiency over IDCW option.
Shakespeare said – What’s in a name? But in reality, naming a thing has lot to do with how we perceive a thing. Take, for example what we used to refer earlier (many of us still use that in casual terms) as ‘Dividend’ in a mutual fund. That time, it was often thought that dividend received from a mutual fund scheme is same as dividend received from a stock we hold, which it is not. To clear that confusion, SEBI rechristened it as IDCW (Income Distribution cum Capital Withdrawal). Did this rename help? Let’s see.
Read More →
Category
Mutual Fund
What a Rally in Equity Market and sweet end of 2023 !!!
Maa Laxmi has been very kind to all of us in our investing journey in the last few years.
To start with, we had the maximum exposure in Small Cap Index from 2017-18 and increased allocation in below sectors from March 2020 when Covid Lockdown was announced.
* Small CAP
* Mid CAP
* Infrastructure
* Capital Goods including real estate
* Commodities / Metals
* Highly bullish on PSU from 2021 (Post Budget)
* And ultra bearish on technology from Jan 2022.
Our aim from Equity Market was to buy in Lump Sum whenever Nifty went below 17000 and continue with SIPs. Luckily, I was able to add 4 installments out of 5 planned for Lump Sum and same was the status of our Ultra Bullish investors. We bought the fear at right time and got rewarded very well however, missed to add in Lump sum in May / June 2023 this year which was a miss at our end. All the bad news were absorbed by the Market from Covid - 2 to Ukraine war, Adani Saga etc.
And credit for this Crazy Rally goes to all of you who continued to buy and pushed DIIs giving upper hand against FIIs.
Our Investing Community is way ahead on targets when we assrued that we aim to get 15% and anything above would be extra bonus. Investors with high Risk are currently sitting at 30%+ CAGR return and moderate risk are at 22%+ CAGR from last 5 years and low Risk around 12% to 15%.
Thank you again for your Trust and belief in us. We will continue to serve our Investing community and make more awareness on Financial journey for our fellow Bhartiya's.
Wish you a very happy and prosperous English New Year 2024. An year, which would be known as Year of Protection and volatility !!!
Read More →
Category
Mutual Fund
Financial freedom is a dream for many, where you have the resources and flexibility to live life on your terms. While it may seem like an elusive goal, mutual funds can be a powerful tool to help you achieve this aspiration. In this blog, we will explore how mutual funds can contribute to your journey to financial freedom.
**→ Diversification and Risk Management**
One of the fundamental advantages of mutual funds is their ability to diversify your investments. Diversification means spreading your money across a range of assets, such as stocks, bonds, commodities. By investing in a mutual fund, you become a part of a larger pool of investors, which, in turn, allows the fund manager to diversify your investments effectively. This diversification helps to reduce the impact of poor-performing assets and manage risk.
**→ Professional Management**
Mutual funds are managed by experienced fund managers who make investment decisions on your behalf. These professionals are equipped with the knowledge and expertise to navigate the complex world of financial markets. They conduct research, analyze market trends, and strategically allocate the fund's assets to maximize returns while mitigating risks. This professional management ensures that your investments are in capable hands.
**→ Accessibility**
Unlike some investment options that require substantial initial capital, mutual funds offer accessibility to a wide range of investors. You can start investing with a relatively small amount of money. This accessibility makes mutual funds an attractive choice for individuals at various stages of their financial journey.
**→ Liquidity**
Mutual funds provide liquidity, meaning you can easily buy or sell your units. This flexibility ensures that you have access to your money when you need it. Whether you're saving for short-term goals or maintaining an emergency fund, mutual funds allow you to maintain financial flexibility.
**→ Automatic Investment with SIPs**
Achieving financial freedom often requires discipline and consistent saving. Mutual funds offer a solution through Systematic Investment Plans (SIPs). SIPs allow you to set up automatic, periodic investments, helping you save and invest consistently. Over time, this disciplined approach can significantly increase your wealth.
**→ The Power of Compounding**
Mutual funds harness the power of compounding, which can significantly impact your wealth over time. As your investments generate returns, those returns are reinvested, and your investment base grows. This leads to exponential growth and can be a key driver in achieving your financial goals.
**→ Flexibility**
Mutual funds come in various categories and cater to different investment goals. Whether you're saving for retirement, your child's education, or buying a home, there is likely a mutual fund category that aligns with your specific financial objectives. This flexibility allows you to tailor your investments to meet your unique needs.
**→ Transparency**
Investors receive regular updates on their mutual fund investments, ensuring transparency. You can easily track the performance of your investments and make informed decisions about your portfolio.
**→ Tax Benefits**
Certain mutual funds offer tax advantages. For example, Equity-Linked Savings Schemes (ELSS) can provide tax deductions under Section 80C of the Income Tax Act.
→ Goal-Oriented Investing
Mutual funds can be a vital tool for goal-oriented investing. Choose funds that match your financial goals to help you reach them in an organized way. This approach ensures that you are not just saving money but actively working towards your aspirations.
**Conclusion**
Financial freedom is not a distant dream; it's a tangible goal that you can work towards with the help of mutual funds. Through diversification, professional management, accessibility, liquidity, compound growth, and other advantages, mutual funds provide a path to financial independence. To make the most of this investment option, it's essential to select funds that match your risk tolerance, time horizon, and financial objectives. Regularly reviewing your investments and staying committed to your goals will help you realize your vision of financial freedom. So, start your mutual fund journey today and take the first step towards achieving your financial aspirations.
Read More →
Category
Mutual Fund
**How to invest in mutual funds without any prior knowledge about it?**
Investing in mutual funds can be a smart way to grow your wealth, even if you have no prior knowledge of the financial markets. Here's a step-by-step guide on how to start your mutual fund investment journey without any prior expertise.
**1. Educate Yourself:** The first and most crucial step is to educate yourself about mutual funds. A mutual fund is a pool of money collected from many investors which is managed by a professional fund manager. The manager invests the pooled money in a diversified portfolio of stocks, bonds, or other securities.
There are various types of mutual funds, such as equity funds, debt funds, hybrid funds etc. each with its own risk and return profile. Take some time to read articles, watch videos, and gain a basic understanding of these concepts.
**2. Set Clear Financial Goals:** Determine your investment goals. Are you investing for retirement, a major purchase, or simply to grow your wealth? Knowing your objectives will help you choose the right type of mutual fund and develop a strategy.
**3. Seek Professional Guidance:** If you're unsure about where to start, it's highly recommended to seek professional guidance. An expert can assess your financial situation, risk tolerance, and investment goals, and suggest suitable mutual funds thus reducing costly financial mistakes.
**4. Select a Mutual Fund:** Always makes sure that you choose a mutual fund that aligns with your investment goals and risk tolerance.
**5. Open an Investment Account:** To invest in mutual funds, you'll need to open an investment account. The account setup process is typically straightforward and involves providing some personal and financial information. The platform you choose will guide you through the necessary steps.
**6. Start with a Small Investment:** It's a good idea to start with a small amount of money, especially if you're new to investing. Many mutual funds have a minimum investment requirement, which can vary from scheme to scheme and AMC to AMC too. Make sure to check this requirement and ensure that it fits your budget. Starting small helps you understand how investing works without risking a lot of money.
**7. Monitor your investments:** After investing in a mutual fund, it's crucial to review your portfolio. You can track your investments through the online platform where you opened your account. Check the performance of your funds periodically and compare it to your investment goals. Be prepared to make adjustments to your portfolio if your goals change or if a fund consistently underperforms.
**8. Continuous Learning:** Investing is an ongoing process. As you gain more experience, continue to educate yourself about mutual funds and investment strategies. Read books, attend seminars, and stay updated with financial news. The more you learn, the better equipped you'll be to make informed investment decisions.
Investing in mutual funds without knowledge is possible, but it's important to know that all investments have risks. Mutual funds too can fluctuate in value, and it's possible to lose money.
If you ever feel uncomfortable making investment decisions on your own, don't hesitate to seek professional guidance. Education, planning, and expert advice can lead to a successful mutual fund investment journey.
Read More →
Category
Mutual Fund
**3 Most Misunderstood Facts in MF**
It is quite heartening to note that day by day most mutual fund investors are increasingly aware about their investments. Now most of them know how long they are supposed to hold their mutual fund units to create wealth or what average return to expect from different categories of mutual fund etc. But still there are certain areas of mutual fund investment, which still seems misunderstood by many. Here is a list of 3 such facts –
Rights of a nominee: Making nomination or explicitly opting out of nomination (in case of joint holders) is a must now. Failing to do so by 31st December 2023 will result into freezing your mutual fund folios for any debit transactions. But exactly what rights a nominee is entitled with? It is important to note here that a nominee is nothing but the trustee of the said mutual fund assets and does not automatically become the sole heir. If there is no Will specifying that the nominee is also the sole heir – other legal heirs can make claims to the assets and the nominee is bound to transfer the assets to the legal heirs. So, mentioning nominees is not a alternative to making a Will.
NFO is not same as IPO: Initial public offering (IPO) is a way for companies to raise capital from the market by getting themselves listed at stock exchanges for the first time. The price of the IPO is determined based on the company’s valuation at that time. The higher the valuation of the company, the higher the IPO price will be. An NFO (New Fund Offer) is completely different. It is the launching of a new mutual fund scheme by an asset management company which may or may not purchase already listed stocks from the exchanges. As a mutual fund scheme randomly buys and sells multiple stocks at different times, its price is calculated relatively as unit value. When a scheme is launched for the first time, its unit value is always set to 10, be it an equity fund or debt fund. But make a note here, this is not the absolute price, instead it’s a relative price for ease of calculating return of a mutual fund scheme on ongoing basis.
Capital gain is not same as interest income: When we earn interest income from a financial instrument, such as Fixed Deposit, we are supposed to pay taxes on accrual basis every year, even if we are not making any withdrawal. This is because, interest income is anyway getting accrued to the investment, whether we are withdrawing or not. But the same is not true in case of pure debt fund (or specified mutual fund) though the tax rate is same here, that is as per respective income tax slab. In case of mutual fund, you are not supposed to pay any tax on accrual basis. Only when you make withdrawal from it, capital gain amount (or ‘profit’ in simple word) is calculated and accordingly you are supposed to pay tax in the following assessment year.
Read More →
Category
Mutual Fund
While everyone hopes that the fund they have picked will constantly offer fantastic returns, this is not always possible. Every investment has both good and bad phases. Hence, exiting a fund when it becomes a laggard is an inevitable exercise. But doing it carelessly can harm your long-term goals. For example, exiting a fund because of a short-term fluctuation in its performance is not the right way to go about it as the underperformance may be a temporary blip in its otherwise satisfactory long-term performance.
Hence, one must have a broad-based view of all the factors at play before taking the final decision. So what all factors should be taken into consideration before exiting a fund?
**Factors to consider before redeeming mutual fund investment**
Comparison with peers and category benchmark
Compare the fund’s performance with its peers and the category benchmark to find out if the underperformance is a one-off case or the entire scheme category has fared poorly. It may so happen that the underperformance may simply be because of a feeble economic environment.
**Time period of underperformance**
It's important to keep in mind that all investments involve some level of volatility and funds may underperform at times. But, if a mutual fund routinely performs poorly for more than 1 year as compared to its peers and falls short of its goals, it might be the time to rethink about the investment.
**Fund strategy**
Every investment strategy passes through phases; thus, it's possible that it will perform poorly under specific market conditions. The investor must determine if the underperformance is the result of the investment style having temporarily gone out of favor or a general departure from the declared strategy. If it’s the latter, then exiting the fund would make sense.
**Change in the fund manager**
The performance of the fund could be impacted if the new fund manager's investment style changes. Despite the fact that his/her decisions fall fully within the mandate, some may produce positive results while others may not. Unless the new manager totally deviates from the original investment mandate, it’s better to give him/her some time.
**Regulatory Changes**
Sometimes, changes in regulations can have an impact on the fund's performance. For instance, SEBI’s Scheme Categorization and Rationalization mandate, the introduction of a 25% cap on large-cap, mid-cap, and small cap each for multi-cap fund portfolio holding, etc. These can cause underperformance of funds for some time as they adjust to the new regulations.
Demerger and/or Merging of Asset Management Company (AMC)
AMCs may merge/demerge for different reasons and this can affect the performance. Unless the fundamental attributes of the schemes get altered because of the merger/demerger, the right thing to do is to stick with the fund and observe for some time.
The most crucial quality in investing is patience, especially during the times of sudden drops. But, it's crucial to restrain your emotions and avoid getting carried away by the market craze. Stick to your asset allocation plan and steer clear of market timing.
Read More →
Category
Mutual Fund
‘Playing to the gallery’ means to do things that one thinks will make him or her popular among many people instead of doing what he thinks is right. In today’s closely connected world of social media, we do this often – we buy popular things and show off, we go to popular destinations and share photos from there, even we share the most popular opinion about everything to sound cool and sane. All these are ok, if you can afford to do so – but what if you do this even while managing money? That may not be that cool. Read on.
This trend can be noticed when someone matches with any one or more of the below character traits –
**(1)Investing in sophisticated products while ignoring the basics** – Investing into high-risk direct equity stocks (listed or unlisted) on a friend’s or colleague’s recommendation or investing into complex derivative products or in a long-term close-ended product with high initial investment required – none of these is wrong or inherently bad, but making such investments are only recommended when you have done your basics right. This includes –
a.Having sufficient amount of emergency fund (at least 6 times of your monthly expenses) kept in very low-risk, highly liquid products.
b.Insuring risks (mandatorily health and life at least) with adequate amount of cover first.
c.Checking a product’s risk and liquidity carefully if that is linked to any critical life goal.
**(2) Paying off high interest loan to spend on frivolous things** – Taking personal loan to fund any emergency expenses, clearly indicates that not all is well in your personal finance. Even buying expensive gadgets or depreciating products on consumer loan proves highly detrimental for your finances. Using your credit card for convenience’s sake is one thing, but depending on credit card to ride over low or no balances in savings account is another thing – a strictly no no if you aim to have a healthy and sound financial status. Even if you are in no need to take any loan in near term, it is still a good practice to check your CIBIL scorecard in detail. If any discrepancy found there, resolve it immediately.
**(3) Not disclosing real financial status even to immediate family** – We all love our family above everything else. But to appease them and to make them happy – if we spend beyond our means, then such happiness is often found short-lived. Hiding details of high-interest debt or credit card expenses (even taken for a short-term) can be proven fatal in case of some emergency.
Personal finance is of course ‘personal’. But basic dos and don’ts are almost always applicable to all of us. Let’s keep our basics strong and then there is no looking back to build a mansion.
Read More →