Equity investing is finally coming of age. The current bull-run which started sometime back in October 2013, has spiked the interest of many investors to add equity as an asset class in their investment portfolio. Mutual Funds do a good job of providing a vehicle for professionally managing money contributed by thousands and lakhs of investors.
However, all equity investing is not the same. One can invest in Equities based on various parameters/strategies based on the size of the companies (Large, Mid, Small caps), the investment style (Value/Growth), or even based on Sectors (Pharma, Banks, and Diversified). Among these, the most prominent consideration while choosing a fund is the size of the companies being invested in. The entire universe of listed companies can be split into three categories based on the market value of the companies– Large cap, Mid-cap and Small-cap.
Large-cap companies are the giants that tend to do steady business in their...
Liquid funds are great. They are safe, secure and provide liquidity to the portfolio. However, they get taxed as debt schemes. This makes the post tax-return low for investors, especially for those in the 30% tax bracket. That's one of the reasons for the popularity of arbitrage funds that give returns similar returns to Liquid schemes but are completely tax-free after the one-year holding period.
What are they? These are funds that invest in equities and take offsetting positions through derivatives like futures. As such, there is no exposure to market movements and investments are relatively safe.
USP? Get returns similar to liquid funds with the tax benefit of equity funds (tax-free after one year).
Where do they invest? These funds invest in cash market (stocks) and hedge them using derivatives (futures etc.) The returns they make are the difference in the pricing between the cash market and futures market....
If you've been following our previous two series on Funds Intro, perhaps you will have noticed that we prefer investing in Debt through Mutual Funds than directly investing in FDs or bonds. There are a couple of reasons for the same:
1. Access - While access to equity stocks is fairly easy, access to debt securities is not. Most of these debt instruments only trade between large banks, corporates and the only viable way for retail investors to invest in them is via Debt funds
2. Liquidity - Even if you directly invest in bonds, you are stuck with them till maturity with no way to sell them off midway. Debt Funds manage their liquidity to facilitate redemptions any day for the investor
3. Management - Debt funds may actually be more tricky to manage than equities. Unlike popular perception, debt also has many risks associated with it - Credit risk and interest rate risk being the major ones. A professional manager to look after them is a...
Determining whether your fund is performing well or not can seem to be such a daunting task. And it is! Analysing more than 40 unique characteristics of schemes, more than 25 categories of schemes in a universe of 600+ schemes can be quite a challenge to comprehend. We are starting a new blog series, which we hope will help you understand few of the characteristics that reveal a lot about your scheme and its desirability in your portfolio. And this brings us to the wiki for the day -
We understand returns right? Something worth 100 today, and 110 a year later gives a return of 10%. Most often our analysis of the scheme starts and ends at what has been the historical return of the scheme over the last 1 year/3 years/5 years. It's not a bad place to start. But it's also important to understand the context of the performance. There are so many factors that can affect the static performance of the scheme.
If you had looked at the...
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...
Bank rates are at an all-time low. Yes, that makes your home loan really affordable, but investors looking for a safe and secure investment vehicle are left hungry for better alternatives. We want to take this opportunity to tell you briefly about liquid/money market funds and why you should know about them
Liquid/money market schemes
What are they? Highly liquid investments in high rated fixed income securities
USP? Get money back in your account anytime within 1 day without any penalty, earn annualised interest rate roughly equal to 1 year FDs. Favourable tax treatment as compared to FDs
Where do they invest? A portfolio of corporate deposits, FDs, government debt etc. that mature in less than 91 days. Usually, these schemes have the highest credit ratings among all debt schemes.
Why should you invest? These are great instruments to park money that you can recall anytime you want with no exit charges and very low...