ATM :: Invest cautiously when markets are at all-time highs

NIMESH SHAH | Wed, 12 Jul 2017 – 07:35 am | DNA
Dynamic asset allocation funds is a smart way to invest in markets without worrying about market highs or lows

ATM

The stock markets are at all-time highs, and it’s understandable if you are confused whether to invest or wait for correction. Timing the market is not easy. And while piling up your savings or putting them into traditional investment options seems like an easier option, it lacks the growth opportunities which capital markets could present.

A smart investor would look to participate in the growth of capital markets but in conservative manner. Introduce yourself to dynamic asset allocation funds, a smart way to invest in markets without worrying about market highs or lows.

Investing in mutual funds which follows the principle of dynamic asset allocation gives you the flexibility of investing in both debt and equity depending on market conditions. These funds aim to benefit from growth of equities with a cushion of debt. Such funds work on an automatic mechanism switching from equity or debt, depending on the relative attractiveness of the asset class.

In a scenario when the equity market rallies, the fund is designed such that profits are booked and the allocation would shift towards debt. On the other hand, if the markets correct, the fund will allocate more to equity, in order to tap into the opportunities available. The basis for this allocation is based on certain models which takes into account various market yardsticks like Price to Book Value amongst several others for portfolio re-balancing.

This model based approach negates the anomaly of subjective decision making, thereby ensuring that the investment made is deployed at all times to tap into the opportunities of both debt and equity market. The other added benefit is that one gets to follow the adage – Buy low, sell high. For an equity investor, this is one maxim which is the hardest to execute, but this fund effectively manages to achieve this objective.

Also, investing in such funds renders an added benefit of tax efficiency as 65% of the portfolio is allocated to equities. Since this category of fund is held with a long tern view, capital gains on equity investment (if invested for over one year), are tax free, as per prevailing tax laws.

So, while the markets are soaring high, you can consider investing in dynamic asset allocation fund to keep you well footed in the market, even during volatile times.

The writer is MD & CEO, ICICI Prudential AMC

Source: https://goo.gl/rGto7F

ATM :: HFC Vs Bank: Where To Get That Home Loan

By Kavya Balaji | July 18, 2017 | Bank Bazaar

ATM

You have chosen your dream home and the project is approved by both banks and Housing Finance Companies (HFC). You need a Home Loan. Which lender should you go for? Are HFCs genuine? Are HFCs well regulated? Do they have fair loan practices? Will they provide standard services? All these questions might be playing in your mind. Here, we try to answer some of those questions for you.

Who supervises HFCs?

Unlike popular perception, HFCs are not unregulated. They are regulated by the National Housing Bank (NHB). HFCs need to register with NHB and the latter regulates and supervises them. There have been talks about the Reserve Bank of India (RBI) taking over but nothing is on the ground till now. However, NHB has been quite proactive in ensuring that Home Loan borrowers rest easy. These include steps like abolishing prepayment charges for floating rate loans, putting a cap on Loan To Value (LTV) ratio and making sure that HFCs have done proper provisioning for their bad loans. So, it is not right to say that HFCs are unregulated and are free to fix their own interest rates. They are well regulated and have standard industry practices when it comes to services.

What about their interest rates?

HFCs follow what is known as ‘Benchmark Prime Lending Rate (BPLR)’ model. They will fix an interest rate based on their average cost of funds. The loan rate that is fixed by HFCs will be at a discount to the BPLR.

There are two issues here. The BPLR is based on past cost of funds/interest rates and is not forward looking. Therefore, HFCs might be slow in passing on interest rate cuts to customers. Another point is that some of the HFCs might not be transparent with their BPLR.

Now, do banks offer better interest rates than HFCs? Sometimes, they do. This is because banks follow the Marginal Cost of Lending Rate (MCLR). Here, RBI ensures that the interest rate cuts made by the central bank are passed on to bank customers through the bank’s MCLR as quickly as possible.

However, note that there are HFCs that are competitive and do offer interest rates comparable to banks. Consider this: HDFC limited, one of the most popular HFCs, offers Home Loans starting at 8.5% while State Bank of India, the most popular bank, provides Home Loans that start at 8.65% unless you’re a woman. For women, SBI offers loans at 8.5%. HDFC has a standard loan process and the interest rates are transparent too.

So, HFC or bank?

You might think that at the end of the day, what matters is how quickly the firm/bank is able to pass on interest rate cuts as we are now on a downward interest rate cycle. Dies that mean you should choose a bank? Wrong!

Understand Home Loan is a long tenure loan. Most Home Loans stretch beyond 10 years. Given this scenario, when interest rates start increasing some years down the line, both banks and HFCs will pass on interest rate hikes quickly. Also, you might have to pay a heavy conversion fee for getting the lower rates now. Some HFCs actually charge a lower conversion fee than a bank.

Another important point that you need to understand is that interest rate cuts are passed on more quickly to new borrowers rather than existing ones. In case there are interest rate hikes, these will be passed on quickly to both new as well as old borrowers. So, passing on interest rates won’t matter as much in the long run. Then?

How expensive is that loan?

It doesn’t matter whether you take a loan from a HFC or a bank as long as you get competitive interest rates and terms. What would matter are the processing fees, prepayment fees and the foreclosure fees.

Typically Home Loans are taken by people in their 30s and are closed within 10 to 12 years. There are hardly a handful of people who let their Home Loan run till 20 years. This is because as people grow in their career, their salaries go up over a period of time and the EMIs seem smaller. So, they would rather repay the loan quickly then have a higher outgo in the form of interest. That is precisely why you need to check the prepayment and foreclosure fee. Heavy prepayment fees will mean an expensive loan. Same goes for foreclosure. There are several HFCs and banks that don’t charge fees for prepayment or foreclosure, even for a fixed rate loan. Consider this factor before zeroing in on a Home Loan provider. Some lenders have a waiting period before which you cannot prepay. Check this too, in case you want to use your yearly bonuses to prepay your Home Loan.

Most of the times, fixed rate loans become floating rate loans after a period of time. You have to go through the terms and conditions of the loan to see how interest rates might change. Another important point to note is whether a top up loan facility is available. Since a Home Loan is with collateral and the value of your home tends to go up over time, it is easy to get a top up loan on your Home Loan. They work out cheaper than Personal Loans. If your Home Loan provider is able to give you a top up loan on your Home Loan, it will be very useful if you need funds many years down the line.

So, there are multiple factors that you need to consider before choosing a Home Loan provider. Here’s a list:

  • Interest rate offered
  • Fixed or floating
  • Processing fee
  • Part-payment charges
  • Foreclosure fee
  • Conversion fee
  • Top-up loan facility
  • Service standards

Source : https://goo.gl/qf6Ypo

NTH :: Will extended stock exchange trading hours help retail investors?

By Yogita Khatri, ET Bureau|Jul 17, 2017, 06.30 AM IST

NTH

The Metropolitan Stock Exchange of India (MSEI) is keen to extend trading hours to 5 pm. This might force top exchanges NSE and BSE to follow suit.

However, will the move benefit small investors? ET Wealth reached out to market participants to know their views.

Rahul Jain, Head of Retail Advisory, Edelweiss Wealth Management, says Yes
Extension of trading hours will help drive volumes, which helps market liquidity, increasing confidence of smaller participants.

For secular retail participation in the capital markets, two things are important. One, education about the asset class and two, the confidence in the markets. While institutions are investing in educating the clients, confidence of small investors in markets will be boosted by growth in volume and more broad-based participation.

Longer trading hours will benefit traders and expert participants in multiple ways. Benefits will accrue to smaller participants as well. Here’s how:
A. It will increase time overlap with global markets, thereby reducing, to some extent, open gap shocks. Minimising such shocks is good for retail and small investors as it helps reduce the volatility of returns. In a country like ours where retail investors have traditionally invested in FDs or physical assets like gold and real estate, low equity market volatility will be a confidence booster.

B. Extension of trading hours will also help drive volumes which is good for the overall market liquidity, thereby increasing the confidence of smaller participants in the equity markets. As it is evident that more overlap with global markets and increased volume is good for all market participants, extending trading hours is an idea worth exploring.

Sudip Bandyopadhyay Group Chairman, Inditrade (JRG) Group of Companies, says Yes
If India is to become a global financial powerhouse and if exchanges are to become truly international, we need to have extended trading hours.

The Indian capital market is significantly influenced by the global markets and global investors. No market participant can deny this influence and co-relation. The most influential global market is the US market. It starts trading long after the Indian markets close.

This creates a peculiar situation which leads to “gap-up” or “gap-down” of opening of Indian markets post any major global event. For the health of any market and its investors and in particular the retail investors, this is definitely detrimental. Extending Indian market hours to align with at least the opening of the US market, will prevent some uncertainties.

Further, Indian financial markets, systems and processes are now robust enough to support long market hours. Both back office processes and banking activities even in normal course, continue far beyond the present market closing hours. Thus, adopting extended trading hours should not pose any operational or banking issues.

If India has to become a global financial powerhouse and if Indian exchanges aspire to become truly international, we need to have extended trading hours. However this can be done over a period of time in phases. At this stage, extending trading hours up to New York opening time, should at least be considered.

Deepak Jasani, Head, Retail Research, HDFC Securities says No
Impact of moves in global stock exchanges do impact the opening levels of Indian markets but in most cases, that effect is overcome in a couple of hours.

For small investors, extended trading hours will not help in any way. The six hours available now for trading are sufficient for price discovery and execution. With mobile trading on the rise, even investors who are occupied at work till evening can track the markets and trade within the trading timings.

Though currency and commodity markets are open till late, this is mainly to allow hedgers/traders to track forex markets or commodity prices abroad. As far as equity markets are concerned, Indian stocks prices do not track any other prices on a minute-by-minute basis. Impact of moves in global stock exchanges do impact the opening levels of Indian stock markets but in most cases, that effect is overcome in a couple of hours.

Exchanges would like to extend time to offer differentiation, gain market share and boost income. Compulsive traders would like extended hours to get more opportunities to trade. Brokers would welcome extended hours provided the incremental revenues are more than the cost in terms of manpower and other running costs.

However, they currently feel that extending trading hours would bring more pressure on them and may not result in much higher volumes and revenues. Markets are trending for 25-35% time and are range-bound/trendless for the balance period. In the latter period, extending the trading hours could prove to be discomforting for all participants.

Sandip Raichura, Head, Retail, Prabhudas Lilladher, says No
A small trader has a defined risk appetite and that doesn’t change because more time is available. He will be looking at price levels, not the time.

Proponents of the benefit of longer trading hours have often justified this by giving examples of the commodity exchanges etc., which work for longer hours. While it may benefit certain segments of investors and traders, I don’t see any direct benefit to smaller investors, at least not immediately.

The small trader has a defined risk appetite and that doesn’t change just because more time is available. The small investor will typically be looking at price levels, and not necessarily the time of day to take decisions. Self-driven clients trading online may possibly do more trades, but that is a conjecture at this stage.

It might negatively affect relationships between small traders and sub-broker or RMs who typically meet in the evenings. This can affect fund flows with cheques not collected in time or that client feeling a deficiency in services if not met regularly.

In fact, brokers might desist from offering sit in or walk in services at low brokerage rates due to the enhanced costs of an extended day and attempt to pass on these costs. What’s most likely is that the same trades are likely to now get staggered over a longer period.

The benefits of an internationally aligned market are more likely to accrue to bigger investors. While European and Asian markets get factored into our markets adequately, the US markets open much later than 5 pm and therefore, it is unlikely that volatility would reduce due to the additional hours.

Source: https://goo.gl/t7cv6Y

ATM :: Want to invest in companies like Google, Facebook, Coca Cola from India? Here’s how you can do

Global Fund investment options albeit limited have been around for a decade, with options to invest into US, Europe, ASEAN, country specific funds like Brazil & China and even funds investing into natural resources companies like Gold mining companies or Energy companies.

By Kaustubh Belapurkar – Morningstar India | Jul 15, 2017 11:02 AM IST | Source: Moneycontrol.com

ATM

International Funds from an Indian investor’s perspective have been a little bit of a hit and miss.

Global Fund investment options albeit limited have been around for a decade, with options to invest into US, Europe, ASEAN, country specific funds like Brazil & China and even funds investing into natural resources companies like Gold mining companies or Energy companies.

The greatest amount of investor interest has typically been in Gold mining funds and US funds. In fact in 2013, when the Indian equity markets where going through a prolonged lull phase, domestic equity funds too were witnessing stagnating growth.

At the time investors increased allocation into US Funds on the back of strong 1-year historical returns of these funds. Post that, though the story has been very different, with the start of the domestic equity market rally in 2014, domestic fund flows are reaching new highs, but Global funds are witnessing a slow trickle of redemptions.

As an effect of this global funds currently forms a minuscule proportion of investor’s portfolio at 0.28 percent from a high of 1.56 percent in Jan 2014.

AMFI

Why Invest in International funds

Investors should consider adding international funds in their portfolios from the perspective of diversifying risk in their portfolios.

Investments should be made for the long term on an overall portfolio allocation basis rather than a decision based on short term historical performance.

By adding international funds in your equity portfolio, you can potentially reduce the overall volatility in your portfolio by as much as 5-10 percent.

It is important to acknowledge that markets go through cycles and no market will be a top performing market year after year as is visible in the table below.

In addition, Indian markets display a lower correlation with developed markets like the US, thus the addition of such exposures helps reduce overall portfolio volatility.

The calendar Year Index Returns (INR)

calendar

Another factor to consider is the ability to take exposure to sectors or companies that you would ordinarily not have exposure to.

Global Companies like Amazon, Google, Facebook, Coca Cola, etc. are widely known and used brands in India, they derive a fair share of the revenues/users from countries such as ours. By investing in these funds, you can potentially gain exposure to such stocks.

Investors should certainly think about adding an international flavor to their portfolio and stay invested for the long term. You can consider investing 15-20% of your overall equity exposure into global funds.

Disclaimer: The author is Director of Fund Research at Morningstar Investment Adviser. The views and investment tips expressed by investment experts on Moneycontrol are their own and not that of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions.

Source: https://goo.gl/MUx88e

ATM :: A quick guide to hastening your home loan repayment

By RoofandFloor | UPDATED: JULY 17, 2017 14:00 IST | The Hindu

ATM

The thought of owing someone a debt is an uncomfortable one for most of us. When the amount owed is large, as in the case of home loans, the cognitive discomfort can be significantly greater. Additionally, the monthly financial burden of paying EMIs and housing loan interest isn’t exactly everyone’s cup of tea. To counter this, many homeowners choose to prepay their home loans.

There are multiple schools of thought when it comes to prepaying a home loan. However, there is no one-size-fits-all approach, and the decision must be made considering both financial and personal aspects.

Merely making the decision to prepay your property loan doesn’t solve your problem, though. Figuring out how to save up for prepayment is the key to succeeding without financial discomfort.

If prepaying your home loan is an option you’d like to consider, here’s a short guide on how you can make that happen.

Consider the decision

Determine whether prepayment is right for you. Home loans offer tax benefits that need to be taken into account. For instance, the housing loan interest (upper limit of Rs 2 lakh) can be deducted from taxable income. However, if your interest amount exceeds the upper limit, prepayment could save you the additional cost. Every individual’s situation is unique and should be assessed carefully before making the choice.

Fortify your backup

Get your financial safety net in place before committing to prepay the home loan. A general rule of thumb is to have the following taken care of:

• Emergency funds (medical or otherwise)

• Backup savings for EMIs and regular expenses in case of loss of employment

• Children’s education funds

• Other recurring financial liabilities

Plug the leaks

Scrutinise your financial records to identify where you tend to haemorrhage money. They usually show up in the form of unnecessary frills such as credit cards with additional privileges (that you don’t use), unused memberships (clubs, gyms and recreational establishments), loans with high-interest rates (here refinancing is an option) and so on. Eliminating these situations will improve your disposable income and thereby your savings.

Get creative

Saving up to prepay home loans can be simplified with some thought. Consider replacing your expensive forms of entertainment and recreation with creative, cost effective solutions. Tighten the purse strings as far as possible to boost your monthly savings.

Hike up the EMIs

This is a simple yet effective option. Even marginal increases in EMI payments can help reduce the principal amount. This helps reduce the tenure of the home loan. Reduced home loan tenure then results in lower total home loan interests.

Utilize windfalls

Consider partial repayments from unexpected sources of income such as bonuses, gifts from family and so on. Check with your bank regarding the number of partial repayments allowed beforehand (usually there is no such limit).

Supercharge your savings

Consider investing in a reputed mutual fund with reasonably good returns meant purely for home loan prepayment. Returns are higher than normal savings accounts while the tax payable is far lower than other forms of savings such as fixed deposits.

The choice to prepay a property loan should be made rationally and be backed by careful planning. Hasty, emotion-driven decisions could seriously hamper your overall financial wellbeing.

This article is contributed by RoofandFloor, part of KSL Digital Ventures Pvt. Ltd., from The Hindu Group

Source: https://goo.gl/gYFXTh

ATM :: 5 Things to remember about Credit Card Payments

Some simple and straight rules to not fall in the vicious cycle of debt and high interest payments
Retrieved on 20th July 2017 | Moneycontrol.com

ATM

Shopping or paying with cards is one of the easiest things these days. Thanks to the magic of all the apps and payment gateways, using a credit card is as simple as a few dabs on the mobile screen.

But even with all the ease and convenience, paying your credit card bills requires real money. The reason many people fall into a debt trap is because they do not realise that however long the credit cycle might be, one always has to pay every penny (often times more) that you spend.

To not fall in the vicious cycle of debt and high interest payments, there are some simple and straight rules that one can follow.

Be prompt with payments

There’s a reason why credit cards are called credit, because you owe the money spent on the card to the lender. Hence, don’t expect as leeway or grace when it comes to making payments. Credit card companies are very stringent about any delays and promptly impose late payment fees, etc. Also, any delay or missing payment is also reported to credit rating agencies like CIBIL or Equifax and impact the credit score. Hence, the need to make timely payments cannot be truly overstated.

Don’t burn the credit limit

So, your card gives you a high credit limit, say 1 lakh. Why bother with the spend? Burn it all and pay later? That is surely not a good idea, namely because the percentage of credit limit consumed every month is a parameter in accounting the credit score. Hence, you are not considered to be of sound profile, if you use up say 90% of your card every month. Also, in case you track up a big bill each month, there is a possibility that you might land in financial tight spot.

Number of credit cards

People love to flaunt the cards. There’s a common belief that the more credit cards one has, the better financially networked he or she is. Well, nothing could be further from truth. The more the number of cards, the higher the possibility for over-spending. Also, each time, a credit card application is made; it is registered in the CIBIL records hence, it is best to have 2 or maximum 3 cards. In case, you desire upgrade your card to a higher one.

Credit period

Typically, there is an interest-free period on credit card purchases, which can even go up to 45-plus days. To avail this benefit, the outstanding amount has to be nil. So, if you roll over certain amount to next month’s billing, there’s no interest-free period on the new purchases.

Avoid cash

Cash withdrawals on your card do not come with an interest-free period. There could be a one-time fee plus interest charges that start from day one till you repay the amount. Given the interest rates charges and so on, withdrawing cash from credit cards should be strictly avoided, unless there is an urgency.

In the end, the simple mantra of happy credit-card-living is simple; spend less, pay all. With prompt payments and credit management, the credit card can be a nice tool that can aid you in everyday life, right from paying for your cabs or buying a new shirt. So, follow these steps and enjoy a stress free life.

Source: https://goo.gl/zQNnkk

ATM :: How refinancing your Home Loan can help you save more

POSTED BY: IBADMIN | JULY 14, 2017 | http://www.IndiabullsHomeLoans.com

ATM

The joy of owning your own space, a home you can call your own, is a dream for many. But thanks to home loans, many are able to realise this dream. But there comes a time, after one buys a home, that the satisfaction of owning your own place may be dampened by the financial burden of EMIs.

Well, what if we told you there is a way? You can let nothing take away your happiness by simply refinancing your home loan.

What does refinancing your home loan mean?

Refinancing your home loan is nothing but a home loan balance transfer. It simply means the option to switch to another lender who can give a lower home loan interest rate. With home loan balance transfer, you can transfer home loan from one housing finance company to another. Home loan transfer occurs when the entire unpaid principal loan amount is transferred to another home loan finance company for a lower home loan interest rate or to avail a top-up on the original loan amount. The financial institution that had originally extended the loan to you gets the unpaid amount and you have to, in turn, now pay your EMIs at the new rate to the financial institution that has taken up the loan.

How do you go about it?

Knowing the value of your property is essential. The next step is doing a cost-benefit analysis i.e comparing the risks versus the rewards. Make sure that the profits you earn out of the lower interest rates are more than the home loan transfer charges you pay.

What are the advantages?

Lower Interest rates:

A lower rate of interest is one of the major reasons that borrowers transfer home loan from one lender to another. For instance, an individual is paying higher interest on an existing home loan than that offered by another lender, he would naturally be tempted to go in for a new loan that brings down his total interest cost and consequently his EMI. It helps in increasing your savings due to the lower interest rates which result in lower EMIs.

Reduce your loan tenure:

The loan tenure is inversely proportional to the EMI payments you are making. Higher the loan tenure, lesser the EMIs, and vice versa. Similarly, the total interest paid is directly proportional to the tenure. The higher the tenure, the higher the total interest paid. One can opt to change the tenure in case of changing life circumstances like a promotion in your job, windfall gains in business which enables the person to afford a higher EMI payment and shorten his tenure, and get debt free earlier. Visit Home Loan Interest Rates page to know more.

Get additional loan opportunity:

Along with the lower home loan interest rate, one can also get an opportunity to get additional funds for registration purposes, home improvement or expansion purposes. One should only opt for a top-up of the loan if he is getting the benefits of lower rates.

Tax Benefits:

An individual taking a loan from specified housing finance companies is entitled to certain benefits and exemptions. Section 24 of the Income Tax Act states that Interest paid on capital borrowed for the acquisition, construction, repair, renewal or reconstruction of property is entitled to a deduction. Rs 2,00,000 is the maximum amount eligible for deduction in the case of self-occupied property and for rented out property there is no limit of amount of deduction.

Diversify your investments:

You can also use home loan balance transfer to increase the tenure in order to reduce the monthly payments. This is a viable option if a better investment is found and you want to divert a part of the payments to that investment.

Source: https://goo.gl/1A7i6V