Tagged: Equity Markets

ATM :: Essentials Young Investors Must Know Before Investing in Mutual Funds via SIP

By SiliconIndia | Tuesday, May 1, 2018

ATM

A Systematic Investment Plan (SIP) is the best investment option for many investors – especially if you’re a young person, just beginning your investment journey. A SIP is a low-risk move, ideal for those who are in it for the long haul because else, the returns tend to be low. A steady investment of even Rs.500 per month has the potential to generate decent returns in the long run without putting a major dent in your pocket. But like all other investment options, it’s never wise to put in your money unless you’re well informed. Here are some things you must keep in mind when investing in Mutual Funds via SIPs.

– What exactly is a SIP?

A SIP lets you invest small amounts regularly in equities, debts and other kinds of mutual funds. It involves you buying units of any (or many) Mutual Funds of your choosing by investing a minimum of Rs. 500 per month. It is then up to you to redeem your units at any point in time. A SIP is ideal for younger investors since it practically guarantees good returns with a lower risk of capital loss. It bridges the gap between high-risk options like equities and low-risk options which may not produce returns.

– The Power of Compounding

There is a thumb rule talking about investments. The truth is that the longer you keep your money in a fund, the more money is likely to be generated over time. This is where young investors have an edge over older ones. If you’re 40 and want to begin investing in a retirement fund, you’re 18 years behind those who began at 22. The 22-year olds are likely to generate higher returnsprimarily because of the compounding effect. Start as early as possible.

– Be Informed

No investment option is completely risk-free and investing in the wrong fund may end up being a grave error. You can never be too careful with where to put your money. It’s always better to look at the past performance of any mutual fund you decide to put your money into. Of course, this is not possible if it’s a new mutual fund. Try to ensure that the mutual fund you pick has been around for a few years at the very least before investing your money. You don’t want to be risking letting it all go to waste, do you?

Your fundsare distributed into a set of pre-decided companies from numerous sectors. These companies are usually mentioned in the prospectus, and you’re free to check up on them. In the interest of staying informed, it is advisable to check out all the companies mentioned.After all, it’s your money that will help fund its future endeavors, and you have every right to know what it’s being used for. Read up on the companies, the industries and the sectors that your mutual fund is investing in, and analyze whether they are ones you’re comfortable with, or if they’re ones you’d like your money to be invested into.

– Your Own Goals

Don’t just start investing because it’s the “in” thing and everyone around you is doing it. If you really want to gain from your investment, align it with your goals. Whether that goal is to buy your dream car after 10 years or to generate enough capital to start your own business in 15 years, or even go to the vacation you always wanted – your end goal and the money it’ll require should be fixed in your mind as early as possible. Once that’s settled, you can go about looking at what exactly to invest in and how much to put into it every month. For example, if your goal is to buy a car costing ?30 lakhs in 15 years, you can’t invest in something that’ll give you any less than that at the given time.

– Market Risks

Mutual Funds Schemes can be considered low-risk and safe to the extent that they are regulated by the Securities and Exchange Board of India (SEBI), and the fact that companies must have a minimum net worth to be eligible for mutual fund investments. However, fraud is a very real possibility and the less informed can easily be ensnared. Technicalities are everything here, so always read the terms and conditions thoroughly. Only pick a SEBI registered investment adviser.

– Choosing the Right Scheme

Mutual fund selection depends on the kind of an investor you as an individual, are. If your goals are long-term and you can handle risk, you could invest in equity schemes. If you’re more of a moderate investor with a lower of appetite for risk, you should consider investing in large cap or multi-cap mutual funds (that is, large companies or multiple companies) which tend to have lower exposure to risks. This is because such funds are channeled into companies which are comparatively stable. If you’re more aggressive and don’t mind the risk, invest in small cap or mid cap funds instead.

– Choosing the Right Bank and Date

This may not look very significant, but it’s actually pretty important. The general practice is for the plan to directly take money from your bank account monthly (or at whatever regular interval you have fixed). So, the date you fix should be keeping in mind that the account isn’t low on funds when the money is cut. Keep your balance at a minimum of at least the investment amount, and make sure you set the date of investment as one which is placed after you get your income (salary, rental income, etc.).

Be careful not to use an account that you hardly use otherwise, sincethere’s a higher chance of it running into issues of insufficient funds around the time your SIP debit is due.

Get Started Now

Once you’ve understood these essentials of mutual fund investments, it gets fairly easy to take a plunge as an investor and start crafting your investment goals. Get started now. The sooner you do, the more the returns! Remember the power of compounding?

Source: https://bit.ly/2jq1iEH

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NTH :: Should EPFO subscribers hike their ETF investments?

The whole theme of EPFO providing these choices to increase and reduce equity exposure is a case of duplication of effort and design. Financial experts are advising investors to leverage existing options.
Hiral Thanawala | May 02, 2018 11:28 AM IST | Source: Moneycontrol.com

NTH

There is good news for over five crore subscribers of retirement fund body EPFO. Soon they may have an option to increase or decrease investments of their provident fund into stocks through exchange-traded funds (ETFs) in the current fiscal. In its last meeting, the Central Board of Trustees decided to explore the possibility of granting an option to increase or reduce equity allocation to subscribers contributing through ETF above the 15% cap.

The Employee Provident Fund Organisation (EPFO) had started investing in ETFs from investible deposits in August 2015. In FY16, it invested five percent of its investible deposits, which was subsequently increased to 10 percent in FY17 and 15 percent in FY18. However, subscribers were not at all pleased with this increase in exposure to equities. There were some who didn’t want to risk their retirement corpus built through the EPF route. While other subscribers were keen to increase exposure to equities for better returns in the long-term.

So, what advice do financial experts have for EPFO subscribers looking to increase their exposure to equities through the ETFs route when the option is opened up?

Who should increase or reduce investments in ETFs?
Several investors are not reasonably patient with their active investments and panic when they see volatility in the market. Chenthil Iyer, a Sebi registered investment adviser and author of ‘Everyone Has an Eye on Your Wallet! Do You?’ said these investors generally invest only in fixed deposits and post office schemes. “For such investors, increasing the equity exposure through EPF route may be a good option as it is a passive mode of investing and ensures a long-term commitment.”

For investors who manage their active investments and have a well-diversified portfolio, Iyer recommends a minimum equity exposure.

Arvind Laddha, Deputy CEO, JLT, Independent Insurance, has a word of caution. “In the past, there have been negative returns for consecutive two-to-three years or even more from equity markets and this could compromise the savings of EPFO subscribers which they are not used to.”

As not all investors understand the risk of equities and their volatile nature of returns, Kalpesh Mehta, Partner at Deloitte India, feels an investor should also consider one’s age, risk appetite, financial obligations and total net worth before increasing exposure to equities through ETFs.

Benefits of increasing investments in ETFs
Here are the benefits of increasing investments in ETFs through EPF contribution as explained by Amit Gopal, Senior Vice President, India Life Capital: 1) Regular monthly SIP because of mandatory contributions; 2) Inexpensive as employees (contributors) don’t have to pay fund management fees in the current model of EPF; and 3) Tax advantages on contributions. To this, Colonel Sanjeev Govila, CEO, Hum Fauji Initiatives lists institutional framework taking care of selection and research of equities while investing.

Drawbacks of increasing investments in ETFs
Gopal highlights drawbacks such as insufficient administrative track record, illiquidity associated with a retirement fund product, absence of choice in fund manager and products.

To this, Iyer cautions, “Putting the responsibility of equity exposure of this fund on the individual may expose it to the vagaries of the individual’s risk perception, leading to possible over-exposure.”

Make EPF more investor friendly
EPF needs to be investor friendly with additional facilities of enhancing and reducing equity allocation which is likely to be made available in the coming two-to-three months. Iyer feels periodic electronic statements should be mailed to the subscribers which clearly mentions the amount and number of units available in ETF.

“Further an automatic mode of distributing the contribution into equity and debt should be made available based on the age of the individual just like NPS.” This, he feels, will ensure minimum manual intervention in decision-making with regard to equity exposure.

According to Goyal, while EPFO have described some methods of passing on returns, nothing concrete has been implemented. “It is unclear how they will ford the system and governance challenges that could arise.”

It would therefore be good if these issues are resolved before increased allocation and employee choices are implemented. An investor needs to keep a track of this developments for their own benefit.

Leverage on existing options instead of duplicating efforts
The whole theme of EPFO providing these choices to increase and reduce equity exposure is a case of duplication of effort and design. Financial experts are advising investors to leverage existing options.

“The NPS already provides the same structure and benefit. Integrating it with the EPFO and permitting portability is a more efficient way of enhancing employee choice. NPS already has the architecture and track record of administering an employee choice model,” Gopal added.

Source: https://bit.ly/2IdyOMu

ATM :: Why prepaying a home loan may be the best investment option in current yields scenario

ET CONTRIBUTORS | By Raj Khosla | Mar 12, 2018, 02.30 PM IST | Economic Times

ATM

Major banks and housing finance companies have raised their lending rates. Whenever home loan rates are hiked, borrowers want to know whether they should prepay their loans to save on interest. In the past, there was no clear answer because there were several investment opportunities that could yield better returns than the interest paid on the home loan.

Not any longer. Stock markets are looking jittery, fixed deposits are tax-inefficient and debt funds are giving poor returns. If a penny saved is a penny earned, prepaying a home loan may be the best investment option available. Where else can you get 8.5% assured ‘returns’ on the surplus cash? Another compelling reason to rework the math and at least partially repay your home loan is the new tax rule that caps the deduction on home loans at Rs 2 lakh a year. If you have a large home loan running, you would do well to make partial prepayments as soon as you can.

There are some obvious benefits of foreclosing a long-term loan. The longer the tenure, the higher is the interest outgo. Just like long-term investments build wealth for you, longterm debt burdens you with high interest. Yet, a long-term loan may be unavoidable in some circumstances. A young person who has just started working may not be able to afford a large EMI. The loan tenure would have to be increased so that the EMI fits his pocket.

In such situations, borrowers are advised to go for a ballooning repayment, where the EMI increases every year in line with an increase in the income. This can have a dramatic impact on the loan tenure. If you take a home loan of Rs 50 lakh at 8.5% for 20 years, the EMI will be Rs 43,391. But a 5% increase in the EMI every year will end the loan in 12 years and two months. If you tighten your belt a bit and increase the EMI by 10% every year, you can become debt-free in less than 10 years (see grphic)

Pay off a 20-year loan in less than 10 years
Hiking the EMI every year reduces the tenure drastically.

pg-7

Contrary to what T.S. Eliot said, April is not the cruellest month. Any salaried individual will vouch for this. While annual increments are something to celebrate, people with large outstanding debts should also try and increase their EMIs in line with the increase in income. In a few weeks, they will also get their annual bonuses. At least some of that should be used to prepay the home loan.

Reducing your outstanding debt or closing the loan is naturally a psychological boost. It gives the individual a sense of financial freedom.

Some people argue that prepaying the home loan robs the individual of liquidity. That’s not correct. Several banks offer home loans with an overdraft facility that allows the borrower to withdraw money as and when he needs it. Though overdraft facilities normally entail annual maintenance charges, home loan overdraft facilities are exempt from this charge. It’s also a good idea to use a loan against property to repay other costlier loans. For instance, an unsecured personal loan that charges 18-20% can be replaced with a loan against property that costs 8.5%.

(Author is founder and managing director, Mymoneymantra.com)
Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of http://www.economictimes.com.

Source: https://goo.gl/UpcRzh

Interview :: 2018 is 5th year of Bull market! If you have Rs.10 lakh to invest go for direct equities

Aim to add incrementally to your portfolio over time particularly when the chips are down.
Dipan Mehta | Mar 05, 2018 10:22 AM IST | Source: Moneycontrol.com

Go for direct equity with the help of an advisor or a portfolio manager because mutual funds have high expense ratio and inherent disadvantages, Dipan Mehta, Director, Elixir Equities said in an exclusive interview with Moneycontrol’s Kshitij Anand.

Q) The tables have turned in favour of bears at least in the medium term. The Indian market has become a sell on rallies kind of market. What is your assessment of the market at current juncture?

A) This the fifth year of a bull market which has been a slow steady one with very little volatility. There have been a few corrections and we are in the middle of one at present. For the long-term investor, this is still a buy on dips market.

Whether this correction will deepen or not will become evident over the next 2-3 weeks. If a lower tops/lower bottoms formation get created and broad market indices trade below their 200 DMA (which they are not at present) then we may be in for an extended sell-off or a mild bear market.

Q) What is your advise to investors who want to put Rs 10 Lakh into markets? He is in the age bracket of 35-40 years. He/she is looking at forming a portfolio with direct equities, MFs, a part of fixed income as well?

A) Go for direct equity with the help of an advisor/portfolio manager. Mutual funds have high expense ratio and inherent disadvantages. Set aside an amount of emergency plus 1 year’s salary/income into debt and put the rest into good quality stocks.

Aim to add incrementally to your portfolio over time particularly when the chips are down.

Q) What should be the ideal strategy for investors in terms of sectors? Do you think PSU banks are a good buy at current levels? What are the sectors which you think are likely to show momentum in the year 2018?

A) PSU Banks, IT and Pharma are to be avoided.

-25-35 percent should be in private sector retail banks and NBFCs.
-15 percent in auto and related ancillaries,
-15 percent in Indian FMCG stocks,
-35 percent rest in domestic consumption stocks such as building materials, appliances, aviation, retail, gaming, entertainment, media, fast food, branded apparels, and innerwear.

Q) The US Fed signalled a minimum of 3 rate hikes for the year 2018. Do you agree the global overhang is likely to weigh on Indian markets for the rest of the year?

A) No, but there will be a knee-jerk reaction whenever there is a global sell-off. With the rise and rise of domestic mutual funds, the influence of the foreign investors has reduced dramatically which means that the co-relation on a medium to long-term has weakened.

Moreover, foreigners have been investing for 2 decades and they have a more mature approach to India. We are a better-understood economy and capital market.

Q) What should be the right strategy for investors right now – sit on cash and wait for a dip or deploy cash incrementally throughout the year?

A) Nibble into the bluest of blue-chip stocks. Companies which have missed in the bull market so far must be targeted for investment. Investors must endeavour to improve the quality of the portfolio.

There are two-fold benefits. If the bull market resurges, then these will be first of the block and gain market leadership. Should a bear market evolve, then the damage will be less and investors will be able to sleep better knowing they have quality stocks in their portfolio.

Q) What will happen in the banking space given the fact that the cost of borrowing is inching higher. The RBI might keep rates on hold in its next policy but may raise rates in 2018?

A) Private sector banks and NBFCs will survive and thrive in every interest rate scenario. Growth and profitability will be temporarily impacted but the process of private sector gaining market share at the expense of PSU lenders will continue and gain traction.

Q) With Dollar gaining strength there is a higher possibility of rupee weakness. Which sectors or stocks likely to benefit the most? What is your target level for the currency?

A) Sectors which will benefit are obvious but be sure to assess the basic underlying fundamentals. No business will create value just because the currency is depreciating. Our view on the Rupee is not so negative.

Source: https://goo.gl/VM7cNE

ATM :: MFs invest Rs 1 lakh cr in stocks in 2017; remain bullish

The high investment by mutual funds could be attributed to strong participation from retail investors.
PTI | Dec 31, 2017 11:15 AM IST | Source: PTI | MoneyControl.com

ATM

Domestic mutual funds pumped in a staggering over Rs 1 lakh crore in the stock market during 2017 and remain bullish in the New Year to maximise the returns for investors.

Mutual funds invested Rs 1.2 lakh crore in equities in 2017, much higher than over Rs 48,000 crore infused last year and more than Rs 70,000 crore pumped in during 2015, latest data with the Securities and Exchange Board of India (Sebi) showed.

“We are seeing a clear shift in preference for financial assets over physical assets such as real estate and gold, which is likely to continue even going forward.

“Apart from this trend, the consistent delivery of returns by the mutual fund industry, prudent risk management and increasing initiatives on enhancing investor awareness assisted in increasing the penetration of mutual fund products,” Kotak Mutual Fund CIO Equity Harsha Upadhyaya said.

The high investment by mutual funds could be attributed to strong participation from retail investors.

In fact, retail participation is now providing the much needed liquidity to the stock markets that have been largely driven by Foreign Portfolio Investors (FPIs) for the past few years.

The investment by mutual funds in equities have outshone those by FPIs.

FPIs have infused close to Rs 50,000 crore this year after putting in over Rs 20,500 crore last year and nearly Rs 18,000 crore in 2015. Prior to that, they had pumped in over Rs 97,000 crore in 2014.

“This year the domestic institutional investors have pipped FPIs on net inflows, thus making the market less dependent on FPI money.

“This has also provided greater stability to the market as during the times when FPIs were pulling money out of the Indian equity markets, the stock market continued its upward march with the support from the flows by domestic institutional investors,” Morningstar India Senior Analyst Manager Research Himanshu Srivastava said.

Retail money flew into equities through mutual funds supported the benchmark indices — Sensex and Nifty — that surged by 28 percent and 29 percent respectively this year. Further, retail investor accounts grew by 1.4 crore to 5.3 crore.

The spike in bank deposits and consequent decline in interest rates following demonetisation on November 8, 2016 has also helped mutual funds.

“Mutual fund distributors too have played a key role in connecting with their existing and new customers. This has not only resulted in his increasing wallet share of customer, it has also helped the distributor in getting new customers to the industry,” Amfi Chairman A Balasubramanian said.

“It is also believed that investors are no more interested in buying into traditional asset classes such as real estate and gold, thus moving to financial asset class,” he added.

Source: https://goo.gl/ibBNN3

Interviews :: Alpha generation in large-cap funds would compress going ahead

Mahesh Patil, Co-CIO, Aditya Birla Sun Life AMC on how he is creating alpha in the large cap space, his contra calls and more.
By Morningstar Analysts | 27-12-17 |

The asset size of Aditya Birla Sun Life Frontline Equity Fund has crossed Rs 20,000 crore. Do you see size posing an issue to manage this fund going forward?

We maintain a good diversification in this fund by having exposure across sectors. We aim to beat the benchmark consistently and incrementally rather than taking very large sectoral bets. Given that the fund invests at least 80% of its assets in large cap stocks, we don’t see size posing as a challenge. Besides, the core of the portfolio has very long term holdings. That said, as the fund size increases it becomes slightly more difficult to build or unwind positions in stocks and needs more effort. But it is part of the process and does not affect the performance significantly.

We have a large number of stocks (60-70) in the portfolio as compared to other similar funds in the industry. Before deciding the quantum of exposure warranted in any stock, we take a close look at the liquidity of the stocks. This strategy allows us to manage large size.

It is becoming difficult for managers to generate alpha in the large cap space. How do you overcome this challenge?

We are seeing a huge rally in the mid and small cap stocks and large cap funds obviously can’t take exposure to such stocks. So multi-cap funds have been able to generate decent alpha by maneuvering where the opportunities are.

As markets mature and price discovery happens across stocks its going to become difficult to generate alpha in large caps. The alpha generation which we saw in the last three to four years would compress going ahead. This is because the alpha was high as compared to the historical average, especially during calendar year 2014-16.

We never target to generate superlative alpha in large cap funds. Instead, we endeavor to find some new stock ideas every year which keeps the portfolio fresh. If there is a serious underperformance, we are nimble enough to take corrective action. While everything is fairly priced in the market at this juncture, we try to continuously look out for undervalued companies. Some amount of contrarian investing and moving away from the crowd helps to spot early turning points in stocks/sectors. Similarly, we maintain a discipline to trim exposure in certain stocks that have overshot their valuation target. This strategy enables us to buy stocks which are relatively cheap in terms of valuation. So some amount of active management is also required at this juncture to generate alpha in the large cap space.

In which sectors/themes are you deploying the steady inflows coming in equity and balanced funds?

We have been overweight on banking and financial services. Financial services sector has had a good run and the valuations have moved up. Hence we are more discrete now in choosing the right segments that offer better growth. While we prefer private retail banks, we are slowly warming up to corporate banks because of some clarity emerging on resolutions of bad debts and a cyclical recovery in economy.

Besides, we are positive on consumer discretionary space. We are seeing a higher demand for discretionary consumption as the per capita income is moving up in India. Further, the implementation of GST will benefit players in the building material, consumer durables and retail space. Rural consumption is also starting to improve with normal monsoons and government focus on stepping up rural spending.

We are fairly overweight on metals. Metal prices are steady as China is cutting down capacity on the back of environmental issues which is supporting price. Indian companies are also deleveraging which will increase their equity value.

Another sector where we are taking a contrarian call is telecom. We are seeing consolidation happening faster than we expected in this sector. While there is still some pain for a few quarters, over a three-year time frame it could be a good time to look at some leading telecom companies.

We are selective in the infrastructure space. Road, railways and urban transport are some pockets where there is significant traction. Companies positioned in this sector are expected to see good increase in their order books.

Post SEBI’s diktat on scheme categorization, how are you restructuring your funds? Are you planning to merge smaller schemes?

Fortunately, we have been working on consolidating schemes much before the SEBI circular came out. Most of our equity funds are aligned as per SEBI categorization. We would look to merge some thematic funds.

Overseas fund of funds category is seeing continuous outflows. What are the reasons for the waning demand for this category.

The awareness level about this category is low. Domestic market has been doing well so people are preferring to invest in India. Overseas fund of funds have done well though.

As markets mature and you see enough ownership of domestic funds, people would look to invest outside India. There are a lot of new generation companies which investors can take exposure through these funds.

Though taxation of this category is an issue, you need to realize that if you are making good returns it should not be a problem. HNIs who already have a high exposure to India can look at these funds. Also, those wish to send their children overseas for education can consider these funds because the underlying returns are dollar based. To some extent, you are taking the currency hedge through these funds.

When do you see private-sector investment picking up?

Private sector investment has been elusive. But there are a couple of factors which indicate that investment will pick up one year down the line. Firstly, capacity utilization has bottomed out and is showing early signs of improving. Secondly, while a lot of large corporates in metals and infra space are saddled with high debt were are seeing the deleveraging cycle has started for some companies. Corporate debt to GDP which peaked out in 2016 is starting to come off. Finally, bank recapitalization would enable corporates to re-leverage and begin the next capex cycle. Sectors like Steel, Oil and Gas, fertilizer and auto are the first to see a revival.

During every budget we get to hear about suggestions to reinstate long-term capital gains (LTCG) tax on equity investments. Some say that exemption of LTCGT can lead to market manipulation. What are your views? If the government introduces LTCGT what would be the impact on markets?

The exemption of LTCGT has helped attract investors in equities. But that’s not the only reason why people invest in equities. They invest because they expect better returns. If there is money to be made in markets, I don’t think it would deter investors from this asset class. So introduction of LTCGT would not have an impact on long term investors. However, it could hurt the sentiments in the short run. We could see some curb in short term speculative money moving in stocks having weak fundamentals.

How has your investment philosophy evolved over the years?

While our broad philosophy has remained the same, we have started giving more attention to management quality while evaluating companies. Our time horizon of owning stocks has also increased and we are evaluating companies with a three-year perspective. There is a larger focus on how companies are generating free cash flows and how it is being utilized. These factors impact the PE multiples. So we are willing to pay a premium if these factors are favorable. To sum up, we have been incorporating these factors in our philosophy.

Your favorite book

One book which I found interesting is ‘Good to Great’ authored by Jim Collins. The book gives good insights into building an organization and focuses on what really matters to not only to survive and endure but to excel.

Source: https://goo.gl/i9ro1V

ATM :: How to choose Mutual Funds or Stocks for your investments

By pooling a lot of stocks or bonds, mutual funds reduce the risk of investing.
By ZeeBiz WebTeam | Updated: Wed, Nov 29, 2017 12:59 pm | ZeeBiz.com

ATM

Both stocks and mutual funds market are booming in India, but as an investor, we are often confused to choose between the two for our investment plans.

Investment in equity, bonds or funds comes with higher risk and higher reward, therefore, it is always better to first study about the scheme we plan to invest.

Mutual funds:

Mutual fund scheme is a pool of savings contributed by multiple investors. The term ‘mutual’ fund means that all risks, rewards, gains or losses pertaining to, or arising from the investments made out of this savings pool are shared by all investors in proportion to their contributions.

There are wide-range of mutual funds in India like – equity, debt, money market, hybrid or balanced, sector-related, index funds, tax-savings fund and lastly fund of funds.

Stock Market

Stock market are usually interesting source of income for both companies and share holders. Under the stock market, anyone can buy stakes of a company in whom they have faith.

Companies which have received better ratings by agencies are generally preferred the most. No matter what may be the circumstances, an investor holds on to the company’s stake for their regular source of income.

Which one is better for investment?

According to Motilal Oswal, if you are typically in your 20s to 30s belt, you can start building your investment portfolio with the help of mutual funds. You need to start off with a very minimum capital and you can find that your investment keeps growing at a gradual space.

The agency believes that for first-time investors, the mutual funds offer a tremendous scope for growth as your funds are invested in diversified forms of revenue generating sources.

On the other hand, Motilal believes that if an investor belongs to late 40s up until 70s of their age and are also seasoned investors, then investing in stocks is a good idea.

It further said that decades of exposure to the financial market helps you gauge the right type of equities, shares or stocks, you need to invest your money in.

Among many advantages of investing in mutual funds is that you can appoint fund managers to select funds, track performance, make appropriate asset allocations and cash-in your profits for you.

These managers try to ensure that an investor’s portfolio consists of well-performing funds, rather than those that might drag down the overall investment returns.

In case, you are stock market investor, and sell your holding within a period of one year, then you have to pay 15% as short-term capital gains tax.

As for mutual funds, there are no gains tax levied on the stocks that are sold by the fund. But one needs to remember that an investor must hold equity funds for a minimum of one year (the longer, the better, really) if they want to avoid paying capital gains tax on the investments.

If you venture into stock investments on your own, brokerage costs of 0.5-1% will be a common expense. Apart from this, you will also have to pay for demat charges.

BankBazaar stated that mutual funds pay only a fraction of the brokerage costs compared to what is charged to individual investors. Investors in Mutual Funds do not need demat accounts.

A well-diversified investment portfolio ideally has around 25-30 stocks, and this kind of portfolio is only achievable with a sizable corpus.

With investment in mutual funds, an investors can buy a certain number of funds which can be invested in various stocks.

Source: https://goo.gl/8BtHrp