Let's admit, Mutual Funds today are as mainstream as they have ever been. You've been hearing about them on your radio, TV, newspaper and various places on the internet (including this blog). There's a good likelihood, every time you've heard the mention of a Mutual Fund, it's followed by a powerful three lettered abbreviation, SIP.
S - Systematic; I - Investment; P - Plan.
All Fund houses, distributor and media talk so much of SIP that for the end investor Mutual Fund and SIP are pretty much synonymous. In fact, many of our investors think they invest in SIPs, not Mutual Funds. We thought we'd lay out a handy guide of what SIPs are, what they aren't and why everyone talks so much about them
What SIPs are:
SIP is basically a mandate, given to the fund house, to periodically invest in a scheme of your choice by deducting money directly from your bank account. It's only a mode of transaction. You very well might invest a...
You have decided to start investing in mutual funds, and you are researching the best-rated funds at all the various sites. Kudos to you, but that’s just the part of the whole process. Tax planning is an integral step in your entire allocation strategy and can make a whole lot of difference to your returns. Tax planning makes sure that money actually stays in your bank account, and is not paid as tax to the government (We are not saying paying taxes is bad, but let’s try not to pay more than what we owe to the government)
Let me start by introducing you to few basic terminologies –
Capital Gain Tax – Any returns from your investment, be it Fixed Deposits, Stocks, Mutual Funds etc., are all subject to tax laws. The returns you make from these investments are termed as capital gains. You are liable to pay your marginal tax rate (your highest tax bracket based on your total income) on these returns as well. This tax, for obvious reasons, is...
There are broadly two asset classes - Equity which is risky but is the source of all growth and Debt, which provides investors with safe returns and surety of payback. Most of us invest in both the asset classes. Sure, you think you have SIPs only in Equity schemes, but don't you have that FD in a big bank, savings in PPF and surplus cash is savings account? After all, these are nothing but debt investments with just a different name. Balanced fund (Equity Oriented) is a type of mutual fund that invests both in Equity and Debt instruments, with a minimum allocation of 65% for equities and the rest in bonds, money market and other debt instruments. Before we proceed to talk specifically about Balanced funds, let's talk about tax for a minute.
Did you know 1: Equity investments are tax-free after one year of holding period?
Yep. It is true. We are not talking just about the once a year sort of investments in ELSS. All equity stocks and mutual funds...
Net Asset Value, or more commonly called as NAV. One of the most tracked, yet utterly useless, some might even argue dangerous, information about a mutual fund
Let's first talk about stocks. We know that a stock, say Reliance or HDFC, trades on the stock market and has its price quoted daily. Some day it goes from 1000 to 1100, and hence becomes more expensive. On other days, it goes from 1000 to 900, and hence becomes relatively cheap. A value investor is always looking for cheaper stock price to be able to get better returns. This is a very simplistic explanation about the price of a stock. But it's basically our understanding of what the stock price tells us.
A Mutual Fund, on the other hand, is a collection of various securities, i.e., stocks, bonds and other financial instruments. Instead of stocks, investors buy units, and instead of stock price, each unit has a NAV (Net Asset Value). However, what needs to be kept in mind...
Ever since the concept of money was introduced to the modern day world, man has been on an eternal quest to gather more and more of the same, Money. And there are numerous ways to be rich. You can be the genius founder of a social media company who turned a college website into multi-billion dollar behemoth of an advertising company, Facebook. Or you can be an ace stock picker with a knack to find quality companies and be one of the wealthiest men in the world, Warren Buffet. But even if you are neither of these extremes, there still exists a way to becoming rich that doesn't really require much talent or hard work. All it needs is discipline. Here are the three ingredients of the secret formula -
Income , Returns, Savings
Income - The first one is obvious. More money has the direct perception of more wealth. And to a good extent, it's true. The more you earn, the more luxury you have to spend and to save. But let's be honest. What you earn and how fast your earnings...
A controversial statement, isn't it? After all, isn't the entire financial industry extremely gung-ho about the benefits of diversification? Diversification offers better risk management, diversification offers steady returns, diversification is the professional way to invest.....etc. Well, all of that is true and yet we stand by what we stated above. You ask how? Let us start by understanding what diversification means in the first place.
Diversification is the process of expanding your portfolio to include various asset classes and securities to reduce your exposure to any systemic risks
In simpler words, "Don't put all your eggs in one basket". Hold equities, fixed income instruments, gold and so on, so as to avoid seeing your portfolio bleed when any single asset class suffers from its usual economic cycle. It also means having various securities of each asset class to ensure no particular holding hampers your portfolio returns. And it is in...
Thanks to the immense amount of marketing, advertisement and the performance of the category over the last 2 decades, mutual funds aren’t an alien concept even to a young 20-year-old something, just graduating out of college. India is one of the youngest demographics in the world, and mutual funds as a category are only beginning to etch their presence in the savings and investment landscape.
However, for a majority of individuals, Mutual funds somehow are synonymous with Equity Mutual funds, which is like saying Chocolate bars are the same as Cadbury (which was pretty much the case until two decades ago).
Mutual Funds only refer to the ecosystem of individuals handing over their small savings to professionals who in turn manage crores of rupees to generate better returns for their clients, given the objective of Investment.
Once the objective is established (high growth, capital protection, etc), one moves to picking the specific category of funds (Diversified Equity,...