WHY YOU SHOULD START INVESTING EARLY?

One of the most important factors to consider while drawing a financial plan is fixing the time period, especially if you are a beginner. The thumb rule is, the earlier you start, the greater the chance of achieving your financial goals. Having the advantage to grow your investments over time, and putting your investments to work for you, will help you live the life you ultimately want to.

It is time tested that if one starts investing early, the percentage of building the corpus for one’s desired future financial goals is higher as compared to those who start very late in their life.

Investing according to financial goals.

Identify and prioritise goals:

The first step in goal based investing is identifying and prioritising goals by segregating them into needs and wants – needs are essentials and hence get precedence over wants, which are desires and aspirations. Once decided, align your needs/wants to the time horizon.​

Explore the systematic method of investing in mutual funds​

​​Investors can also benefit from the systematic plans offered by the mutual funds. For instance, a systematic-investment plan (SIP) is used for wealth accumulation. A systematic-transfer plan (STP) helps in transferring wealth from one asset to another, in safeguarding the portfolio against volatility, and in adapting to the changing risk appetite with age and increase in responsibilities. Lastly, a systematic-withdrawal plan (SWP) is useful in deriving a regular income from the created wealth created.​​​​

Power of Compounding

Young investors have an advantage in investing since the longer you stay in the market, the less risky your investment becomes and the more corpus you can generate over a period of time. This happens because of the compounding effect and the rupee cost averaging benefit you get over a long term.

Once you are done with prioritizing your financial goals of life, quantify them, that how much amount you may need to achieve those goals and based on that choose mutual fund schemes. So give wings to your dreams and start investing in something each month to achieve your goals without any burden of heavy debt on your shoulder.

Investing at any age isn’t easy, but waiting to invest for when it’s convenient isn’t the best approach (because it’s never going to be easy). Don’t fall into the I-need-a-lump-sum-of-cash-to-start-investing trap start small, with whatever you can afford to invest today because it’s most likely going to be worth more tomorrow.

Keep in mind, the market goes up and down, much like our emotions, and that means sometimes your investments will fail. Still, in the long term, investing early and giving your investments time to mature will help you come out ahead.

Finally, you don’t have to be an expert to invest. Find yourself a traditional advisor like us who will do the legwork and guide you in the right direction. 

Invest NOW – Click here

ELSS: Invest to save tax and wait for the Returns

Birla Sun Life Tax Relief 96 – Growth Weekly Chart

 

Birla Sun Life Tax Relief 96 is an open ended Equity Linked Saving Scheme (ELSS) with 99.09% exposure to equity.

 

Portfolio Analysis: The fund aims to generate returns by investing in complete equity with maximum exposure to Automotive and Banking/Finance sector.

Top Stock Holdings

 

Sector Allocation

 

Returns as on 8^th May, 2018

Risk Profile: This fund is considered as “Risky Fund” due to complete exposure to equity instruments, it’s suitable for investors who are looking for Tax benefits.

Taxation Perspective: Birla Sun Life Tax Relief 96 is ELSS fund is where investor is eligible for tax exemptions up to 150,000 INR under section (u/s) 80C of the Indian Income Tax Act, 1961 if they stay invested for three years or more. ELSS Funds are also eligible for Long Term Capital Gains which will be treated tax free as the holding will be more than one year. The Dividend earned from ELSS funds is also treated as tax free.

Technical Perspective: Post the completion of wave 1 at the highs of 24 levels and prices formed running complex correction pattern in wave 2 which completed at the lows of 22 levels. Now wave 3 is ongoing which the strongest segment of an impulsive move. Now the outlook for this fund will continue to be positive, any pullback towards the blue support line should be utilized as buying opportunity for the targets of 35 levels.

Investment Rationale: Birla Sun Life Tax Relief 96 fund has shown some outperformance in sync with the Indian Equity Markets. Currently it is in the beat of its trend so one should dive in this fund through SIP or lump sum investments.

Invest NOW in Birla Sun Life Tax Relief 96 Fund online – Click here

How to create Investment portfolio using Mutual Funds?

I believe innovation is the key to success even in Financial and Investment domain. I thoroughly believe in application of Elliott wave that can be extended to NAV of Mutual funds as well. It provides vital information on maturity of the trend and one can accordingly make investment decision.

Following is UTI equity fund research shown on 7^th December 2016 in our Mutual fund research report by Waves Strategy Advisors

UTI Equity Fund Growth Weekly Chart (shown on 7^th December 2016)

 

UTI Equity Fund: Happened

 

Technical Perspective – Anticipated on 7^th December 2016

The Weekly Chart for UTI Equity Fund Growth shows that post retracing 38.2% of the previous up move prices bounced sharply and now it has managed to take out the previous peak high which suggests that probably a complex correction pattern is in formation and currently wave y of the same is ongoing. Once wave y completes its course the corrective leg in the form of wave 2 will end and then the bull trend should resume in this fund. Move above 114 will suggest about the completion of the same.

Happened: The NAV of the fund increased drastically and moved exactly as expected. This simply shows how one can use Elliott wave to predict the path ahead even on Mutual Funds!

Invest NOW in UTI Equity Fund Equities Fund online – Click here

We can help you in creating your portfolio of Mutual Funds. I think it is best to diversify and not only park money in stocks alone. By diversifying it across different Mutual Funds one can create a sustainable financial model with prudent mixture of both stocks portfolio and MFs. Invest in Mutual funds through us and we can assist in providing multibagger research from our research associate – Waves Strategy Advisors to create a holistic portfolio. Invest here

How A Young Investor Can Build A MF Portfolio?

If you have just started a career and wish to kick start some savings, then mutual funds can be a great way to do it systematically.

But then, if you are new to equity markets, then investing in equity mutual funds and experiencing any short-term volatility can spook you out of mutual funds, which otherwise make for great long-term products.

Hence, for an investor with little or no knowledge about equities, the following steps may make life easier:

– Consider making a start with debt-oriented products (such as MIPs), which offer 10-25% exposure to equities. This will provide a good entry point to equity investing.

– It is a misconceived notion that MIPs are only for those who look for monthly income. MIPs can be held with a growth option. Their simple aim is to generate debt-plus income, with the additional equities they hold. This may be a better option than going for a recurring deposit.

– Hold some surplus in liquid/ultra short-term funds to build an emergency fund, or if you would like to set  aside some amount for your own spending – ranging from buying a mobile, to going on a vacation, or for expenses incurred to apply for B-school a year or two later.

Consider parking your incentives and bonuses in this kind of contingency fund. You can always shift this money to other investment avenues later. It is likely that it will be spent if it remains in your savings account.

• In about a year’s time, you can gradually add balanced funds which will offer 75% exposure to equities (and the rest in debt) and then a year from then, start off with diversified equity funds with a large-cap exposure.  Again, use only the SIP route.
• At this point, you can start considering tax-saving mutual funds as well, for your Section 80C benefits. Until then, use other tax options such as PPF, EPF and some basic term insurance and medical insurance for your tax benefits.
• By the time you are over 3 years into your career, you may start having specific goals such as saving to buy a property, upgrading your lifestyle with consumer durable products, saving for your own marriage, or investing for your retirement or for your family’s needs – such as child’s education.

At this juncture, you can have a well allocated portfolio of equity and debt funds. This may have liquid/ultra short-term funds for short-term requirements and a combination of equity and income funds for long-term goals.

Please note that you may even begin this whole process with a good asset allocation strategy, if you already have fixed goals in mind, have an idea on how to go about it, or have the right guidance. Otherwise, the above will be a more phased approach.

The biggest advantage with mutual funds is that it allows you to ride different asset classes (equity, debt, gold) using the same vehicle. Hence, it becomes easy for you to have an asset-balanced approach once you start investing towards specific goals.

Happy investing!

High NAV vs. Low NAV – The Tale of Two Numbers

The Net Asset Value or the NAV is the price at which a single unit of a particular mutual fund is traded. It is calculated by dividing the total net value of the assets held by the fund, to the number of outstanding units.

How NAV differs from stock price?

While the NAV might seem to be similar to stock price, the two differ a lot. Since the NAV is based on a bunch of underlying assets, its value is declared only once (at the end of a day), once the trading in those underlying assets is completed. In comparison, a stock price (although fluctuating) is available throughout trading hours. Moreover, unlike a stock price, the NAV does not give you an idea about the performance of mutual fund scheme.

Highs & lows of NAV

If you are planning to invest your money in a mutual fund, do not let the high and low NAV values influence your decision about short-listing a fund. As discussed, unlike shares, the absolute value of a mutual fund NAV does not say much about the performance of the fund.
Low NAV - When a fund house launches a new fund (New Fund Offer – NFO), the units of the fund are available for a standard NAV of Rs. 10 – this shouldn’t be a deterrent. Further, as the formula above states, a fund could have a lower NAV because its net assets are low or the no. of outstanding units is high (due to a temporary transition like NAV split, etc). Also, a fund’s NAV decreases proportionately, whenever it pays out dividends..

High NAV - Similarly, a high NAV could be because of a good performance over the years. But then, with mut, the pastual funds, performance is never a guarantee for future performance.

Low NAV means More Units and More Dividends  is a myth

Investors should refrain from being attracted to low NAV funds just because you realize that your money can fetch you more units and that this might be beneficial when the fund declares a dividend. Here, the investor will not really benefit because a dividend is nothing but their own money being paid out. In fact, after the dividend is paid out, the NAV is adjusted accordingly!

How Many Funds Do You Need For Adequate Diversification?

Well, there is no magic number that can answer the question. More than the quantity, quality of diversification would matter. There is no point in having five funds, all with the same / similar investment approach. This is not going to give you the real diversification that you are looking for. So diversification would need to be done across:

Asset classes: It is prudent to spread your money among various assets like equity, debt and gold. This ensures that you participate in the out performance of these assets which usually happens at different points in time.

Market capitalizations: Putting all your money in many schemes, all operating in the same market cap too is not optimal. You would need a blend of large, medium and small cap funds to build a good portfolio due to the varied risk and return characteristics that each of them exhibit.

Investment styles and strategy: There are many investment styles like growth investing, value investing, dividend yield strategy, special situations strategy etc. A good portfolio will have a blend of these styles.

Geographies: You would also do well to spread your money in more than one country. This is to safeguard against geo-political events and currency risks. Every country has its own strengths and weaknesses and geographical diversification ensures that you get the opportunity to participate in the other growing economies, also thereby reducing country-specific risk.

Sectors and Themes: If your risk appetite permits, one should also allocate a small amount of the total portfolio (may be 5 or 10%) to sectors and themes which would do well in the time to come. However, this should not form part of the core allocation of your portfolio.

In a nut shell: Diversification is a must for mutual fund schemes too. The focus should be on the quality rather than the quantity of diversification. Constituents of the portfolio must complement each other in minimizing risk and generating returns.

SHOULD YOU INVEST IN MARKET LINKED TAX SAVING PRODUCTS?

If you are comfortable exposing yourself to market fluctuations, consider investing in market linked investment products that save tax. Otherwise, consider traditional tax saving investment options.

Following are some of reasons that why you select market linked tax saving products:

1. Greater returns:One great advantage of market-linked investment products is the returns they offer. Unlike traditional investments that offer a static interest rate of 8%-9% , ELSS, MFs and ULPPs offer returns as high 25%. Debt funds protect your money when equity markets are not performing well, while equity funds ensure you get higher returns than debt instruments when markets are up. As a result, you benefit immensely.
2. Tax benefits:Similar to FDs and PPFs, ELSS and pension funds offer tax savings. Investments up to Rs 1.5 lakh are eligible for tax deduction under Section 80C of the Income Tax Act. In the case of ELSS, dividends earned during the investment period are tax free. Further sale of ELSS units are not subject to tax as they are considered long-term capital gains.
3. Investment frequency:These products give you the liberty of investing in lump sum or at periodic intervals. This feature trumps FDs which require lump sum deposits. A systematic investment takes advantage of market volatilities yielding positive returns.
4. Lock-in period:ELSS has the shortest lock-in period of 3 years while for ULPPs, it is 5 years. When you compare these numbers with the lock-in periods of a tax-saving FD or a PPF, you get a clear winner.
5. Fund managers:You don’t need to be an expert on stock market and portfolio management for investing in mutual funds or ELSS. The financial institution in whose scheme you have invested has professional fund managers to handle your portfolio and ensure you receive maximum gains. Therefore, you gain from a hassle-free, well-diversified package of many individual investments, which you would otherwise find complicated to manage on your own.

Before making any investments, the readers are advised to seek independent professional advice, verify the contents in order to arrive at an informed investment decision. Mutual Fund investments are subject to market risks, read all scheme related documents carefully.