Tuesday, February 27, 2018

MYTHS RELATED TO INVESTING IN THE POPULAR SAVINGS INSTRUMENT

So you’ve decided to invest your money, but where to invest is still a question? Mutual Funds, where you give your money to someone more informed about the markets for high returns, is the best choice for beginners. However, there are many myths associated with investing and picking the best mutual funds. Gaining knowledge is never-ending exercise. The various misconceptions which many investors hold while buying mutual funds.
  • Lower the NAV, cheaper is my fund – The Commonly believed that when the NAV is lower, the fund is cheaper and hence will provide higher returns. NAV is nothing but the current market value of the portfolio today. Older the fund, higher is the NAV as the market value grows over a period of time.
  • The investment has to be for very long-term – When someone suggests a mutual fund, the first question asked is whether it is “long-term ” investment. The fact is its good if you invest for a very long term, as you the benefits of compounding.
  • The investment sum has to be big – A common myth among investors is everyone feels one must have a large number of funds to invest in a mutual fund. But the reality is that you can start investing in a fund with as small as Rs 500 only.
  • Mutual fund equals to no risk – It’s important to note that no single mutual fund in this class is clearly superior to any other. Rather, the quality of a given mutual fund can be judged by the risk-return ratio that it offers. There are several funds that offer approximately equal rates of return at approximately equal levels of risk.. This acknowledgement is always made to you, when you sign the document of an agreement while investing, which is often missed by investors.
  • History will always repeat – Everyone who tends to invest in mutual funds first looks at the historic performance of the fund and then decides to make the investment. Therefore we can clearly say everyone feels the future performance will be linked to the previous performance and will fall in line. Always expect returns only as high as you are willing to risk. Unrealistic profits require unrealistic investment and risk appetite.
  • Investing in higher rated funds will fetch higher returns – People believe that the fund which has the highest ratings are safe and will give the best returns. The truth is mutual fund ratings are dynamic and are based on the performance of the fund at that given point. So, a fund that is rated highly today, may not necessarily maintain its high rating tomorrow and it also doesn’t guarantee a better performance going forward.
Investing involves risk and the sooner you accept the fact, the easier it would be for you. So figure out how much risk you can afford to minimize your loss in mutual funds. Have a goal in mind and invest to achieve that. The goal will motivate you to stay invested and meet the target.

Wednesday, February 21, 2018

WHY EQUITY IS A BETTER BET THAN GOLD, REALTY!

We Indians have inherited the habit of savings since generations. Earlier, people used to save their hard-earned money to meet planned expenses. They would squirrel away a part of their income by keeping it in some safe location and for getting it only to look for it when there was a need for funds to meet shortfalls. Wonder whether this will work in today’s time as well?  Again, this money was lying idle and not earning anything. Gone are the days when savings were just sufficient enough to meet our future needs. With the changing social structure, increased life expectancy, changing lifestyles and needs etc., one needs something more than just savings.
Another inevitable reason why just savings are not enough is inflation. Price of goods today will not be same tomorrow; money gets dearer with each passing moment. To accumulate wealth, at the same time beat inflation, one needs to invest and not just save.
An investor can invest in various instruments such as gold, equity, debt etc. Each instrument has its unique risk and return profile and an investor must carefully analyse all parameters before investing. From a long-term perspective, equity as an asset class scores over other asset classes in terms of performance. Here are a few reasons why investing in equity as an asset class is important:
Higher inflation-adjusted returns – Since investing in equities is akin to investing in the company itself; equity investments generally have the potential to generate higher returns (albeit with higher risks involved). These returns, generally, beat inflation and give the investor real returns on their investment amount over long term. This coherent nature of equities makes it a preferred investment option for investors who have moderate to high-risk appetite.
Meet financial goals – Different investors have different financial goals such as marriage, buying house, going on a vacation, children’s education etc. These goals are generally long term in nature and the quantum required to meet these is high. The income generated from traditional savings schemes helps to meet financial goals to some extent but they are not enough when inflation comes into play. Equity provides the much-needed push to returns and facilitates a long-term wealth creation opportunity to help achieve one’s goal.
Easy liquidity option – Most of the traditional saving instruments come with a lock-in period. Early liquidation is not possible in some cases and even if it is possible, it comes with a penalty. An investor tends to lose if he/she withdraws before the said period. Equity, on the other hand, as an investment provides easy liquidity. There is the complete transparency as regards the exit price and charges, if any.
While investing in equities acts as a good portfolio diversifier and a catalyst to returns, it requires thorough research and expertise to pick the right stock.  Even after investing in a stock, investor needs to constantly track not only company’s financials but also related non-financial events and macro-economic events. Rather than undertaking such tedious tasks on their own, investors can invest in equities through the mutual fund route. There are various benefits of investing in equities via mutual fund:
Facilitates professional management of funds at a relatively low cost. The fund managers are better equipped to take call on investment, given the experience to handle the volatility
Enables investor to diversify the portfolio by investing across various companies and sectors
Mutual fund provides a facility called as “systematic investment plan, which helps an investor to invest fix amount at fixed time interval. As equity markets are generally volatile and one cannot time the market, it is beneficial for investors to take the SIP route and stay invested during different market conditions.
When it comes to equity investing, an investor should keep in mind that “equity investing requires time in the market rather than timing the market.”
An easier way to benefit from volatility is to invest in mutual funds that are designed with intent to do this for you or simply invest through systematic investment plans.

Thursday, February 8, 2018

Elss Sip A Winning Combination For Tax Saving For Retail Investors

At the start of a fiscal year, financial planners usually advise investors to opt for systematic investment plans (SIPs) in equity linked savings scheme (ELSS) mutual funds. This not only obviates the last-minute rush where investors park a lump sum in tax-saving funds, but also helps them spread their investments through the year.
Even though it is an ELSS, play it smart through the SIP route.
A systematic investment plan (SIP) is a phased approach to investing. That means, each month when you get your salary, you invest a small amount in an ELSS. There are three distinct advantages in this SIP- approach to ELSS buying:
  • Tax planning becomes more of a planned affair for you rather than trying to bunch all your tax-related investments in the last quarter. This not only inculcates saving discipline but also saves you the funding blushes in the last quarter.
  • You obviously get the added benefit of rupee-cost averaging by opting for a SIP. That means when the NAV goes down you buy more units and when the NAV goes up you get a better yield. Over the longer term, this approach tends to be more productive for you.
  • SIP on ELSS helps you create liquidity on your ELSS on a rolling basis. For example, if you start your ELSS SIP in April 2017, then that installment matures in April 2020. However, if you bunch all your ELSS investments in March 2018, then you have to wait till March 2021 to liquidate your ELSS investment.
Remember, ELSS investing is not just about saving your taxes via Section 80C. While the tax break is critical, it is the lock-in period that enforces discipline on the investor and the fund-manager. Of course, do not forget to adopt the SIP approach while investing in ELSS. That gives you a combination of stable returns, tax efficiency and rupee cost averaging. Surely, a winning combination!
Invest through SIP to make Tax Planning Quick & Effortless!
Information on tax benefits are based on prevailing taxation laws. Kindly consult your tax advisor for actual tax implication before investment.

Friday, February 2, 2018

Nifty crashed post Budget? Is a top in place?


#Nifty has shown sharp reversal post #Budget2018. In this webinar I will discuss latest #Elliottwave pattern, technical analysis on #Nifty, #stocks and much more. Visit https://www.wavesstrategy.com for detailed research and stock tips, commodity tips, currency tips

Thursday, February 1, 2018

POWER OF COMPOUNDING – SECRET TO WEALTH CREATION

Imagine you have 10 currency notes. You take these notes and keep them away in a drawer. You don’t take the notes out of the drawer for a couple of years. Later on, when you open the drawer, there are more notes than you originally put there. You got more money by simply not touching the money you already had. This is called a fairy tale in real life. But in the world of mutual fund investments, it is called compounding interest.
Compounding interest is earning an interest on the interest you have already earned. When you invest in a mutual fund, you earn a certain percentage of returns. These returns are added to your existing investments and they earn returns as well. Simply put, if you invest ₹100 and earn an interest of ₹10, then your total corpus becomes ₹110. The next time you earn an interest, it will be on ₹110. This is how compounding interest works. It rewards you for staying invested and continuing investing.
Let’s say you invest ₹1 lakh every year in a mutual fund. For the sake of simplicity, we assume that the fund returns 10% every year. The following table shows how compounding interest would make your investments grow over 5 years.
Power of compounding on investment of ₹1 lakh a year for 5 years
YearOpening balance (₹)Investment (₹)10% interest (₹)Closing balanced (₹)
11,00,00010,0001,10,000
21,10,0001,00,00021,0002,31,000
32,31,0001,00,00033,1003,64,100
43,64,1001,00,00046,4005,10,500
55,10,5001,00,00061,0006,71,500
Total investment:₹5,00,000 | Value after 5 years: ₹6,71,500 | Interest earned: ₹1,71,500
 The power of compounding works even better when you increase the quantum of investment every year. Increasing investments on an annual basis is a recommended way of building wealth for the long-term. As you grow older and your experience increases, your income will also rise. And with it, your investments should go up as well. It will make compounding interest even more effective.
 All of these numbers look impressive even when the rate of interest earned has been assumed to be a conservative 10%. Equity mutual funds earn a lot more than that over the long-term. Hence, the lesson to learn here is that to create real wealth, you should stay invested in mutual funds, increase the investment amount as you can and let compounding interest work its magic for you.