By SiliconIndia | Tuesday, May 1, 2018
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?
After the recent correction valuations of most of the mid & small caps as well as largecaps have come to more reasonable levels, but are still not in lucrative.
Kshitij Anand | Apr 04, 2018 09:27 AM IST | Source: Moneycontrol.com
So where are fund managers betting your money in FY18? Well, a close look at the funds which outperformed benchmark indices in the largecap space suggested that fund managers are in no mood for experiments.
They stuck to quality stocks despite volatility, according to data collated from Morningstar India database. Five funds which outperformed Nifty include names like Invesco India Growth which rose 18.9 percent, followed by BOI AXA Equity which gained 18.09 percent, BOI AXA Equity Regular rose 17.13 percent, and Edelweiss Equity Opportunities Fund rose 16.46 percent.
A close look at the stocks in which some of these funds have made their investments include names like HDFC Bank, RIL, Maruti Suzuki, ICICI Bank, Graphite India, L&T, IndusInd Bank, IIFL Holdings, HDFC, Avenue Supermarts, TCS, Sterlite Technologies, and Escorts etc. among others.
The rally was not as swift among the benchmark indices which rose 10-11 percent in the last 12 months. After a blockbuster 2017 and FY18, all eyes are on FY19 which according to most experts belong to largecaps.
Mid & smallcaps outperformed largecaps by a wide margin in the year 2017, but for FY19, most analysts suggest investors not to ignore this space. One possible reason is attractive valuations compared to mid & smallcaps.
Street expectations are for at least high-teens earnings growth in large-caps and about 20 percent earnings growth in mid-caps and small-caps. But, for investors, a healthy balance of large and midcap funds would make a strong portfolio.
“Performance of stocks in FY19 will depend on the quality of companies, quality of managements, balance sheet performances and profitability. FY19 will not be as easy as FY18 when markets were at an all-time high,” Jagannadham Thunuguntla, Sr. VP and Head of Research (Wealth), Centrum Broking Limited told Moneycontrol.
“The year 2018 will differentiate men from boys. We recommend that 50-60% of capital should be parked in large caps, 20-40% in mid& small caps and 10-20% in thematic stocks,” he said.
After the recent correction valuations of most of the mid & small caps as well as largecaps have come to more reasonable levels, but are still not in lucrative. The best strategy for investors is to use the mutual fund route to invest in quality largecaps as well as midcaps.
“On a broader portfolio basis, for a person in the age bracket of 35-40 years, the exposure to direct equity should also ideally be around 50-60% while the rest could be spread across other avenues of investments,” JK Jain, head of equity research at Karvy Stock Broking told Moneycontrol.
“A mixture of flagship mutual funds schemes from different segments like Largecap, Midcap, Balanced and Multicap funds, which have delivered in the past must be a part of one’s portfolio,” he said.
Disclosure: Reliance Industries Ltd. is the sole beneficiary of Independent Media Trust which controls Network18 Media & Investments Ltd.
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.
TIMESOFINDIA.COM | Updated: Jan 10, 2018, 14:44 IST
NEW DELHI: Markets in 2018 are continuing its bull run with both BSE Sensex and NSE Nifty crossing the psychological levels. The 50-share barometer Nifty on Monday breached the 10,600-mark and the 30-share Sensex rose above the 34,350-mark. With the markets outperforming, investments in equity funds are also giving pretty good returns, a data from Value Research showed.
Let us take a look on which funds can be your best bet amid this bull run:
As per the data, these are top bets in equity funds:
Equity: Large cap
* Mirae Asset India Opportunities Fund: With 36.6 per cent return for a year followed by 15.17 per cent and 20.17 per cent in three and five years respectively. (Note: Three-year and five-year returns are annualised.)
* JM Core 11 Fund: 38.91 per cent in the first year along with 14.76 per cent and 17.31 for the third and fifth year.
* Kotak Select Focus Fund: Returns of 31.99 per cent for one year. 14.21 per cent and 19.84 for three and five years respectively.
Equity: Mid Cap
* Mirae Asset Emerging Bluechip: 46.22 per cent for the first year. 23.22 per cent and 30.19 for three-year and five-year respectively.
* L&T Midcap fund: 1-year investment fetched 50.13 per cent returns, while three-year and five-year drew 22.24 per cent and 28.53 per cent returns.
* Aditya Birla Sun Life Pure Value: 52.46 per cent in first year. 20.59 per cent and 29.65 for three-year and five-year respectively.
Equity: Multi Cap
* Motilal Oswal Most Focused: 40.2 per cent returns for a year and 20.06 per cent for three-year.
* Reliance ETF Junior BeES: One-year investment garnered 43.92, while three-year and five-year fetched 18.41 per cent and 20.05 per cent respectively.
* ICICI Prudential Nifty Next 50: 43.3 per cent returns in the first year. 18.06 per cent and 19.77 per cent in the third and the fifth year.
Equity: Tax Planning
* Tata India Tax Savings Fund: 42.95 per cent in the first year followed by 17.9 per cent in third year and 21.17 per cent in fifth year. Also, the fund has given 18 per cent returns in the past three years and its three-year is the highest in the category.
* IDFC Tax Advantage Fund: 51.71 per cent in one-year, while 17.56 per cent and 21.48 per cent for three-year and five-year respectively.
* L&T Tax Advantage Fund: Returns of 42.43 per cent in one-year. 16.36 per cent and 19.47 per cent in the third and fifth year.
* Tata Retirement Savings Fund: 36.56 per cent, 16.09 per cent and 20.05 per cent returns in first, third and fifth year.
* Principal Balanced Fund: Returns of 35.65 per cent, 15.56 per cent and 17.26 per cent for one, three and five-year.
* L&T India Prudence Fund: 26.52 per cent in the first year, while 13.27 per cent and 18.01 per cent returns in three and five-year respectively.
* Franklin India Income Builder: 7.52 per cent, 8.39 per cent and 9.03 per cent for one, three and five years.
* SBI Regular Savings Fund: Returns of 7.35 per cent, 9.28 per cent and 9.56 per cent in first, third and fifth year.
* Invesco India Medium Term: 7.1 per cent, 8.17 per cent and 8.12 per cent for one-year, three-year and five-year respectively.
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
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.
India Infoline News Service | Mumbai | December 30, 2017 18:41 IST
Learn about ELSS investment & answer to all your questions like what is ELSS, how to invest in ELSS, tax benefits in ELSS at Indiainfoline
Equity Linked Savings Scheme or ELSS funds are a type of mutual funds whichbase their returns from the equity market. These funds are tax saving in nature and are eligible for a tax deduction of up to Rs1.50 lakhunder Section 80C of the Income Tax Act. Below are a few things that an investor must know before investing in ELSS funds.
What is ELSS?
ELSS schemes are a category of mutual funds promoted by the government in order to encourage long term equity investments. Under this scheme, most of the fund corpus is invested in equities or equity-related products.
Types of ELSS:
There are two categories in ELSS mutual funds i.e. dividend and growth.
The dividend fund is further divided into Dividend Payout and Dividend Reinvestment. If an investor opts fordividend payout option, he receives the dividend which is also tax-free,however,underthe dividend reinvestment option, the dividend is reinvested as a fresh investment to purchase more shares.
Under the growth option, an investor can look for longterm wealth creation. It works like a cumulative option whose full value is realized on redemption of the fund.
How to invest in ELSS?
One can invest in ELSS via two methods i.e. lumpsum or SIP.
SIP or Systematic Investment Plan, is a process where an investor needs to invest a fixed amount of money every month at a specified date. SIP inculcates a disciplined approach towards investing in an investor. SIP also gives the benefit of rupee cost averaging to an investor.
What is the lock-in period in ELSS?
ELSS funds have a lock-in period of three years. Whencompared to EPF, PPF, NSC and other prevalentinvestments under Section 80C, ELSS has the shortest lock-in period.
What is the benefit of tax in ELSS?
The primary purpose of any investment is to gain deductions under income tax for wealth creation. ELSS funds fit that bill perfectly. An investor gets a doubleedged benefit of tax saving and wealth creation at the same time. Dividends earned from ELSS funds are also exempted from tax. ELSS funds also provide the benefit of long term capital gains as they have a lock-in period of three years.
What is the investment limit of ELSS funds?
One can start investing in ELSS mutual funds with a minimum amount of Rs500, and there is no upper limit on how much a person can invest in ELSS funds. However, the tax saving ceiling is only up to a maximum of Rs1,50,000 a year.
What are the risks involved in ELSS funds?
ELSS mutual funds do not have ironclad guarantee over returns, as theygenerate their earnings from investments in the equity market. Nevertheless, some of the best performing ELSS mutual funds have given consistent and inflationbeating returns in the longrun. This quality is not possessed by the other fixed income tax saving investments like PPF andFD.
ELSS mutual fund investment has now become a popular tax saving investment under Section 80C, and it is also ideal for retirement planning and wealth creation coupled with the benefits of lower lock-in period, SIP method of investment, rupee cost averaging risk and no tax on dividends or the benefit of capital gains. ELSS funds should be taken into account by every investor while planning their investment goals.
Disclaimer: The contents herein is specifically prepared by ‘Dalal Street Investment Journal’, and is for your information & personal consumption only. India Infoline Limited or Dalal Street Investment Journal do not guarantee the accuracy, correctness, completeness or reliability of information contained herein and shall not be held responsible.
Everyone wants to be financially secure and well off by the age of 35-40. However, when we are in our 20’s, we tend to live life in the moment and forget saving for the future.
By: Sanjeev Sinha | Updated: November 27, 2017 2:25 PM | Financial Express
All of us have various financial goals in life. Everyone wants to be financially secure and well off by the age of 35-40. However, when we are in our 20’s, we tend to live life in the moment and forget saving for the future. This is not the right approach towards creating wealth. Therefore, to ensure that you are financially secure and on the right track with your money, here are 5 important investments that you must make before you hit your 30-year milestone:
1. Investment towards tax saving
Considering that you are working and earning, it is important for you to assess your tax liability and take advantage of tax deductions available under Section 80C of the Income Tax Act. “By proper tax planning, you can not only reduce your tax liability but also save some more to invest towards your other goals. One of the best tax-saving instruments is Equity-Linked Savings Schemes (ELSS). It is a type of open-ended equity mutual fund wherein an investor can avail a deduction u/s 80C up to Rs 1.50 lakh for a financial year,” says Amar Pandit, CFA and Founder & Chief Happiness Officer at HapynessFactory.in.
2. Investment towards emergency corpus
There are various events like accidents, illnesses and other unforeseen events that we may encounter in our lives. These events should never occur, but if they do, one needs to be adequately prepared for the same. In critical cases, such events may hamper one’s ability to work and may even lead to a loss in earnings for a few months or years. Hence, “it is advisable to build a contingency corpus, which is equivalent to at least 5-6 months of living expenses. Further, your emergency fund should be safe and easily accessible (liquid in nature) at short notice, in case of an emergency. Hence, savings bank accounts and liquid mutual funds are two options for setting aside the emergency corpus. However, considering that liquid and ultra-short term mutual funds are more tax efficient in nature, it is advisable to park a major portion of your corpus in the same,” says Pandit.
3. Investment towards long-term goals
It is very important to save and invest towards your long-term goals such as marriage, buying a house, starting your own venture, retirement, and so on. You must start with determining how much each goal will need and the savings required to achieve the goal. Once the corpus is fixed, you can invest towards the goal regularly. As an investment strategy, start fixed monthly investments – SIPs (Systematic Investment Plan) in mutual funds. Always remember, the earlier you start investing towards your goals, the longer time your investments will have to grow and the more you will benefit from the power of compounding. Equity mutual funds which are growth oriented are a preferable investment option for long-term goals.
4. Investment towards short-term goals
There are many short-term goals that are recurring in nature, such annual vacation, buying a car or any asset in the near term and so on. For such goals, you are advised to park your funds in liquid or arbitrage mutual funds rather than a savings account. “Mutual funds are more tax efficient than savings accounts and also there are different funds for different time horizons. For example, for goals to be achieved within a year, you can opt for liquid or ultra-short term funds whereas for goals to be achieved post one year, you can opt for arbitrage funds,” advises Pandit.
5. Investment towards health and life cover
Life and health insurance typically are not supposed to be considered as investments. However, both are very important and must be considered as one of the priority money move to be made before turning 30. If you are earning and have a family dependent on you, you must assess and buy the right life insurance term cover for yourself. Further, with costs of health care and medical on the rise, any untoward illness without sufficient cover will have you dip into capital which is unnecessary. Hence, there cannot be any compromise on health insurance. Thankfully, there are various health covers available in the market today. You should opt for the right cover for yourself, depending on your needs and post considering all the options.
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
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 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 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.
On an average, the gross returns by active funds exceed returns from Nifty by more than 11%. This outperformance is after accounting for the costs of managing an active fund
Nilesh Gupta & G. Sethu | First Published: Mon, Oct 02 2017. 01 59 AM IST | Live Mint
In 1975, John Bogle launched the first ever passive fund, Vanguard 500 Index Fund, and heralded an era of passive investing. Bogle was influenced by Eugene Fama’s view that the capital market was informationally efficient and that sustained success in stock picking was impossible. Since then, trading has increased; more and better investment research is being undertaken; high-speed communication networks have taken away the advantages to a privileged few; and most importantly, institutional investors dominate the markets. In this environment, it is not easy to pick stocks or enter and exit the market successfully and consistently. The torchbearer for passive investing today is the exchange-traded fund (ETF).
In the US, during FY 2003-16, total net assets of equity index funds increased by 3.5 times (from $0.39 trillion to $1.77 trillion), while that of active equity funds increased by just 0.7 times (from $2.73 trillion to $4.65 trillion). More importantly, during this period, a net amount of $1.29 trillion moved out of active equity funds while $0.46 trillion moved into index equity funds. Why is passive investing gaining over active investing? It’s because active investing has not been able to deliver returns (net of costs) that are more than from passive investing. Passive funds posted an expense ratio of 0.09% in 2016 while active equity funds were seven times more expensive with an expense ratio of 0.63%.
The FT reports that over a period of 10 years, 83% of active funds in the US underperform their benchmark, with 40% funds terminating before 10 years.
This global trend prompted us to examine the India story. Since 1992, Indian stock markets have seen many developments. Trading has increased; there are more institutional investors; regulations have improved; transactions have become faster; settlements have become shorter; number of analysts covering the market has increased; communication networks are good. We should expect active funds to struggle to beat the market, right? You could not be more mistaken.
We examined the returns and expense ratios of 448 actively managed mutual fund schemes from the period of FY 1996 till FY 2017, a total period of 21 years. We used their net asset values (NAVs) to compute the returns from holding these schemes for each financial year. Remember that the NAVs of mutual fund are published after deducting all the costs incurred in running the scheme.
In most of the years, when the market booms the active funds beat the index (such as Nifty) by a wide margin. When the market is bearish, their performance is mixed. In some bearish years, they beat the index, but often they lose much more than the index.
On an average, the gross returns by active funds exceed returns from Nifty total returns index by more than 11%. Remember that this outperformance is after accounting for the costs of managing an active fund. What about the costs of managing a mutual fund? The expense ratio for active funds from FY 2008 to FY 2017 averaged 2.32% per annum and for ETFs it was 0.61%, leading to a difference just greater than 1.7%. On an average, in India the extra returns provided by actively managed mutual funds have been much higher than the extra cost charged for delivering the return.
This is in contrast to the data from the US. Even in the halcyon 1960s, active funds in the US beat the market only by about 3%. What are the possible reasons for this outperformance? Some market experts argue that several quality stocks are not part of the index and hence index funds or ETFs cannot invest in them. Some note that the evolving nature of the market is not reflected in the index.
It may also be possible that the relatively smaller size of the mutual fund industry in India could be helping active fund managers get such high returns. In India, the mutual fund industry has only 13% of market capitalization as compared to 95% in the US. It is possible that in the past, mutual fund managers had better information available. If either of the reasons turn out to be true, we might find that, in the future, the actively managed mutual funds do not outperform the market by such large margins.
So, should Indian investors invest their savings in actively managed mutual funds? Irrespective of what the data says, the answer is not so simple. Here we have only considered the average returns of all actively managed mutual funds. A retail investor who is likely to invest only in a limited set of schemes would be concerned about choosing those schemes that give better returns in the future.
This analysis has not considered the risks taken by the mutual funds to get returns. A fund can easily beat the market by taking more risks. We need to compute the risk-adjusted returns to answer this question. On doing that, we may understand how the active funds in India generate such high returns compared to the market index. Is it a story of great fund management skills? Or is it inefficiency of the market? Or is it a case of taking high risks? Investors and the regulator have a responsibility to understand this.
Nilesh Gupta is assistant professor and G. Sethu is professor at the Indian Institute of Management, Tiruchirappalli
Sarbajeet K Sen | Sep 14, 2017 11:37 AM IST | Source: Moneycontrol.com
Poor performance of a fund must set the investor thinking on whether to continue with the investment.
When did you last review your mutual fund portfolio? Maybe a long time ago. Many investors might feel relaxed after investing in mutual funds with the thought that their money is safe with experts trained in investing and stock selection.
However, the mutual funds landscape is a mixed lot. There are good, high-performing funds and there are laggards who are unable to keep up with performance of the leaders.
Did you check which of these category of fund you have invested? If it is one of the top-performing ones, giving you good returns, you need not worry. But if it is one of the funds that have not performed well in comparison, it might be time to think of a switch to another fund.
So when did you last review your mutual funds investment portfolio to know whether it needs a change? If you do it periodically, well and good, but if you have not reviewed for a long time, you should assess how your various fund investments have been performing.
“Investors should review their mutual fund portfolio at least once in 6 months. They should look at the performance of the fund, the sectoral allocation that they chose and whether there have been any big changes,” S Sridharan, Business Head, Financial Planning, Wealth Ladder Investment Advisors
Sridharan says if the review shows that the fund has performed poorly, it should signal a possible exit and switch to another fund. “Poor performance of a fund must set the investor thinking on whether to continue with the investment. However, exit decision should not be based only on performance of the fund. Investors should look at other parameter like what went wrong and whether the fund manager has the capability of revising the portfolio to the positive side in the near future,” he said.
Vikash Agarwal, CFA & Co-Founder, CAGRfunds, says one should avoid unnecessary churn in portfolio. “The essence of money-making is regular investments in well-managed diversified equity mutual funds. One should avoid unnecessary churns in the portfolio which may enhance cost in terms of exit load and tax implications,” he said.
However, Agarwal says there can be multiple reasons which might merit a review and change of one’s mutual fund holdings. Some of these are:
–Continued underperformance of the fund such that the fund is unable to beat its benchmark
-The fund is able to beat the benchmark but the returns are not commensurate with the levels of risk being taken by the fund
-A particular stock/debt instrument holding which forms a significant holding of the fund is likely to underperform due to a fundamental issue. Example: If a fund has significant exposure to a company which has acquired a loss making company, it might merit a deeper review of the fund
–Change of fund manager: In case there is a change in fund manager, then it is useful to review the fund as the fund style and philosophy might undergo a change and it might not be suitable to investment objective anymore
“If your fund is showing such characteristics then it is ideal for you to exit and switch to a better managed fund,” Agarwal said.
Navneet Dubey | Sep 19, 2017 04:18 PM IST | Source: Moneycontrol.com
Equity mutual funds can give you good returns if you keep your money invested over a long period of time to overcome market cycles.
Your dream of becoming a ‘crorepati’ may seem difficult. But in reality, if you plan your finances and invest in the right instruments someday you will have your dreams realised someday. One of the best ways to try and achieve the crorepati dream could be investing in equity mutual funds for good returns over a long period of time. There is a definite correlation between the time and money. If you have less money to invest then you have to wait for a longer time to get your goal accomplished and if you have more money to invest you might reach your goal earlier if you plan and invest properly.
However, before investing in mutual funds, especially –equity MF’s, you should ask yourself two questions:
how much you have to invest and over how long to reach your Rs 1 crore destination.
Here we try to get you answer to both the questions.
How much to invest monthly?
As a young investor, you may easily take a higher risk by saving less amount and gain more returns to achieve your financial goals. While being in the middle of the age, you can take the moderate risk to head toward becoming a crorepati.
Thus, at an early age even if you have less money to invest, you can become crorepati by investing Rs 700 per month (which is the least amount) for 35 years, at an assumed 15% rate of return to accumulate the desired amount.
However if you start later, you need to invest more money to reach your financial goal. For instance, you will need Rs 5500 per month for 25 years, at an assumed 12% rate of return, you will be able to make Rs 1 Crore approximately.
A larger amount of Rs 13,500 per month for 20 years, at an assumed 10% rate of return, will enable you to make Rs 1 Crore.
How to select a fund?
To earn 12-15% of return on your investment, you need to select good equity stocks or one can go for equity mutual funds to mitigate the risk to an extent. While selecting, equity MF, you need also check that your portfolio should have mid-cap/small-cap funds for around 30-40% and the remaining 60-70% should have a diversified fund, a large-cap fund, etc. to maintain an aggressive portfolio with right asset mix.
Whereas to maintaining a return of around 10-12%, you should invest in balanced fund/hybrid fund, etc. to maintain a moderate risk portfolio. In such case, one can avoid or reduce the investment amount in mid-cap/small-cap funds or avoid making investments in risky stocks.
Are there alternatives?
Investing money in pension plans, NPS can also help you achieve this financial goal. However, the returns offered under such schemes are not stable and market linked. Moreover, in some instruments, returns are subject to change as per the government rules. Also, investing in an instrument like fixed deposits, national savings certificate, etc. may not help you achieve the goal within the maximum time period as mentioned thereon.
One should also have to remain invested for a longer time period and follow proper asset allocation strategy to achieve the target amount. It is must to take the help of a financial adviser before making such financial decisions.
In the grid given above, make sure you know that any investment made in equity mutual fund or equity stocks are not guaranteed. The returns are also volatile and not fixed as they are dependent on the financial market.
Kshitij Anand | Sep 01, 2017 08:15 AM IST | Moneycontrol News
Stocks which have zero debt/equity ratio include names like Jubilant FoodWorks which gained 59 percent, and Bata India rallied 50 percent so far in the year 2017.
The word ‘leverage’ as a term has become more of a worry for investors especially after the recent crackdown of the Reserve Bank of India (RBI) on companies with excessive debt on the books.
In the month of June, RBI identified 12 accounts accounting for 25 percent of gross bad loans in the system for immediate bankruptcy proceedings. And, earlier this week, media reports suggest that the central bank is coming out with another list.
The Reserve Bank of India has sent the second list of over 40 large corporate defaulters that include Videocon, JP Associates, IVRCL and Visa Steel, among others, to be referred to the National Company Law Tribunal (NCLT), CNBC-TV18 reported earlier this week quoting sources.
The term ‘debt’ is not essentially bad because to run operations companies do require money to invest into assets, working capital, buy new machinery etc. which would help in improving margins, increase productivity and boost profit.
“Having high debt on the books is not a negative as long as the cash generation out of the usage of the borrowed funds is sufficient enough to service the debt and leave something for the equity shareholders (to compensate them for the risk),” Deepak Jasani, Head – retail research, HDFC Securities told Moneycontrol.
“Typically debt borrowed for investment in commodity sectors at boom times (no distinctive product) or in a Govt subsidised (subsidy on capex/tax or on interest) sector has a chance of creating servicing issues for the borrower (and NPA issues for the lender),” he said.
The S&P BSE Sensex rose by about 20 percent so far in the year 2017 and plenty of small and midcap stocks have more than doubled in the same period.
Among the S&P BSE 500 stocks, we have taken 15 stocks with zero debt across various sectors which have given up to 60 percent return so far in the year 2017. 12 out of 15 companies outperformed Nifty in the same period.
Stocks which have zero debt/equity ratio include names like Jubilant FoodWorks which gained 59 percent, and Bata India rallied 50 percent so far in the year 2017.
Other stocks which rose between 20-40 percent include names like Colgate Palmolive which rose 22 percent, followed by Greaves Cotton rose 22.2 percent, and Whirlpool India gained 31 percent in the same period.
“Debt is an important component for companies to expand its business beyond geographic reach which finances the capital expenditure. It provides an opportunity for companies to increase its productivity as well as revenue share through its boom,” Dinesh Rohira, Founder & CEO, 5nance.com told Moneycontrol.
“But, with increasing loan defaulter at realm coupled with broadening size of NPA in the economy, the financial health is currently at the edge of eruption. Further, a recent crackdown by RBI on companies with huge debt obligation has escalated concerns for investors to realign its portfolio,” he said.
Things to know when you invest in a Zero debt company:
Ideally, a part of your portfolio should be invested in zero debt or companies which are low on leverage because they might withstand any crisis. They may not turn out to be great when you compare the performance with companies which have slight leverage on their books.
Hence, a part of your portfolio should be in zero debt companies while the rest should be in growth stocks. The strategy will act as a hedge against volatility.
“Low debt or debt free company is not always a good option for investment as there are certain factors which are on backend such as sector growth, economic growth, and credibility of the promoters,” Ritesh Ashar – Chief Strategy Officer, KIFS Trade Capital told Moneycontrol.
“Using conservative approach on interest expense the company may be sacrificing the growth prospects & this can be a disadvantage to its competitors which tap the growth opportunity in the sector by pumping debt,” he said.
Other parameters to track apart from D/E ratio:
There are various other parameters which investors should track before putting money in companies apart from just looking at the debt and equity ratio.
“Investor should scrutinize that every borrowing is aimed at improving fundamental rather than meeting an old obligation. Few financial leverage ratios such as debt-to-equity, interest rate coverage and debt service coverage should be compared with an industry standard to arrive at a logical conclusion,” said Rohira of 5nance.com.
Ashar of KIFS Trade Capital said that investors’ attention to a level is acceptable which can be seen through Interest Coverage Ratio, Debt Equity ratio & ROCE vs Interest rate charges.
“Leveraged companies face issues of cash crunch and repayment of loans whereas zero debt companies are free from these hassles. As the interest rate increases the lending becomes expensive and dilutes profitability,” he said.
TIMESOFINDIA.COM | Sep 1, 2017, 12:36 IST
You can invest in mutual funds with amount as low as Rs 500. There is no upper limit for investing in mutual funds. Each mutual fund – be it equity or debt – has certain risk due to volatility and uncertainty in market. Ideally, you should be investing 10-20 per cent of your savings in mutual funds through monthly SIP.
Here are few points that you should keep in mind while investing in a debt or equity oriented schemes:
List down all your short-term and long-term goals in future such as holiday, marriage, children, education of children, retairment etc. Invest more into equities for your long-term needs as it is greatly possible to be aggressive in such cases. For your short-term needs, mutual funds with 1 year lock in can be adopted.
2) Risk capacity
The amount of investment risk you are able to take on is generally determined by your financial condition. Sudden financial shocks such as job loss, an accident etc. can affect your investment decisions by altering the amount of risk you’re able to afford. Your financial commitments such as home loan, business loan, car loan, expenditure in kids education etc. may also affect your investment risk capacity.
When it comes to investing, age is as big factor as the other two mentioned above. The best time to start investing is when you are young. The best time to learn about the markets and how to deal with its risks is when you’re young. Young investors have decades before they need the money. They have more time for their investments to recover and make up the shortfall. Once you are into your 30s and 40s, allocate a greater fraction of your portfolio to minimal risk funds or long-term funds. Also allocate some money to equity funds for your aggressive goals.
4) Fund selection – debt or equity
Debt funds can give you steady returns but in a constant range. Since debt funds invest money in treasury bonds, there’s much less risk associated with them. Debt funds are good investment option when market is volatile. Equity mutual funds give good returns over the long period to time as compared to debt funds. However, the possibility of losses and negative returns is also higher when market is volatile. Equity funds are good when the markets are booming.
You may also consult financial experts before taking final decisions. Mutual fund agents and distributors can also help you in this regard.
While debt funds, unlike fixed deposits and small saving schemes are also subject to market risk, though less than equity funds, the return expectation is commensurately higher than traditional products over the same tenure.
Kirtan Shah | Aug 24, 2017 10:19 AM IST | Source: Moneycontrol.com
Lately I have been meeting a lot of relatives, friends & acquaintances, grappling about a common concern of what to do now with the new normal of low interest rates on fixed deposits & small saving schemes. It is very disturbing for many because of their investment style and return expectations from the past. Invest in mutual funds, I said. ‘Don’t mutual funds invest in stocks?’, ‘Aren’t mutual funds risky?’, ‘Will I get fixed returns?’ they asked. Mutual Funds as a product offering which can invest in equity, debt, commodities and even a combination of them depending on the objective of the fund and hence investors across risk profiles, goals & time horizon will find a suitable product, I said.
Why Debt Funds
(1) Tenure of investment – Regardless of your time horizon, there is a suitable debt mutual fund available.
(2) Tax Efficiency – This is the reason why most FD investors will appreciate debt mutual funds. If you invest for less than 3 years, the gains are taxed at the income tax slab rate like in an FD but if you hold the investment for more than 3 years, the gains are taxed at 20% (even if you are in the 30% tax bracket) and that too not on the full gains but only on the gains that exceed inflation. So if you earn 8% on the debt fund and inflation (measured by CII) increases by 5% in the same period, you pay 20% tax only on 3% (8%-5%), which is 0.6% (20%*3%) versus 2.4% (8%*30%) 4 times higher in an FD investment. The post tax return on a debt mutual fund is far superior to a FD, even when we are assuming that the debt fund will generate returns similar to the traditional products.
(3) Possibility of higher returns – Return is a function of calculative risk taken. It is not that FD does not have any risk. It is presumed to have no risk, which may not be entirely true.
Let me highlight a couple of risks that all fixed income instruments have.
(a) Interest Rate Risk – Lets assume you have invested in a FD paying 7.5% return over 3 years. What if interest rates in the market move up? The same institutions will then pay 8% to the new depositor vs you still receiving 7.5%.
(b) Reinvestment Risk – In the same case above, if the interest rate moves down, you will get a lower rate from the same institution, when you try and reinvest after 3 years. This is the challenge most traditional product investors are currently facing and will continue to face in the future. Over the last 15 years, investors have seen bank FD’s paying as high as 12% as well but the average over the last 15 years is 8.5% on the bank FD.
(c) Inflation Risk – While the above investment matures after 3 years, you realize that inflation has moved up by 5% in the same period. The net result on your investment is not 7.5% but only 2.5%, which we call as the real rate of return. Most of the times you will observe that inflation is increasing at a pace faster than the returns offered on the FD, generating negative real return.
All the above are risks that one has to take irrespective of the fixed income instrument they invest in. While debt funds, unlike fixed deposits and small saving schemes are also subject to market risk, though less than equity funds, the return expectation is commensurately higher than traditional products over the same tenure. In the below chart you will see how various debt fund categories have performed over the last 3 years.
Risks in a Debt Mutual Fund
Interest Rate Risk – Debt funds invest in various fixed income instruments issued by the government, banks & financial institutions, RBI, corporates etc., which are mostly traded on the exchange helping the fund to generate higher returns over the interest (coupon) committed. The price of the traded fixed income instrument is inversely proportional to the market interest rate. Lets say the debt fund bought a government bond paying a coupon (interest rate) of 8% and is now trading in the market. In the future when interest rates drop, government would issue a new bond at a lower interest rate, say 7.5%. Everything else kept constant, it’s logical to buy the old listed bond, which pays higher interest rate of 8% than the new bond and hence the price of the old bond increases because of higher demand, generating capital gains for the debt fund over and above the 8% coupon. Interest rate risk in the bond fund is captured by modified duration. Higher the modified duration, higher is the risk and higher are the return expectations. If a fund has a modified duration 2, it means for every 1% drop in market interest rate, the debt fund will generate positive 2% returns over and above the YTM (investors can understand this as the coupon/interest rate). The table below will help you understand the interest rate risk profile of various debt funds.
Conclusion – If you want to take lower risk, select funds with lower modified duration.
Credit Risk – The fixed income instruments in which the debt funds invest are credit rated. Credit rating agencies give a rating to all these instruments showcasing the credit worthiness of the issuer to pay interest and return the principal. Higher the credit rating, lower the risk and hence lower is the coupon the issuer pays and vice versa. So let’s say, if the debt fund buys an instrument, which is highly credit rated at AAA, fund will receive a lower coupon rate, as the risk is low. Unfortunately, in the future if the credit rating agency reduces the credit rating to AA, the debt fund will still receive the same coupon that was committed earlier but the risk has increased and hence this fixed income instrument will start trading at a lower price on the exchange, incurring capital loss to the debt fund. The inverse is also true. The point to be noted is that the capital loss is only notional. If the debt fund does not sell the fixed income instrument in the market and continues to hold, it still receives the coupons committed as normal. The table below will help you understand the credit risk profile of various debt funds.
Conclusion – To reduce the risk, select funds, which invest in high credit rated products.
The right debt fund for you
The answer to which debt fund you should invest in, depends on your goal and risk profile. If your investment horizon is less than 3 months, the most ideal option is investing in a liquid fund. Having said that, you can invest in any other scheme from the list below, but the risk profile of the fund may increase if invested for less than the ideal investment horizon. Lets say you choose to invest in corporate bond funds for 3 months to generate higher returns, you have to understand that the risk will be higher than normally holding the corporate bond fund, which is medium if held for more than 2 years. The below table will give you a clear snapshot of which fund debt fund suits your requirement.
The writer is CEO – Sykes & Ray Financial Planners
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
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.
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)
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.
While the early-launched closed-end mutual funds ones delivered, some seem to be lagging behind their peers and benchmarks
Kayezad E. Adajania | First Published: Tue, Mar 14 2017. 05 40 PM IST | LiveMint.com
It has been almost 3 years since the first wave of closed-end funds was launched. From the first such scheme—IDFC Equity Opportunity Fund-Series 1 (IEOF1)—which was launched in April 2013, the Indian mutual funds industry has launched over 100 closed-end funds till date. Collectively, they have collected Rs18,000 crore. Closed-end funds came with a promise of giving better returns than open-ended funds. Although most of the closed-end funds are still serving time, we think it’s a good time to check how they have done so far.
Mixed bag performance
At a broader level, closed-end funds have failed to impress. Over the past 2 years, closed-end funds in the mid-cap space returned 3.23%, while open-ended schemes returned 4.72% (see table). Over the last 2 years, many closed-end funds too have completed 2 years.
Some managers of these funds could claim, with some justification, that their mandate—as defined by the Scheme Information Document—is to beat their benchmark index, not their peers. But did they score on this count?
About 65-85% of the large-cap, multi-cap, mid-cap and small-cap schemes have beaten their benchmark indices. But these numbers aren’t so great numbers if you dig a little deeper. Schemes like Sundaram Select Micro Cap – Series I, Sundaram Select Micro Cap – Series III and Reliance Capital Builder-Series A outperformed their benchmark indices, but came in the bottom quintile of the small-cap category.
Sunil Subramaniam, chief executive officer, Sundaram Asset Management Co. Ltd, said: “I am not sure if our schemes have been compared to the correct set because our micro-cap funds have been very thematic. For instance, our first few series focused on multinational companies, the next few focused on cyclical industries and so on.”
Then, there are schemes that have underperformed their benchmark indices as well as their category averages. “Our scheme’s benchmark index consists of larger-sized mid-cap scrips, while the fund itself goes for small-sized companies. The share prices of underlying companies of the benchmark index have risen (more), as compared to the companies that our fund holds,” says a fund manager of one such scheme who did not wish to be named because he says the closed-end tenure is not yet over and comparing the fund at this juncture ‘wouldn’t be fair.’ He justified the stock selection saying: “Our set of companies do well, typically, when there is a secular bull run, as opposed to flat markets that we’ve seen recently.” Time will tell if his claims come true.
Experts say that closed-end funds have performed in pockets. “Schemes that focus on mid- and small-cap scrips can adopt a ‘buy and hold strategy’ as there is no continuous inflow or outflow,” says Kunal Valia, director, Credit Suisse Securities India.
The challenge of timing
In 2013, when equity markets were at low on the back of policy paralysis, and little government- and private-sector spending on the back of corruption allegations at the time, some fund houses saw an opportunity.
The anticipation was that a new government in the Centre would revive the economy. True to expectations, the Nifty50 went up 29% between June 2013 and 16 May 2014, the day election results were announced.
Most of the schemes launched until then did well. ICICI Prudential Value Fund – Series1 (launched in October 2013) and ICICI Prudential Value Fund – Series2 (launched in November 2013) have returned around 22% and 23% respectively over the past 3-years and are in the top quintile of multi-cap funds. But getting the timing right was not the only factor in their favour. “The outperformance is mainly on account of skill of the fund manager, ability…to identify under-researched and under-owned ideas…and no pressure due to inflows or outflows,” says Valia.
The dividend promise
Some closed-end funds, particularly the earliest ones, aimed to pay dividends as regularly as possible. “During 2007-09, equity markets went up and then crashed. People made profit, theoretically, but never encashed them. The ensuing fall eroded their profits. So when we launched closed-end funds, we decided to book profits and pay dividends as much as we can,” said S. Naren, chief investment officer, ICICI Prudential Asset Management Co. Ltd.
Did they live up to their promise? A Mint study of open-ended and closed-end funds between 2013 and now shows that many of the closed-end funds did pay dividends (see table). If you rank the funds in terms of the dividends paid between 2013 and now, top 13 out of the 20 funds were closed-end.
What should you do?
Manish Gadhvi, head (Mumbai operations), NJ India Invest Pvt. Ltd, one of India’s largest retail mutual fund distributors, says that closed-end funds makes sense if picked well. “Retail investors tend to misbehave on both sides of volatility—upside and downside. If, say within 6 month, markets go up by 30-35%, they redeem. If markets drop by 25%, they redeem. But if you follow a micro-cap stock-picking strategy, your stocks can go up by 200-300%. Hence, closed-end funds aren’t totally a lost cause,” he says.
A big drawback in closed-end funds is the absence of track record, says a senior research analyst at a bank, whose bank had launched some of these closed-end funds, though he claims to have not recommended any: “There is no fundamental research on how this fund has performed. There is no evidence of its performance because there is no past performance.”
It’s too soon to decide whether the current breed of closed-end funds have worked out or not, as the evidence so far is patchy. It’s safer to stick with the tried and tested open-ended funds, which come with a track record—unless a closed-end fund offers something that no existing fund offers.
Source : https://goo.gl/PAJGx7
Kshitij Anand | Mar 26, 2017 06:11 PM IST | Source: Moneycontrol.com
A detailed study by Karvy Stock Broking reveals that if somebody who would have invested just Rs 5,000 per month for the last 20 years in these five funds, you would have earned you more than Rs 1 crore now.
This can’t be true! That would be your first reaction. Making money in the stock market is tough especially when you are a working professional and can’t devote much of your time to read company balance sheets, track quarterly results or learn complicated futures & options.
The simpler way is to give that money on a regular basis via systematic investment plan (SIP) to a fund manager who would use it to invest in stocks, bonds or other fixed income instruments depending on the choice of plan you have taken.
A detailed study by Karvy Stock Broking reveals that if somebody who would have invested just Rs 5,000 per month for the last 20 years in these five funds, you would have earned you more than Rs 1 crore now.
The math behind it is simple. If you had done a monthly SIP of Rs. 5,000 for the past 20 years, your total investment would be Rs 12 lakh according to Karvy estimates, and your money would have multiplied by:
Reliance Growth Fund 18.27x: Rs 2.19 crore
HDFC Equity Fund 15.68x: Rs 1.8 crore
Reliance Vision Fund 11.81x: Rs 1.4 crore
HDFC Top 200 Fund 11.5x: Rs 1.3 crore
Birla SL Equity Fund 7.58x: Rs 0.9 crore
“We believe SIP is a wonderful tool available for investors who wish to create wealth in the long-run. Investors are already aware of the numerous benefits that it offers to them,” AV Suresh of Karvy Stock Broking told Moneycontrol.com.
“It makes the best use of the power of compounding and creates huge wealth for investors. Apart from this, it also helps one to sail through different market cycles by investing at different market levels,” he said.
If you believe in the power of compounding, then equity markets offer you the best tool to harness such a strong force via mutual funds, which let you create wealth in the long-term.
Einstein once said that ‘Power of Compounding is 8th Wonder of the World. He who understands it, earns it … he who doesn’t … pays it.’ Compounding is the first step towards long-term wealth creation.
The idea is to remain patient and allows your wealth to grow. When you buy a mutual fund, compounding allows you to earn interest on your principal and then again when you reinvest the interest it helps you build a huge corpus over a period of time with the small amount of initial investment.
“You just planted a mango tree and you want fruit tomorrow. Oh no. You just can’t. Similar to your investments. A tree undergoes challenges like pest attack, drought etc. before it yields the first fruit. Similarly, business entities are succumbed to internal and external growth barriers,” Vijayananda Prabhu, Investment Analyst at Geojit Financial Services told Moneycontrol.com.
What type of funds should you consider?
To generate wealth over a period of time, selection of funds is very necessary. If you get stuck with a wrong fund then chances of wealth creation reduce significantly.
Equity funds need a holding period of at least 5 years to avoid negative returns. But the next question is how much to expect from them in the long term. After all, you don’t invest in equity to just preserve capital.
“You invest in building wealth. High return expectations, arising from very short-term abnormal rallies in markets, make investors miscalculate what equity funds can deliver. The result? They save less, hoping that high returns will make up for it,” Vidya Bala, Head, Mutual Fund Research, FundsIndia.com told Moneycontrol.com.
“Large-cap and diversified equity funds deliver superior returns over prolonged time frames. As seen about, there is a 43 per cent chance of this category delivering returns of over 15 per cent over any 7-year time frames in the past 10 years (rolled daily),” she said.
Bala further added that this is simply because, over longer periods, they contain down markets (that would have happened during the period) better than midcap funds. Mid-cap funds’ ability to sustain steady periods of high returns is low at 26 per cent.
Top five funds to consider for next 20 years:
How to pick up a fund is critical. Some analysts advise investors just to choose a fund manager and the rest will be all taken care of. The market always rewards risk and we know that risk and return always go hand in hand; hence, any short terms should not lead you to discontinue your SIPs.
“In mutual funds, it’s not the fund that performs but the fund manager. Just hand pick the top 5 fund managers and choose their consistent funds,” said Prabhu of Geojit Financial Services.
“A few things to look for is the ability to protect the downside during volatility, their information ratio (consistency in beating the benchmark) and market experience,” he said.
But, we all are aware of one fact that all past performance is not an indicator of future performance. Moreover, with ever changing markets, it becomes quite difficult to predict the best performers for the next 20 years.
However, Karvy lists out five funds which have the potential to deliver consistent returns. ICICI Pru Top 100 (G), Birla SL Frontline Equity (G), Canara Rob Emerging Equity (G), Franklin India Prima Plus (G), and ICICI Pru Value Discovery (G).
Sun, 19 Mar 2017-12:14pm | PTI | DNA India
Buoyed by the surging stock markets, the Employees Provident Fund Organisation (EPFO) may propose to invest up to 15 per cent of its investable amount in equity markets during the next fiscal, Union Labour Minister Bandaru Dattatreya said.
“We are proposing to invest up to 15 per cent during the next year. Central Board of Trustees (CBT) meeting will be held on March 30. We will seek its opinion. So far, during the past one-and-half year we have invested Rs 18,069 crore. We are getting good yield. It is encouraging,” Dattatreya told
Posted On: Apr 30, 2012 | CommonFloor.com
A property transfer to your family member or to a near and dear one is not as easy as you might think. If you own a property in India and wish to transfer it to another person’s name you might as well think that your family member belongs to a similar group. Indeed, it is always safe that you seek legal help when it comes to property transfer. There are various circumstances in which one can transfer property to another person’s name. In case of death, selling your property or gifting it can be are options that can be considered. Properties can vary from a unit to apartments, houses, flats, holiday houses, vacant blocks of land, rental properties and hobby farms.
Once you have decided to transfer the property to another person, you need to know the basic and important formalities required in the process of a property transfer.
Know the valuation or the market price: It is very important that you get the precise valuation of your property before transferring it. Doing this will give you a clear idea about the fluctuations of the capital gains tax event (CGT event).
Hire an attorney: It is always better that you hire an attorney if you’re either gifting or selling the property. An attorney will help you fill out and file the quit claim deed precisely. It is also possible that you can fill out the forms by yourself but you might get a little confused and might require a lot of time. You can also acquire a quit claim deed online as well.
Quit claim deed: This deed is signed in order to transfer any ownership interest of the owner without making any promises regarding the properties interest. They are basically used in order to clear up the title problems or to transfer the property amongst couples after separation or any informal decisions. It is very important to write the precise and complete names of the transferor and the transferee.
Get a warranty deed: It is very important that you get a warranty deed in order to transfer the property to another person’s name. It is also known as the “Grant Deed”.This transfers ownership of the property and promises transfer of property of the owner to the transferee.
Legal description of the property: Mentioning a precise legal description of your property at the time of transferring is very important. Details like your address, landmark, few specifications and dimensions are the details which are needed to be mentioned.
Exclusions: The idea of exclusions is to clearly mention that while transferring the property between people, both the receiving and the giving parties are exempted from being taxed. This can be applied in case of a parent, child, in-laws, step children, and so on.
Gift deed/Will deed: Transferring a property can either be as a gift or as per mentioned in a will. If a person is transferring the property in order to escape the liabilities, he/she will not be exempted from paying the liabilities. The transfer of property as a gift deed will require a stamp duty, whose value and purpose rate will be fixed by the government. It also has to be registered. In case of a Will deed, the stamp duty is implied and the Will will take effect only after the death of the person. There is an option of the Will deed being either registered or not registered.
Country name: It is mandatory that you write the name of the country where the property is situated. The form has to be filled with precise information.
Purchase price:In case you’re selling the property, you will have to enter the purchase price. If you’re gifting the property, you will have to enter the nominal monetary amount in the form.
Notarizing the deed: While you’re notarizing or transferring your property, it is important that you find a suitable notary public in order to notarize the deed.
Points to be remembered:
- Other than a relationship breakdown, the stamp duty is payable for other reasons while transferring.
- The market valuation of the property has to be given to the Office of fair trading in order to calculate the stamp duty.
- If the property has a mortgage amount, you will have to discuss this issue with the person who is receiving the property.
- There are a certain amount of costs which will be involved while transferring property.
By Madhu T | ECONOMICTIMES.COM | Updated: Dec 26, 2016, 02.34 PM IST
The prime minister has spoken and the finance minister has clarified. It seems, long-term capital gains on your equity mutual funds are not likely to be taxed in the budget. Still, there are so many theories floating around: short-term capital gains tax may be hiked; holding period to qualify for long-term capital gains tax may be raised, and so on. Now, the big question: should equity mutual fund investors be worried?
The answer is a big no. Sure, taxes would take away a part of your returns. However, taxes are never the sole reason for making an investment, including equity mutual funds. If there is a change in taxation of your gains from your equity mutual funds, you will have to alter your investment plan to ensure that you meet your various financial goals without any difficulty.
Let us see why equity mutual fund investors should not unduly worry about a likely (or real) change in taxation. First, consider what will happen if the short-term capital gains tax rate is increased? Or the holding period is increased?
Well, it would hardly have an impact on your investments. Surprised? It seems, you have forgotten that you don’t invest in equity mutual funds for a short period.
Short-term capital gains tax of 15 per cent comes into the picture when an investor sells his equity mutual funds before a year. Since individual investors are expected to invest with an investment horizon of at least five years in equity mutual fund schemes, this change will not have any impact on them. Sure, they will take hit if they are forced to sell their investments due to an unforeseen event.
Now, what about the likely reintroduction of long-term capital gains tax? Or likely increase in holding period to qualify for long-term capital gains tax?
If equity mutual funds are sold after a year, the gains are treated as long-term capital gain. At the moment, the long-term capital gains on equity mutual funds are not taxed in India. As said before, if the holding period is raised to two or three years, it will not have an impact on your investment life, as you anyway invest in equity with a minimum holding period of five years.
What if long-term capital gains are taxed? Sure, that would hurt. You will have to part with a large chunk of your returns at the time of selling your investments. This would call for you to revisit your calculations done at the time of fixing various financial goals. Since the tax is likely to take away a part of your corpus, you will have to increase your investments to make up for it.
For example, if you have to part with 10 per cent of your gains as tax at the time of withdrawal, you will have to invest more to create the target you had in mind. Or pray you earn more than your return projections. Kidding, it is always better to err on the side of caution. So, check whether you can make extra allocations.
Similarly, if the holding period is changed, you will have to take that into account while deciding on the investment to meet your financial goal.
Now, should you fret about long-term capital gain taxes and pull out money from equity mutual funds? Well, that is not even an option for you. Remember, you have decided to put money in equity to build a corpus for your various long-term goals because equity has the potential to offer superior returns than other investments over a long period. That hasn’t changed even now. That means you will have to bet on it irrespective of the taxation.
Remember, long-term capital gains on equities were taxed earlier. It was abolished in 2004 and Securities Transaction Tax (STT) was introduced by the government because STT was easier to enforce and boost tax collections.
CY2017 begins after a chain of events that has changed the investment landscape for Indian investors. It is better to take an informed decision than just chasing winners in the past.
Dec 16, 2016, 04.25 PM | Source: Moneycontrol.com | Nikhil Walavalkar
Uncertainty remained the buzzword for most investors throughout CY2016. Issues such as Brexit, presidential elections in USA, interest rate decision by US Federal Reserve along with OPEC’s changing stance on crude oil production ensured that the global investment climate remained volatile. The demonetization decision by the Indian government added some local flavor to the uncertain investment environment.
“Barring the rate hike decision by US Federal Reserve, CY2016 has seen many events worldwide unfolding contrary to what was expected,” says Ashish Shanker, head- investment advisory, Motilal Oswal Wealth Management Services. “These black swan events, including demonetisation have led to a lot of disruption caused to investments. In CY2017 investors have to focus on opportunities keeping in mind this changed environment, than just chasing winners in the past.”
Equity has given tepid returns in last one year. Benchmark CNX Nifty has given 2.38% returns in CY2016. The numbers for the large cap funds and the midcap funds as category for the same time frame stand at 4.34% and 6.02%, respectively. Though mid cap and small cap funds have been flavor of the season and have ruled the performance charts for last two years, it is the time to revisit your allocation.
“Large cap funds should do well in CY2017 given the relatively attractive valuations of large cap stocks. Though mid and small cap funds have done well over last two years, it makes more sense to avoid fresh bets on them now due to their swollen sizes and the possibility of mid and small sized companies getting hit more due to demonetization as compared with their larger counterparts,” advises Ashish Shanker.
Most investment experts have been advising investing in stocks either through systematic investment plans or on dips given the fair valuations Indian stocks enjoy. Though the diversified equity funds always form the core part of aggressive investors’ portfolios, savvy investors prefer to take some extra risk in search of higher returns through sector funds.
Infrastructure is one such theme experts are bullish about. Investors have not seen much action after the initial bull-run went bust in 2008. However, last two years have seen changes in the government policies and the scenario has improved due to increased government support. “Infrastructure spending should go up in India which should benefit companies in infrastructure space,” says Feroze Azeez, deputy CEO – private wealth management, Anand Rathi Financial Services. He recommends investing in ICICI Pru Infrastructure Fund and DSP Blackrock TIGER Fund. “Infrastructure sector is beaten down and it offers a good opportunity to invest. Correction in market can be used to invest in this space. Invest if the NAV of the funds you want to invest fall by 10% from current levels,” he advises.
Rupesh Bhansali, head of mutual funds at GEPL Capital says, “Demonetisation has ensured that the banks have high levels of CASA. This situation should continue for at least couple of quarters. Focus on digital payments and cashless economy should benefit banks.” Government has invested capital in public sector banks and banks too are going after non-performing assets. Interest rates are on their way down which should revive private sector’s capital expenditure. This should ensure that banks make a strong come back. Bhansali recommends investing in Birla Sunlife Banking and Financial Services Fund.
Feroze Azeez is optimist about the fortunes of banking sector and recommends investing in Reliance Banking Fund.
Pharmaceuticals and healthcare is one more sector that is back on investor’s radar. Pharma and healthcare funds as a category has lost 4.3% in the last one year. If you have been holding these funds for last two years, you have earned 3.5% returns. “Pharma sector has been under pressure for last two years and is attractively valued,” says Ashish Shanker. Over last two years regulatory issues cropped up for Indian pharma companies in USA. Some companies have faced temporary bans and some were forced to withdraw products. Market has taken note of these developments and punished the companies, which is evident in the price erosion these stocks have seen. However, the companies too have taken right steps to take corrective measures and brought in changes in their business to comply with the norms.
“On the one hand there are pharma companies that have taken corrective steps and can do the same amount of business worldwide quoting at much lower prices compared to a year ago and on the other hand there are new investment opportunities by ways of new entrants in the listed space by way of recent IPOs that make pharma funds an investment opportunity worth exploring,” explains Rupesh Bhansali. He likes Reliance Pharma Fund and SBI Pharma Fund.
Information Technology is another sector many savvy investors prefer to invest into. However, most investment experts prefer to wait for the clarity on visa issues before taking any fresh bets on this sector.
Sector funds though offer an opportunity to make some extra return they face concentration risk. “On an average sector funds are 1.5 times riskier than the average diversified equity funds. To make money in sector funds, you have to get both – your entry as well as your exit right,” warns Feroze Azeez. If you are not one of those who can keep a track of sectors and markets, it is better to go with diversified equity funds with long term track record.
Find out in the ET Wealth RICS report
Updated: Dec 16, 2016, 05.37 PM IST | Economic Times
ET Wealth Survey Series is an effort to bridge the gap between industry, marketers and consumers. It is a well-researched effort to identify the vacuum that exists in the consumer personal finance space. With ET Wealth Surveys, we want you to know better how your audience earns, spends, invests and saves.
Of the universe of 156 million urban internet users, given here is the estimated size of each investment product:
By Kshitij Anand, ETMarkets.com | Updated: Nov 02, 2016, 11.09 AM ISTPost a Comment
NEW DELHI: If you believe in the power of compounding, then equity market offers you the best tool to harness this strong force via the mutual fund route, which can let create good long-term wealth.
Compounding interest separates the haves from the haven’ts. Compounding is the first step towards long-term wealth creation. When you buy a mutual fund, compounding allows you to earn interest on your principal and on the interest that you reinvest. It helps you build a large corpus over time with the smallest of initial investment.
“Einstein said the power of compounding is the eighth wonder of the world. One who understands it, earns it and the one who does not, pays it. Please exploit the power of compounding for long-term wealth creation through equity mutual funds,” Raamdeo Agrawal, Co-Founder & JMD, MOFSL, said in an interview with ETMarkets.com
“God and the government have come together to make you rich in the Indian market this year. Rs 10,000 a month invested in any equity growth fund for 25 years (Rs 30 lakh) can earn you between Rs 3 crore and Rs 25 crore,” he said.
The prerequisite for creating serious wealth is to start early, have patience and not get swayed by daily market movement. Give your investment some time to yield fruits, say experts.
You don’t have to be rich to create wealth. Many salaried people have been able to create wealth just with the magic of compounding and by following a disciplined approach towards investing.
“I know many salaried investors, who have created significant wealth than their remuneration over time. The key is to remain invested without monkeying and attempting to time the market,” said Porinju Veliyath, MD & Portfolio Manager, at Equity Intelligence India.
“Equity Intelligence has changed the financial profile of hundreds of middle-class professionals through value investing in equities,” he said.
Veliyath said India’s capital market system has evolved to world-class standards, enabling even small savers to invest conveniently, thanks to our efficient regulators and institutions.
Making money in the market has never been easy, but mutual funds have made the job a lot easier.
Stock markets never move in one direction.
There will always be some concern and fear – if not domestic then global – which will keep the market on the edge. But with a disciplined approach towards investing, investors can use volatility to buy quality stocks on dips.
“In my career spanning 25 years, there has never been a quarter where everything has gone perfectly well for India. If I go back to 1989-1990, the year 1991 was of crisis, the BOP crisis, we had the Babri Masjid demolition, Bombay bomb blasts, fall of a government, something or the other had always been missing,” Rashesh Shah, Chairman, EdelweissBSE 0.13 % Group, said in an interview with ETNow.
“To use a cliché, it is a glass half full or half empty, but the half full is actually fairly good, because in the same 25 years, the index has given you more than 18 per cent return CAGR and that was after tax,” he pointed out.
Shah said even if investors just bought the index, complete passive investing has given investors more than 18 per cent return. “As you know, the index started in 1984 or around it, and it was 100 at that time and the 100 is close to 28,000 now.”
By Babar Zaidi | ET Bureau | Aug 22, 2016, 01.56 PM IST
Investors saving for goals that are 4-6 years away are advised to go for balanced funds. These funds invest in a mix of equities and debt, giving the investor the best of both worlds. The fund gains from a healthy dose of equities but the debt portion fortifies it against any downturn. They are suitable for a medium-term horizon. Mumbai-based Koyel Ghosh has been investing in a balanced scheme for the past two years for funding her entrepreneurial dream. She will need the money in about 2-3 years from now.
“I want to save enough to be able to start my own business in 2-3 years.”
What she has done
She has been investing in an equity-oriented balanced fund for the past two years. She should redirect future SIPs in a debt-oriented scheme to reduce the risk.
Balanced funds are of two types. Equity-oriented have a larger portion of their corpus (at least 65%) invested in stocks and qualify for the same tax treatment as equity funds. This means any gains are tax-free if the investment is held for more than one year. These schemes are more volatile due to the higher allocation to stocks.
On the other hand, debt-oriented balanced funds are less volatile and suit those with a lower risk appetite. However, the price of this relative safety is that they offer lower returns and the gains are not eligible for tax exemption. If the investment is held for less than three years, the gains will be added to your income and taxed at the normal rate. The tax is lower if the holding period exceeds three years. The gains are then taxed at 20% after indexation benefit, which can significantly reduce the tax.
Balanced funds have done very well in recent months because both the equity and debt markets have rallied in tandem. But this performance might not sustain, so investors should tone down their expectations. Also, investors might note that the one-year returns of debt-oriented balanced funds are more than those from equity-oriented schemes. But this changes when we look at the medium- and long-term returns. The five-year returns of the top five equity-oriented balanced funds are significantly higher than those of debt-oriented balanced schemes. This statistic should be kept in mind if the investor plans to remain invested for 4-6 years.
Beware of dividends
Balanced funds have attracted huge inflows in recent months, but some of this is for the wrong reasons. Some fund houses are pushing balanced schemes that offer a monthly dividend. This might sound attractive because dividends are tax-free, but in reality this is your money coming back to you. Unlike the dividend of a stock, the NAV of the fund reduces to the extent of the dividend paid out.
Also, experts view this as an unhealthy practice and point out that the dividend payout might not be sustainable. “The dividend is not guaranteed, and the fund is under no obligation to continue paying a dividend,” points out Amol Joshi, Founder, PlanRupee Investment Services. “If the market declines, the chances of dividend payout and the quantum of dividend will be lower.”
Even so, several fund houses are using this gimmick to attract investors. In some cases, fund houses have even told distributors to alert clients about future dividend announcements and reel them in. This is also an unhealthy practice aimed at garnering AUM by mutual funds.
What the investor wants
*Moderate risk to capital
*Higher returns than debt
*Flexibility of withdrawal
*Favourable tax treatment
MEERA SIVA | September 18, 2016 | The Hindu Business Line
Once invested, don’t look at the portfolio frequently
Property investments in India do not give enough inflation-adjusted return, but Indian equity and bond markets present a lot of opportunities for investors, feels Saurabh Mukherjea, CEO of Institutional Equities, Ambit Capital. Excerpts from an interview with Business Line:
How do you filter companies before you make an investment decision?
I look for good stocks with high return on capital employed and consistent revenue growth. The industry the company operates in should be attractive, that is, it should be growing at over 15 per cent annually and the top players should have sizeable market share so that profits are not eroded in competition.
Some examples are men’s shaving products, trucks and speciality chemicals. Secondly, the management has to be competent and focused on the core business.
Once invested, it is also important not to look at the portfolio too frequently. Patience is central to success in investing and money cannot be made by being hyperactive.
What red flags do you watch out for?
One must be watchful of corrupt and lazy promoters whose core competence is only making great presentations.
Even good brands in booming industries flounder due to promoter issues. Besides, in India, one in two companies has some sort of accounting issue. So we have a detailed checklist to weed out accounting problems.
Only 100-120 companies in the Indian listed universe meet these checks. I think it is best to avoid companies with governance and book keeping issues as value will be destroyed sooner or later.
What returns do you look for in your investments?
While the quoted inflation rate is a lower number, what I look at is the rate of inflation for my basket of consumption.
This is around 12 per cent. So any investment that I make must meet this cut-off for return. I invest only in products that I understand and avoid exotic asset classes and overseas markets.
What are your current investments?
Due to the nature of my job, I cannot own stocks directly. So my equity investments are through mutual funds. I also have debt investments in Government and corporate bonds.
I feel there may be some tough times ahead globally due to the negative interest rate scenario. Due to these potential uncertainties, I have invested in gold through an ETF.
What are your views on real estate as an asset class?
I own the flat we live in, but beyond that I feel property investments in India do not give enough return. I feel real estate is a silent killer in high networth portfolios insofar as such returns do not keep up with inflation experienced. A 12 per cent return, post tax, is my threshold. Rental yields are very low, at 2 per cent. So buying and renting out a residential property makes little sense.
Also, in cities such as Mumbai and New Delhi, prices went up due to huge amounts of black money. With a crackdown on that, returns will be muted.
Would you recommend direct equity investments?
There are many risks in equity investments and it is best left to experts.
So mutual funds should ideally be a good way for the average middle-class investor to get equity exposure.
However, the reality is that there are many schemes and a plethora of choices that are confusing. Investors rarely get to meet fund managers and there are no reliable filters from which one can pick fund managers.
On the other hand, you can build a portfolio of good stocks by using simple filters.
For example, companies that have seen consistent revenue growth of 15 per cent every year and 15 per cent return on capital employed.
It is possible to build a good equity portfolio with 15-20 stocks and hold it over a long-term.
Our analysis shows that the annual return of such sensibly constructed portfolios can average 25 per cent over a decade.
Buying the stocks when there is pessimism in the market is a good strategy.
One can also do systematic investments in stocks.
PARVATHA VARDHINI C | August 28, 2016 | The Hindu Business Line
The fund’s debt exposure offers downside protection to conservative investors
Equity-oriented balanced funds are a good choice to beat the current volatility in the markets. These funds invest up to 35 per cent of their corpus in debt instruments and thus provide good downside protection for risk-averse investors. Franklin India Balanced is a fund that fits the bill in this category.
Performance and strategy
In falling and yo-yoing markets, Franklin Balanced remains resilient. In 2011, when the bellwethers and broader markets lost 25-27 per cent, the fund lost only 13 per cent.
In the see-sawing markets of 2015, the fund emerged on top, gaining about 5 per cent, while the indices fell 1-5 per cent.
Franklin Balanced managed to stay on top in the 2014 rally too, by deft asset allocation. The fund did not latch on too much to riskier mid- and small-cap stocks to ride the bull run and allocated less than 15 per cent of its equity portfolio to the same. It, instead, took advantage of the rally in bond prices, by increasing its holdings in government securities in this period. A sharp up-move in both equity and bond markets saw the fund clock 47 per cent return in 2014, as against the 30-37 per cent clocked by the bellwethers and the BSE/Nifty 500 indices.
Its returns are better than of peers’ such as Canara Robeco Balance and Reliance Regular Savings Balanced. The performance even matches that of diversified equity funds such as SBI Magnum Equity.
The fund normally keeps its mid-cap allocations to less than 10 per cent of its equity portfolio, barring occasional spikes up to 15 per cent during market upswings. Its top sectors are typically a combination of cyclicals and defensives. The fund has stepped up its holdings in bank stocks after a breather last year due to multiple headwinds hitting the sector. Barring SBI, its choices lean towards private banks such as HDFC, IndusInd, YES Bank, ICICI and Kotak Mahindra Bank currently.
In the auto sector too, the fund pushed up stake in Mahindra and Mahindra, betting on good monsoon. Other holdings here include Hero MotoCorp, Tata Motors and TVS Motors. Power Grid Corporation, Maruti Suzuki, Mahanagar Gas and Oil India are recent entrants. About 26 per cent is allocated to government securities. In the last couple of months, the fund has been trimming its exposure to corporate bonds. While its exposure to corporate bonds is not significant currently, in the past it has stuck with higher rated bonds — those rated AAA or AA.
By Kshitij Anand | ECONOMICTIMES.COM | Aug 27, 2016, 03.22 PM IST
NEW DELHI: The potential for wealth creation is immense only if you follow a disciplined approach to investing instead of hunting for the one stock that can outperform every other asset class.
Investing is more like cricket, explain experts. You need players with diverse skills such as batting, bowling, fielding, wicket keeping to make a successful team. It will be foolish if you rely on just one player such as a Sachin Tendulkar to help you win matches.
In investing too, diversification is key and mutual funds create that opportunity for you. Keep investing in mutual fund via systematic investment plans (SIPs) to harness fruits of wealth creation for the future.
“Everyone cannot be a Sachin Tendulkar. To become the number one Test team, you do not require all the Sachin Tendulkars in the team. Even if you have 10 other average players and one Sachin Tendulkar, that is more than sufficient to make you wealthy,” Nilesh Shah, MD, , Kotak AMC, said in an interview with ETNow on the occasion of SIP Day.
“It is the discipline that creates wealth rather than hitting every ball for a four or a six. Whether you are keeping your money in fixed income, bank deposits, gold or cash – these are all various ways of savings, but for an ordinary investor the way to invest is through systematic investment plan (SIPs) of equity mutual funds, especially those who are not aware of the intricacies and nitty-gritty of the equity market,” he said.
If you want to create wealth without compromising on your monthly liquidity, then investing via systematic investment plans (SIPs) is your best bet. The nextgeneration retail investors understand the potential of the equity market, and that is one prime reason why we have seen a surge in average SIP investment.
Mutual funds added 12.61 lakh investor accounts, or folios, in June quarter to take the tally to a record six-year high of Rs 4.89 crore. Retail investors accounted for 95 per cent of total mutual fund (MF) folios, Amfi said in a report.
Retail folios comprising 95 per cent of total mutual fund folios expanded for the seventh straight quarter, CrisilBSE 0.14 % Research pointed in a note last month. Around 76 per cent of the total retail portfolios put money in equity-oriented funds for the seventh consecutive quarter amid an uptrend in the stock market.
Most of the mutual fund (MF) houses are mulling launch of more variants of systemic investment plans (SIPs) to attract investors. The variants include SIP topups and smart SIPs.
“No doubt, investors have started to invest in the market systematically. Approximately Rs 3,000 crore is being invested every month up from Rs 1,000 crore two years ago,” Jimeet Modi, CEO, Samco Securities, told ETMarkets.com.
“A major contribution is coming from the working class population and HNIs, as financial literacy is rapidly crossing new frontiers in India,” he said.
Modi said there were 2 million folios two years ago and now it has ballooned to 3.7 million, indicating that more and more people are investing their savings in equities through the mutual fund route.
One prime reason for the enthusiasm displayed by the fund managers is the potential of Indian economy, which can produce wealth-creating opportunities in companies.
At a time when most of the developed markets are struggling to grow, the Indian market has the potential of clocking a growth rate of above 7 per cent. The market has already bounced back 20 per cent from its 52-week low, which is a sign of strength.
“As a thumb rule, if we have tripled our economy in last 10 years, can we not double it over the next 10 years? It is not guaranteed, but possible. Now, if in next 10 years we are going to double our economy, then that economy will create companies which will create wealth for investors,” said Shah.
“If investors give money in the hands of professional fund managers, who have track records of outperforming the benchmark indices by a reasonable margin, it is fair to assume that they will continue to outperform the indices and those funds will end up creating wealth for investors,” he said.
By Kshitij Anand, ECONOMICTIMES.COM | Aug 10, 2016, 01.51 PM IST
The unique challenges to growth of developed markets make emerging markets, especially India, look attractive. However, a strong upside from current level looks challenging at this point in time, says Nimesh Shah, MD & CEO, ICICI Prudential AMC . In an interview with Kshitij Anand of ETMarkets.com, he shared his views on markets, GST and the behaviour of retail investors. Excerpt-
ETMarkets.com: How significant is GST reform for the economy? It looks like the market has already factored in most of the upside from the reforms? What is your take on the whole equation?
Nimesh Shah: Over the years, the goods and services tax (GST) has become a symbol of reforms in the country for both Indian as well as foreign institutional investors (FIIs). With the passage of the GST bill, sentiments have surely improved, but it is imperative to understand that the GST is unlikely to change things overnight.
As a country, we will be reaping the benefits of this reform over the next five to seven years, and not in next five months. Now the size of the organised sector in several industries is bound to go up, thanks to the improved compliance of taxation because of the nature of GST and its benefits for the economy.
At current valuation, the market seems to have fully factored in the positives of the bill. One must take cognisance of the fact that a rerating of the Indian market is likely to happen over the long run. However, if there is an immediate re-rating, solely based on the expected positives, the market is likely to see some correction.
ETMarkets.com: The domestic market is already trading at valuations that are above historic highs. Is there potential for more upside or should investors brace for a sharp fall? Some experts even call this a new normal. What is your take?
Nimesh Shah: It is premature to say high valuation is the new normal for the Indian equity market. There is a plethora of factors in the form of good monsoon, repressed oil price, bottoming of earnings de-growth, which are currently supporting market valuations.
Adding to this is the unique growth challenges of the developed markets, which make emerging markets, especially India, look attractive. However, a sharp upside from current level looks challenging at this point of time.
At the same time, one cannot completely turn a blind eye to the possibility of volatile times arising due to negative global news flow.
Historically, it has been observed that negatives on the global front have managed to trump the positives on the local front. But prudent action in times of volatility would be to use that as an opportunity.
ETMarkets.com: Has the retail investor matured in the way he invests in equities now?
Nimesh Shah: There has been a remarkable improvement over the past few years in the way retail investors invest in equities. Over the past couple of years, retail investors have preferred to approach stock market via the mutual fund route, rather than investing directly in stocks.
We see this as an acknowledgement of mutual fund industry’s robust track record, well designed and very well regulated product line and transparency.
Within the mutual fund route, the heartening feature is that increasingly funds are coming through the SIP route. As an industry, we have witnessed the SIP book swell from Rs 1,800 crore in March 2015 to nearly Rs 3,000 crore per month and growing. Other than this, the other major positive is the change in investment behaviour.
There was a time when investors used to enter at market highs and would sell in case of a correction, leading to negative investor experience. However, this has changed now, thanks to the relentless investor education initiatives by the media, distributors and fund houses. Now, the mantra is to stay invested and not be swayed by market swings.
ETMarkets.com: Can a retail investor become a crorepati by just following the SIP approach? If yes, on an average how much he needs to set aside every month to achieve that goal?
Nimesh Shah: Yes, if a retail investor invests in a diversified equity fund through a systematic investment plan over the long term, she/he can become a crorepati. For example, Rs 20,000 invested through a monthly SIP for about 15 years can grow to over Rs 1 crore, if you assume a rate of return of 12 per cent.
ETMarkets.com: Is the big bull run intact in in the domestic market? The Indian market is already up 20 per cent from its 52-week low. Do you think the current bull run is driven by liquidity rather than fundamentals? If yes, are we staring at a big slide as soon as the liquidity tap dries up?
Nimesh Shah: The current rally is fuelled by both domestic as well as global factors. One has to take into account that the current rally in emerging markets is happening after 3-4 years of underperformance vis-a-vis developed markets.
At a time when almost all the developed nations of the world are facing a zero or sub-zero interest rates coupled with muted growth, India is emerging as an oasis of growth.
Going forward, gradual improvement in demand and strong operating leverage will drive earnings in the upcoming quarters, rendering the much-required earnings support.
All these factors are likely to support the equity markets, even at a time when liquidity starts to taper down.
ETMarkets.com: What is your call on the bond market? Should investors go for debt funds?
Nimesh Shah: The Indian bond market has been an attractive bet for global investors thus far. The four factors that have worked in favour of India are a) a well-managed current account deficit (CAD), b) benign global commodity prices, c) favourable credit growth trajectory and d) non-inflationary Government policies.
Thanks to the prevailing interest rate scenario in global markets, the Reserve Bank of India (RBI) is likely to maintain an accommodative policy stance given the uncertainties on account of international factors.
We are of the view that yields will head lower in the days ahead. Therefore, we would recommend short to medium duration or accrual funds for incremental allocation.
ETMarkets.com: Fitch said the global bond market is at risk of losing $3.8 trillion. How are we placed in the global equation?
Nimesh Shah: India is far better placed in the context of international fixed income markets. In the developed markets, interest rates are at a historic low while in the case of India, interest rates are still elevated. The focus of monetary policy now is more towards managing inflation and globally it is on renewing growth.
Over the last three years, GOI and the RBI have managed to get current account deficit and domestic inflation under control, along with moderate growth and political stability. As long as this equation is not juggled with, India is well placed in the global equation.
ETMarkets.com: Can you name five stocks that you think could fetch multibagger return over the next 2-3 years. And why?
Nimesh Shah: In the current market, construction, auto ancillaries, pharma and healthcare services are the pockets that are in a position to generate attractive returns in the medium term.
ETMarkets.com: ICICI Prudential AMC has become the largest asset management company in the country. What are your five key takeaways from your journey so far?
Nimesh Shah: Our journey to the top (as the largest asset management company) has been accompanied by much learning. Primarily, as an industry, we realise when a product is transparent and is beneficial to the investor, the industry is bound to multiply several folds, with time.
Our experience shows that a fund house with a proven track record of managing investor money is bound to attract more investments.
As for investment experience, it is a noted phenomenon that investors shy away from investing in equities when valuations are cheap. Therefore, we have products like balanced, dynamic asset allocation funds that aim to benefit out of volatility and provide a better investment experience.
Lastly, one of the inherent challenges has always been simplifying the process of investing. As of now, the inflows into mutual fund schemes are limited through banking channels, thereby missing on the cash payment channel.
Once Sebi’s uniform KYC regulation is implemented, these processes are likely to be simpler, thereby aiding larger participation across financial class.
AASHISH SOMAIYAA | Tue, 5 Jul 2016-06:35am | dna
Do you know why technology giant Apple has been able to earn the numero uno position among its peers and scale new peaks every year? It was a result of a small change which won big results for the company.
When Steve Jobs took over reins the second time around, he shrunk the company’s product basket to five core products as he felt that lighter the product bouquet the faster the company would be able to sprint.
Critics would claim that a limited product basket increases the chances of heavy losses if even one product fails to click with buyers. But Jobs proved them wrong and he wasn’t the only one to follow a focused approach.
Legendary tales of the focused approach are often recounted in the world of equity investments too. Celebrated equity investor Warren Buffett has demonstrated the miracle of betting on few horses than is usually advocated.
The top five investments made up nearly 65% of his total portfolio.
But aren’t lay investors incessantly nudged not to put all eggs in one basket? Well, results thrown up by our research concludes that splitting the eggs in too many baskets – also termed as diversification in – doesn’t always reduce the risk.
Putting all your eggs in the same basket means you should have identified the right basket and you should work overtime to ensure that basket is safe. On the other hand, putting your eggs into too many baskets in the name of diversification puts an onus on you to identify many more baskets.
The study of risk associated with open-ended equity schemes measured using standard deviation strongly points out that a broader portfolio doesn’t reduce risk. Standard deviation captures the performance swings of a scheme. The higher the fluctuations in a fund’s returns the greater will be its standard deviation. So, if a fund has an average return of 15% with a standard deviation of 4% then most of the times the returns of the fund would be between 11% (15%-4%) and 19% (15% +4%).
For the ease of comprehension, we call the schemes that held less than 25 stocks as focused, the ones that held 25-50 stocks as diversified and those beyond 50 stocks as over-diversified (they should be really called “spray-and-pray” because no one can profess to thoroughly conduct bottom-up research on over 50 companies at the same time).
The data shows that focused or concentrated portfolios (having less than 25 stocks) have generated higher average returns and their standard deviation as a measure of volatility is not significantly higher than the other schemes. On the other hand, there’s nothing to really pick between schemes that were supposedly diversified and had between 25 to 50 and over 50 stocks as two separate groups. In fact, the average return for >50 group is same as the 25-50 group and there is no decline in standard deviation as a measure of volatility.
If we peg this standard deviation against the returns, we realise that there is more to gain by following a focused equity strategy. Concentrated equity schemes delivered better returns and were even able to curtail the downside during the shorter period as compared with the mixed bag schemes. In turn, these mixed bags were able to steer past equity schemes that had a larger universe of stocks.
What is ailing diversified schemes? They are facing what can be termed a problem of plenty. Splitting the apples into too many baskets forces the fund manager to spend more time on monitoring each basket rather than picking up the right apples.
If the fund manager has fewer stocks to scrutinise day-in-day-out and track monthly toplines and quarterly results, he would be able to allocate more time to cherrypick the right horse that would lead him to victory. We all know one cannot change a horse mid-race.
This impact of concentration on portfolio returns has been studied by several analysts. Most recently, Joop Huij and Jeroen Derwall analysed the performance of 536 global equity funds over the period of 1995-2007 and noted their findings in the report ‘Global Equity Fund Performance, Portfolio Concentration, and the Fundamental Law of Active Management.’ They concluded, “Evidence from US equity mutual funds suggests that fund managers who are willing to take big bets and hold more concentrated portfolios display better performance than managers who hold more broadly diversified portfolios.”
It is worth noting here that a fund house widened the cap of 30 stocks held by its focused scheme in 2010 to accommodate 50 stocks. The performance of the scheme among its peers slipped ever since it expanded its portfolio.
The reason is simple. If you have a limited basket to invest you would place your best bets only after doing adequate research as one wrong move could abysmally impact the returns. One can draw similarities between a fund manager and a gardener, who has to choose a handful of plants for the given area. He would always handpicked the most rewarding plants leaving out the rest as he wouldn’t want the fertility and his efforts to be wasted on plants, which merely occupy space.
Similarly, a focused scheme’s fund manager would dive in only if he is convinced about the business. He/she would be privy to superior information about specific market segments and players. He would then invest and nurture for long them to bear the fruits. Unless he sows a higher area (read high concentration in stocks), he won’t be able to multiply the profits well.
As the Oracle of Omaha, who detested diversification, once said, “Wide diversification is only required when investors do not understand what they are doing.”
Now that you are convinced about the focused fund’s strategy, don’t just jump into any scheme. Analyse whether the portfolio is suitably invested across sectors to protect your investment from business-cycle related liquidity issues which could drag your portfolio returns. As Huij and Derwall point out in their report, “Funds with a high tracking-error level outperform only when they are concentrated in multiple market segments simultaneously.”
The writer is CEO of Motilal Oswal AMC
Vivina Vishwanathan | First Published: Mon, Jul 11 2016. 04 03 AM IST | Live MInt
Actor Sunny Leone’s current business interests include perfumes and online gaming. Personal investments, too, are made with a long-term intent
Sunny Leone is not an ordinary Bollywood star. The 35-year-old has been the most searched person on the Internet in India for four years in a row. The adult movie star-turned-actress was always fascinated with business and was a control freak when it came to finances. But that was before she met husband, Daniel Weber.
“I was 8 or 10 years old when I used to go to the street with my brother and a neighbour in Canada, and shovel snow in the driveways and earn a dollar a piece. But the snow was two-feet high and we thought we should charge more because it was double the work,” says Leone, who was born in Canada and lived there as a child. In fact, as a child, she routinely put up lemonade stands during summers and shovelled snow in the winters to earn money. “I was the girl who sold things for my basketball team and soccer team. That was before I even went to high school.”
Her interest in business continued in high school. “When I went to high school in California, I joined a club called Future Business Leaders of America. That is when I started learning a lot of things about marketing, and supply and demand. I took different classes around business and economics. We would go to young entrepreneurial conferences in that area and that’s kind of where everything started.”
Even at a young age, Leone wanted to start her own venture. “When I became an adult, I realised that (adult content) was a business. But more than that, I wanted to own a website and run my own company.” She used to handle everything. “If I have to be in this industry, I want to make all the money—every dollar. After all, it is my body, my image and my brand.”
So, she learnt to manage her website, learning HTML, video editing, photography, and how to build thumb gallery posts (TGP). “I would do everything from start to finish. That was when I learnt about website traffic. In a digital world, traffic is the best thing you can have. I learnt where to send this traffic and how to capitalise all of it.”
Leone says a business should be grown slowly and steadily. “Believe me, it takes at least a year to three years for a business to turn profitable. I don’t believe in any business that is fast paced. If it is moving very fast, it doesn’t seem right to me. I like the idea of growing slowly and steadily and making the roots of the company strong.”
Move to India
Moving to India was a calculated risk for Leone. When she got an offer to participate in the prime time reality show Bigg Boss in India, Leone initially declined. “I thought it was absolutely insane because I’d got so many hate mails from the Indian community. Because I had got so much hatred, I said I don’t want to go through it again.” But then her husband, Weber, went to her with a PowerPoint presentation and armed with statistics. “We had the viewership and the reach details. We started doing further research. I think at that time Bigg Boss was watched by 25 million people in 10 different countries or something. It was huge. By the time I finished researching, we both came to the conclusion that if we didn’t take this chance, it might be one of the biggest regrets we would ever have.”
She was taking a chance, and she was scared. “There was a lot of negativity and backlash for Viacom, Bigg Boss, and Colors for bringing me here because it was the first time someone from that (adult content) industry was coming to mainstream television. Meanwhile, I thought if I work for a couple of weeks, make money and then come home, I could put a down payment on a house and go back to living in my bubble. I didn’t think anything was going to come from it.”
But when she started working in Bigg Boss, she realised she was breaking into a market that she has been trying to enter for years. “Our research showed that majority of the traffic that came to my website or different social media sites was from India. We were not capitalising the traffic. Nobody made it to the ‘join’ page or purchased anything. Bigg Boss was my chance to break into a market that I had never been able to tap into.” She says people knew her and were at her website but were not spending. “There is definitely a disconnect that happens when you are someone from abroad. Living here is being a part of the Indian culture and there is a connect that happens. Hence, moving to India was very calculated.”
Taking plans further
After Bigg Boss, Leone bagged some Bollywood movies and debuted with Jism-2. She has also done a song for Shah Rukh Khan-starrer Raees, which is expected to hit the screens next year.
While Leone may be getting more and more films now, she knows that her role in the entertainment industry will not last forever. “It can end like tomorrow,” she says. Therefore, she is always thinking of branching out. “Once we got a handle of how it works in India, after signing a bunch of movies and doing different brand endorsements, we have tried to think of ways to branch out.” She considers movies as only a small piece of the puzzle. Among her other ventures are TV shows. Apart from movies, she does a show every year. At present, she co-hosts MTV Splitsvilla.
As part of the expansion plan, she has launched a perfume line—The Lust. “It is manufactured by me. Taking the Kardashian model, and some of the other artists out there in the US, the goal is to keep growing. When the movies or something else ends, I know that we have created something here above, beyond, and bigger than us.”
After perfumes, Leone plans to venture into women’s cosmetics. “I plan to create products for women such as nail polish, skin care, lipsticks…. I’m not sure about clothing right now but it is something we keep talking about,” says Leone. “We have invested a lot of time and money in it. I personally would like to invest more money in merchandising and branding because it is something that can continue forever.”
Recently, Leone wrote a collection of short-stories for the mobile-first digital publishing house Juggernaut. Titled Sweet Dreams, the stories, as defined by Juggernaut, are “fictional stories of power… emotions… desires”. “It was a little bit more difficult than I anticipated. It takes a lot of work to be a good writer.” She is also into online gaming with Teen Patti with Sunny Leone.
The next step, says Leone, may be producing movies in India. “But I am in no rush because there is a shift happening in the entertainment industry and if you don’t have great content and dialogues, usually it doesn’t work.”
Leone has stopped working in the adult content industry. Her focus now is on building her brand. “I stopped working in that industry long time ago. But we have a lot of traffic and we don’t know what to do with it. Now we have a reach of around 100 million people. Hence, let’s say, there is a company that wants me to tweet about something or put it on Facebook, I use this traffic to monetise now.” The same strategy works when she wants to raise money for charity. “We also found that the traffic is now monetised because those people are donating or spreading the word. We are able to do so many things now, which we were just not able to do earlier.”
Leone has over 1.5 million followers on Twitter; a reach she uses for promotions and branding. “Every day, we use social media to get across something that we want to say. A brand will call and say we want you to tweet about our brand once, which we do.” But she says she doesn’t like spamming. “For instance, we do movie promotions. There have been some directors who come and say ‘I want you to keep tweeting every 20 minutes the same thing over and over’. I say it is not going to happen because you are not going to get traction with this. It is not going to work. You are not even letting it get absorbed before having me tweet again. We don’t want to block them (the followers) or get them to unfollow.”
Like her business ventures, in investments, too, Leone has only what she understands. Her investment portfolio has a mix of stocks, mutual funds, real estate, and retirement funds. “In the US, we have invested some of our money in very stable stocks and some mutual funds. We also have some IRAs (Individual Retirement Accounts).” An IRA offers various tax breaks. It’s a basket in which you keep stocks, bonds, mutual funds, and other assets. “We have bought our home there. We have invested a lot of our money in real estate. We do love the idea of getting into real estate a bit more. We are also interested in investment homes. And we obviously save a lot of money.”
When it comes to stocks too, she remains updated. “When this whole Brexit happened, we lost some money, which was not fun. But I do believe that it will steadily go back up and back to normal. This is just a shock to everybody. I didn’t think that this would affect us, but it did.”
The Indian stock market, however, is not part of her portfolio yet. “It is difficult for Overseas Citizens of India and people from outside of India to invest in India. You have to follow the whole process, which is crazy.”
The Indian real estate market, too, is not in her view. “It is really difficult to invest in Indian realty. When there are so many people involved, money just goes away. And then trying to sell the house and transfer the money into our bank account out of India is another huge issue. I think buying stocks and mutual funds is probably little easier with the right people in India, than buying real estate.”
She is not interested in start-ups due to the way their valuations work. “I have been hearing a lot of information about start-ups and how they are getting evaluated. Personally, I think it is a very interesting business model that I don’t think is going to last very long. My husband might think completely opposite. I think it is great if it is a start-up that stays true to what it is, instead of getting evaluated and getting into selling some big dream to somebody else.”
Leone doesn’t look at gold as an investment choice. “I know that there are a lot of families in India that buy gold. I like wearing them—gold, diamond, jewels—rather than looking at them as an investment option.”
Daniel: the financial guru
Before Leone was married, she took care of all her finances. “As far as finances were concerned, I used to put a lot of my money back into my company. But at some point I did have to branch out. You can’t micro manage everything. Before I met Daniel (her husband), I was in control of everything.” Initially she had doubts about doing business with her husband. “When we started doing business together, it was really difficult mentally to bring someone into my inner financial and business circle. But he has a great business mind as well. So when we started discussing all these different things, it was very natural for us to come together and form a company together.” Now she thinks it is the best thing that has ever happened to her. “His business background and mine are totally different. And he just completely streamlined everything and helped me organise things because I was growing faster than I could manage. You need help at that point. You can’t think of doing everything. You will stop growing, since you don’t have the time in a day to do everything.” She says her husband manages everything, ensuring that she and her staff work every day and their money is allocated in the right places in multiple countries. However, financial decisions are always taken after weighing the pros and cons.
Being financially independent
Leone always wanted to be independent. “I wanted to be on my own ever since I was really little. Also my parents would tell me over and over again that you have to be independent. That stuck with me.” Besides financial independence, her parents always tried to tell her to save money. “I grew up in a lower middle-class family, so we didn’t have a lot of money. As I got older, I realised I should save money. She doesn’t have any money regrets. “I am pretty calculated. If I am not 100% convinced that this is going to be financially viable, I won’t take the risk. If I know that it is a risk and if it doesn’t work, I am okay with what is lost too. I think I am realistic when it comes to investments.”
Source : http://goo.gl/u5y8sE