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6 FACTORS TO CONSIDER WHILE INVESTING IN A MUTUAL FUND

Are you thinking about investing in Mutual Fund? But do you  know on what basis one should select a scheme. Below we discuss a few pointers which investors can use to select mutual fund schemes -

1)    Identifying Goals and Time horizon to achieve these goals: An individuals must identify his/her goals and the time period within which the person wants to achieve his goals before putting their money in a mutual fund scheme. Once the person identifies his desire he/she can accordingly choose a appropriate scheme.

2)    Risk Tolerance: Identifying the risk capacity is as important as identifying the goals before make any investment in mutual fund. Suppose if an individual as a capacity to take moderate risks then such investors can put their money in Balance funds and not in Growth because the risk level in Balance fund is quiet less then Growth fund.

3)    Past Performance: The ultimate goal is returns. Investors should look at returns given by the fund during different time periods and compare them with the benchmark. For equity mutual funds, check the long-term performance, while for debt funds look at returns over the short to medium term.

4)    Recurring Expense or Fees: Other than the amount of investment a person as to bear some additionally charge such as Management Fee, Exit load etc. Although the fee amount is quiet less but it will reduce your return when individual holds the fund for a long period of time. Ideally, the bigger the size of fund, the lower is its recurring cost.

5)    Fund Manager: It is important to know the fund manager as well because the fund manager is the one who manages the entire corpus. If the fund manager has expertise over different investment categories and fund styles, it can be considered an advantage by investors, since it may help him design a portfolio that is efficient.

6)     Be Disciplined: It is necessary that one should invest in mutual fund in discipline manner as it would help to achieve good return from the investment. Set up a schedule for adding units while being careful to keep cash for emergencies. Investing at regular intervals will reduce the risk of volatility. Consider SIPs.

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Strategic Allocation to Equities

Generally, Mutual Funds are opted over any other investment option for one major reason - that is they provide market benefits without making losses, which could have been there if you invested in Stocks. 

It is like being in the market indirectly, as you can get most of the benefits and not overcome the negative part of it easily through diversification. But, this extra piece of pie can only be attained if you are including a major part of your mutual fund investment in Equities. As it is that extra piece of the pie over and above the cake that helps you earn the extra income.

The question arises, Does people actually invest in Equities when they opt for Mutual Funds?

 

If you invest in Mutual Funds and input 95% of your MF Portfolio in Debt, then what is the use??

The below info-graph, with calculative figures, will show why Equities are important in a Mutual Fund Portfolio - 

Also, you can use the following four steps to go along with your Equity Investments – 

Equities can boost up your Investments and mainly the Returns to a major level. So start up your Equity based Mutual Fund Investments right now and earn the Extra pie!

To strategize your Mutual Fund Portfolio and learn in detail about the percentage of Equity Allocation further, connect to us HERE

Layman in Mutual Funds? Read this.

Today there are a number of investment options available for an investor through which an individual can generate good profit and fulfil their future goals. One of such investment option is Mutual funds.

Now the question arises What is Mutual fund? Basically, it is a group which pools together the capital of various investors and makes investment into various asset classes. It is managed by professional fund managers. So lack of knowledge to the investor will also not be a concern. The different asset classes in which the fund manager parks the money of the investors are Equity, Debt, Money market, other mutual fund scheme etc.

Now the question arises, why one should invest in Mutual fund rather than investing in Shares, Debt fund or Fixed deposit. The answer for this is explained below - 

-  Professionally managed funds: This is a most important benefit that an investor gets when he/she invests in a mutual fund scheme. The fund invested by the investor is professionally managed.

  

-    Diversification of the funds: The another reason why an investor should prefer

Mutual fund over shares is that the funds which are invested in mutual fund is diversified in different sector, different shares and different assets class.

-  Less Risky: The funds are diversified and professionally managed by the fund managers these makes investment in Mutual fund less risky than investment in equity.

-   Amount of Investment: One can start his investment with a small amount say 500 Rs and there is no discrimination in mutual fund whether you invest Rs500 or Rs 50000 the fund managers will manage your capital in the similar way as they manage the money of the large investor.

-   Different Schemes: Mutual fund provides different schemes to invest according to their risk capacity. For example an investor who as the capacity to take more risk can invest in equity scheme whereas the investor who wants to take less risk can invest in debt scheme. But one should remember “Higher the risk, higher the returns”.

-     Liquidity:  In open ended scheme an individual can buy and sell mutual funds units whenever he/she wants to do so. On withdrawal within one year exit load is charged around 1%.

-   Tax Saving: Mutual funds can be used as an instrument for saving tax under section 80c upto 1,50,000. The minimum holding should be for 1 year to save tax. If units are redeemed (sold) before one year the investor will be liable to pay tax on his/her investment. 

 So these are the basic advantages and reasons why an individual can prefer Mutual funds   over other investment options. To fetch more knowledge on the same feel free to reach us - HERE

Indian Equity markets path ahead, Deteriorating breadth a concern!

Indian Equity markets path ahead, Deteriorating breadth a concern!

 

The below is English Transcript of the interview published in Economic Times of Navbharat Times by Ashish Kyal, CMT

Indian Equity markets have continued to rise after it formed an important low on the Union Budget held in February 2016. Sensex touched the low of 22494 on 29^th February 2016 post which the entire trend reversed sharply higher. We have seen a rise of nearly 30% in less than 7 months providing promising returns to investors. Sensex closed the previous week at 28800 levels. 

Midcap and Smallcap indices have been a strong outperformer in the entire uptrend. A few stocks have reached very expensive valuations and therefore stock selection is going to be very important both for traders and investors.

Deteriorating breadth: A concerning sign during this entire rally that started in early 2016 is that the Advance decline line has been moving lower. This simple indicator measures if there are more number of advancing stocks than declining. A falling line indicates that during the rise there have been lesser number of stocks that are moving higher and more number of stocks that are falling. During such times one should be cautious and invest only in those stocks that have lower Price to Earnings multiple and good growth potential.

Technical perspective: One of the basic methods that investors can use to understand the trend is to see the low of previous month. As long as prices do not break previous month’s low trend will remain positive. The low of prior month on Sensex is now near 27600. In the entire rise of 2016 we have not see a single negative monthly close. So investor can follow this simple method to stay in the trend.

Sector performance: Banking, Infra and Auto had been the strong sectors that helped Sensex touch 17 months high whereas defensive sectors like IT and Pharma had been the major laggards. From long term perspective we can expect Consumer discretionary, Automobile sector to outperform given the fact that increase in disposable income along with falling interest rates will result into consumer spending.

Outlook on Gold: Gold had shown strong rise in 2016 so far. Prices rose from near 25000 levels and moved towards 32000 few weeks back. Gold can continue to see stable rise for the rest of the year with important support coming near the zone of 30,000. As long as Gold manages to sustain above this level we can expect uptrend to continue. 

Week Ahead: Sensex can show some consolidation or range bound action in coming week within the zone of 29200 on upside and support near 28400 levels. Decisive break above the level of 29200 will take Indian markets towards new highs. Traders and investors should use proper stoploss levels and evaluate risk reward ratio before investing as volatility can increase going forward! 

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