Existing mutual fund investors would need to evaluate their schemes if they change their strategies substantially in order to ensure they are still in sync with their financial goals and asset allocation
Kayezad E. Adajania | Last Published: Tue, May 01 2018. 10 30 PM IST | LiveMint
HDFC Prudence Fund (HPF), the country’s largest equity-oriented mutual fund scheme with assets close to Rs37,000 crore, will now be known as HDFC Balanced Advantage Fund and can switch entirely between equities and debt. Until now, it could invest only 40-75% in equities. On 25 April, HDFC Asset Management Co. Ltd announced plans for many of its schemes, as part of the ongoing merger and re-categorisation exercise.
Most other fund houses, too, have announced their plans to re-categorise their schemes. If you don’t agree with your schemes’ new form, you have a chance to exit without paying an exit load. Here’s how you should decide what to do.
Your scheme could change…
If there is no change to your scheme, you have nothing to worry about. But if your scheme is about to change, check how big or small it is. For instance, if you own a large-cap fund that is set to become a large- and mid-cap fund or a multi-cap fund, it won’t matter much. In fact, this particular move is good, said Prateek Pant, head of product & solutions at Sanctum Wealth Management. “Going ahead, it will get difficult for large-cap funds to outperform their benchmark indices. The definition of large-cap fund has narrowed down and benchmarking performances against total returns index would make things tougher for large-cap funds,” he said. Read more here.
If your scheme undergoes a big change, evaluate. For instance, SBI Treasury Advantage Fund, which will be known as SBI Banking and PSU Fund, was meant for short-term investments. Now, its strategy would be to invest in debt scrips of state-owned companies and banks. “If the risk profile of a scheme changes, look at it again. If it no longer meets your purpose, leave it,” said Vidya Bala, head-mutual fund research, Fundsindia.com.
…but do not jump the gun
Don’t blindly go by the change in your fund category. Mirae Asset Emerging Bluechip Fund (MEBF)—an erstwhile mid-cap fund—has become a large- and mid-cap fund. The name remains the same, and, what’s more, the fund remains the same too.
On the face of it, a shift from a mid-cap to a large- and mid-cap fund is a big change. But dig a little deeper and you might not want to worry about it. According to capital markets regulator Securities and Exchange Board of India (Sebi), a large- and mid-cap fund must invest a minimum of 35% each in large- and mid-cap stocks. As it turns out, MEBF has been increasing its exposure to large-cap companies over time; from an average of 20% in 2014 and 26% in 2015 to 38% so far this year, as per Value Research.
“We didn’t want to tamper our existing portfolios too much. So, whichever categories our funds fitted into naturally, we have moved our funds there,” said Swarup Mohanty, chief executive officer, Mirae Asset Global Investments (India) Pvt. Ltd. HPF, too, remains the same. Although a dynamic category fund can switch entirely between equity and debt, a person close to HPF said it can—and will—continue to invest 65-70% in equities like always. Of course, how the fund performs in falling markets in the face of its present equity allocation remains to be seen as the fund will now be compared to other dynamic funds. HPF refused to comment.
The tax implications
If your scheme merges with another or ceases to exist, there are no tax implications. If, however, you choose to withdraw, you may have to pay short-term capital gains tax of 15% (plus surcharge and cess) if you had bought the units in the past one year or long-term capital gains tax, otherwise.
The only respite is you don’t pay an exit load, if any, even if you withdraw within the exit load period.
What should you do?
Each merger and re-categorisation poses a unique situation. How one investor reacts to a change could be different from another investor’s reaction. Sit with your financial adviser to understand the ramifications of your scheme changes. But here are some broad principles you should follow.
* If your scheme’s risk profile increases a little, there is no cause for alarm. For instance, a large-cap fund becoming a large- and mid-cap fund is acceptable. If your scheme’s risk profile increases a lot, take a closer look. For instance, SBI Magnum Equity Fund (a large-cap fund) is now a thematic fund SBI Magnum Equity ESG (Environment, Social, and Governance).
* Just because the fund has changed its category or name does not necessarily mean the scheme has changed. Check if the scheme will continue with its strategy.
* But if the scheme’s objective has changed—especially due to a merger with some other scheme—evaluate it. HDFC Gilt (government securities) Fund – short-term plan will now be merged with HDFC Corporate Bond Fund. Both schemes are different.
* New investors, beware. Past performance is set to become a bit hazier, especially for those schemes that have to alter their strategies, for the next three years. In this case, check who the fund manager is, and go by his track record.
* Debt funds are trickiest to navigate in this exercise. The good news is that they’ve become sharper and each of them now comes with a well-defined objective. Revamp your entire debt schemes portfolio.
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.
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
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.
NIMESH SHAH | Wed, 12 Jul 2017 – 07:35 am | DNA
Dynamic asset allocation funds is a smart way to invest in markets without worrying about market highs or lows
The stock markets are at all-time highs, and it’s understandable if you are confused whether to invest or wait for correction. Timing the market is not easy. And while piling up your savings or putting them into traditional investment options seems like an easier option, it lacks the growth opportunities which capital markets could present.
A smart investor would look to participate in the growth of capital markets but in conservative manner. Introduce yourself to dynamic asset allocation funds, a smart way to invest in markets without worrying about market highs or lows.
Investing in mutual funds which follows the principle of dynamic asset allocation gives you the flexibility of investing in both debt and equity depending on market conditions. These funds aim to benefit from growth of equities with a cushion of debt. Such funds work on an automatic mechanism switching from equity or debt, depending on the relative attractiveness of the asset class.
In a scenario when the equity market rallies, the fund is designed such that profits are booked and the allocation would shift towards debt. On the other hand, if the markets correct, the fund will allocate more to equity, in order to tap into the opportunities available. The basis for this allocation is based on certain models which takes into account various market yardsticks like Price to Book Value amongst several others for portfolio re-balancing.
This model based approach negates the anomaly of subjective decision making, thereby ensuring that the investment made is deployed at all times to tap into the opportunities of both debt and equity market. The other added benefit is that one gets to follow the adage – Buy low, sell high. For an equity investor, this is one maxim which is the hardest to execute, but this fund effectively manages to achieve this objective.
Also, investing in such funds renders an added benefit of tax efficiency as 65% of the portfolio is allocated to equities. Since this category of fund is held with a long tern view, capital gains on equity investment (if invested for over one year), are tax free, as per prevailing tax laws.
So, while the markets are soaring high, you can consider investing in dynamic asset allocation fund to keep you well footed in the market, even during volatile times.
The writer is MD & CEO, ICICI Prudential AMC
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.
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).
Just like its predecessor, 2017 promises to be a rollercoaster ride. A curtain-raiser on how to navigate the investing landscape
BY SAMAR SRIVASTAVA | Forbes India | PUBLISHED: Feb 20, 2017
2016 held an important lesson for investors—that surviving volatility is as important as making the right investment.
It was no ordinary year. The sharp market swings following Brexit, the election of Donald Trump as America’s president and Prime Minister Narendra Modi’s surprise demonetisation announcement singed investors. What is significant is that those who stayed put were none the worse off. Each time, each jolt later, the markets recovered.
This much is certain: 2017 promises to be no different. Brace for volatility, make it your friend, stay the course and profit from it.
It is against this uncertain investing backdrop that large Indian companies are looking attractive once again. Over the last three years, their smaller counterparts have delivered superlative returns. Could it be their turn now? Our story (page 58) points to an informed yes as a faster global growth forecast, rising commodity prices and lower relative valuations mean this is likely to be the year of large-caps.
Large-caps have propelled Birla Sun Life Frontline Equity Fund to the top of the fund size table. The story of how fund manager Mahesh Patil went back to the drawing board after the 2008 financial crisis and overhauled its investing process is a compelling one.
Rapid growth companies, such as those the Birla fund has invested in, are facing a peculiar problem—identifying investible opportunities with the cash they’ve generated. What should companies ideally do with this cash and how should an investor view the cash on the books of a company? There’s no one answer with different investors offering various suggestions.
While equity markets have outperformed other asset classes, real estate remains a sound bet for those wanting to buy a house to live in. “Just as you can’t time the top of the cycle, you can never time the bottom of the cycle,” says Srini Sriniwasan of Kotak Investment Advisors. We also ask him why he believes residential demand could come back faster than expected.
Commodities have been on a tear this past year. Those who took a contrarian call in 2015 were rewarded handsomely in 2016. While the first leg of the commodity rally has played out, investors are now waiting to see whether the new US president follows up on his promise of infrastructure spending. This could provide a further fillip to prices of iron-ore, zinc and copper. Any hint of fiscal expansion will be greeted cheerfully by commodity markets.
Gold, a safe haven asset, had a good year in 2016 as investors took shelter from political shocks like Brexit. The approach tends to be to not invest in gold to beat the markets as over long periods, it tends to underperform. But in 2017, gold should do well if the US dollar remains weak and investor demand climbs up during times of volatility.
The more cautious investor, who typically invests in fixed income, had a happy 2016 as bond yields fell rapidly. Their returns outpaced a large-cap index fund. For most, this was a pleasant surprise. At the same time, nothing lasts for too long and investors wanting to do better in bonds would be better off shifting to shorter maturity bonds. They’ll also have to keep a close eye on India’s credit rating as a cut could see yields spike.
To round off this special package, we bring you two interesting trends. One, on bottom-of-the-pyramid businesses where returns have been steady: Equity funds who invested in them have done well as a column by Viswanatha Prasad, CEO, Caspian Advisors, an impact investing fund, points out.
And two, on HNI investors, with a greater appetite for risk, who are investing in startups as a new asset class, seeing themselves as partners in their progress.
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.
Amit Anand Choudhary | TNN | Sep 7, 2016, 05.11 AM IST | Times of India
NEW DELHI: The Supreme Court said on Tuesday that people who have invested their hard-earned money for booking flats could not be allowed to suffer because of the bad financial condition of a builder and directed realtor Supertech to refund money to homebuyers who invested in its Emerald Towers project in Noida .
“We are not concerned whether you sink or die. You will have to pay back the money to homebuyers. We are least bothered about your financial status,” a bench of Justices Dipak Mishra and A K Goel told Supertech, directing it to refund the money within four weeks to 17 homebuyers, as assured by the company earlier.
It also asked the company to furnish a chart of payments made to the 17 buyers at the next date of hearing.
Justices Misra and Goel held that the company could not take the excuse of being in bad financial condition to deny the rights of flatbuyers who wanted their money back after the project got into controversy for allegedly violating the law.
The court also asked the National Buildings Construction Corporation (NBCC) to inspect the site and find out whether the buildings had been built in the green zone in violation of norms.
Supertech is the third real estate giant in recent weeks to have come under judicial scrutiny for not refunding money to the buyers. Earlier, Unitech and Parsvnath had ex pressed their inability to refund money due to financial problems, only to see the apex court rejecting the plea and directing them to take steps to pay back the money to buyers.
The Allahabad HC had in 2014 ordered demolition of the two 40-storey residential twin towers – Apex and Ceyane – in Noida and directed Supertech to reimburse the flat buyers with 14% interest in three months. The twin towers have 857 apartments, of which about 600 flats had been sold.
The apex court, while staying the demolition of the towers, had last year directed the company to refund those flat buyers who wanted their money back. It also asked the company to consider providing alternative flats to them.
Appearing for Supertech, senior advocate Rajeev Dhawan told the court that the money had been invested by the company in construction of the building and that only a few of the buyers want to get back their money. He said of the over 600 people who approached the company after the HC order, 274 had sought alternative arrangements. He said the company was also returning money to those who approached it in time for refund.
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.
SHREYASH DEVALKAR | Tue, 14 Jun 2016-06:40am | dna
Today investors are spoiled for choice when it comes to avenues available for allocating fund and investing money. They can choose from fixed income products, domestic equities, global equities, derivative products, currencies and much more. With the freedom of options comes the responsibility of choice. Hence, it becomes important that we as informed investors study the advantage and risks associated with such asset classes and invest our money judiciously.
Great strides in technology have seriously shrunk the world, making every corner of the earth accessible to humans. Our daily lives are surrounded by evidence of the global economy. The phones we use are manufactured in Korea, our televisions are made in Japan, our cars are from different pockets of the world and our favourite Lebanese food is just a phone call away. In such an environment it is important to consider investment options beyond the domestic boundaries. Global equities are slowly emerging as a good investment option for domestic investors. The benefits of investing in global equities are myriad.
A fundamental reason to consider international investing and in particular global equities is diversification. Investment in global equities helps in spreading out the risk associated with equity investing as it entails investing in different markets which may not be highly correlated with each other. What this means for the average investor is that since all markets do not move in tandem, losses in one equity market can be offset by gains in another.
By diversifying into global equities the investor may be able to earn the same kind of returns as with a non-diversified portfolio, but with lesser risk, or be able to achieve higher returns, but with the same amount of risk.
International investments have shown an ability to improve risk-adjusted returns. The historical volatility of returns (as measured by standard deviation) for the global portfolio was almost 10% lower.
The MSCI World Index, which captures large and mid-cap companies’ across developed markets and covers approximately 85% of the free-float adjusted market capitalization in each country, the five year and ten year annualised Sharpe ratio is at 0.53 and 0.28, respectively. The corresponding numbers for the MSCI Emerging market index is at -0.15 and 0.18, respectively. In addition to diversification, global equities have the advantage of offering an investor exposure to faster growing economies and provide access to some of the world’s most successful companies.
Some of the world’s top performing markets in CY2015 were Argentina, Hungary, Denmark, Iceland and China while on the other hand the worst performing ones were Colombia, Peru and Bermuda. India’s returns figured in the bottom 50% of the returns computed for 74 of the top stock markets in the world. Quantitative easing might have pushed the European and US markets to multi year highs. However, flow of funds is likely to be directed towards countries which are showing better prospects of growth and fiscal discipline. Excluding India, markets like Taiwan, Vietnam and South Korea are expected to give good risk adjusted returns. Some funds can also be allocated to European equities.
Since the level of expertise and knowledge required in investing in global equities is quite high, the best option for an individual investor is to seek guidance from experts or fund managers of professionally managed funds.
Mutual funds offer various schemes where a portion or the entire fund may be exposed to global equities. In this case, professional fund managers study global markets and allocate the fund’s corpus to the countries where they expect good growth and returns.
The writer is fund manager with BNP Paribas
Source : http://goo.gl/7oMOxr
Babar Zaidi | TNN | Jun 13, 2016, 06.53 AM IST | Times of India
NEW DELHI: The first time Arjun Amlani used an online calculator to assess his retirement needs, he was shocked. The Mumbai-based finance professional, whose gross income was around Rs 10 lakh a year then, needed more than Rs 8 crore to fund his retirement needs. “The eight-digit number was too scary,” he says.
Figures thrown up by excel sheets and online retirement calculators can be intimidating. Here’s an example: if your current monthly expenses are Rs 60,000, even a conservative inflation rate of 7% will push up that requirement to over Rs 4.6 lakh in 30 years. To sustain those expenses for 20 years in retirement, you need a corpus of Rs 9 crore. To some investors, such enormous figures seem so unattainable that they just stop bothering about retirement. That’s a mistake.Retirement cannot be wished away. The paycheques will stop coming, and your living expenses won’t end but keep rising due to inflation. Worse, critical expenses like healthcare will be growing faster than overall inflation. The sooner you start saving for that phase of life, the more comfortable retirement will be.
The big question is: how can one build a nine-figure nest egg when the monthly surplus is Rs 15,000-20,000? Mutual fund sellers claim that an SIP of Rs 15,000 can grow to Rs 10 crore in 30 years. But this calculation assumes compounded annual returns of 15% for the next 30 years.It’s not advisable to base your retirement plan on such over-optimistic assumptions. Life insurance agents will offer plans that will give you an assured sum on retirement. But the returns they will generate are too low and the amount required will be too high. An endowment policy that gives Rs 10 crore after 30 years will have an annual premium of roughly Rs 12 lakh — or Rs 1 lakh per month.
Increasing the investment
When Amlani used the calculator, his monthly income was around Rs 85,000 and he needed to invest almost 20% of this for his retirement. A year later, his income has gone up and so have expectations. The calculator now says he needs to save over Rs 10 crore in the next 27 years, but Amlani is not worried. If he continues putting money in his PF, PPF and equity funds as planned, it won’t be difficult for him to reach the target.
All Amlani has to do is increase the quantum of investment every year. If a 30-year-old with a monthly salary of Rs 50,000 starts saving 10% (Rs 5,000) for his retirement every month in an option that earns 9% per year, he will accumulate Rs 92 lakh by the time he is 60. But if he raises his investment by 10% every year (in line with assumed increase in income), he would have saved Rs 2.76 crore.
It’s surprising that not many investors follow this simple strategy even though their income rises every year.Sure, the annual increment in salary is nullified to some extent by the increase in cost of living. Yet, even when there is a marked increase in investible surplus, people don’t match investments with the increase in income. The silver lining is that contributions to the Provident Fund are linked to income and automatically increase after every annual increment.
The right investment mix
We looked at three types of investors: risk-averse individuals who stay away from equities, moderate investors who have some exposure to stocks and aggressive investors who are willing to take risks. Each starts with a monthly investment of Rs 15,000 spread across different retirement saving options, and increases the investment amount by 10% every year. Unfortunately for the risk-averse investor, his nest egg is considerably smaller than those of the moderate and aggressive investors.
This is because apart from PF and investments in small savings schemes, he has invested in low-yield life insurance policies and pension plans. Life insurance policies offer assured returns and a tax-free corpus. But the returns are very low–even a long-term plan of 25-30 years will not be able to generate more than 6-7%. Pension plans from life insurance companies are also high-cost instruments. While this shows that equity investments are critical for a long-term goal, the other two haven’t taken too much risk either.
The equity exposure of the moderate investor does not exceed 53% while the aggressive investor has a marginally higher allocation to stocks. The moderate investor comes close to the Rs 10-crore mark, while the aggressive investor manages to reach the nine digit figure.
Investing discipline needed
The big problem, however, is the lack of investing discipline. Though our calculations do not allocate too much to equity, we have assumed regular investments for 30 years. In reality, data from AMFI shows small investors withdraw 47% of investments in equity funds and 54% of investments in non-equity funds within two years. In fact, 27% of equity fund investments are withdrawn within a year. “Small investors just don’t have the patience or the long-term vision required to make money from equity investments,” says a senior fund manager. It’s futile to imagine a nest egg of Rs 10 crore if your investment term is only 1-2 years.
The trajectory of equity investments is never a straight line. It will have ups and down, which is an inherent feature of this asset class. However, in the long-term, these investments will prove more rewarding than fixed income options. Although equity funds have churned out much higher returns in the past 15 years, we have assumed a conservative 12% returns from equity investments.
Source : http://goo.gl/qYLTb0
By Ravi Teja Sharma , Kailash Babar | ET Bureau |10 May, 2016, 11.02AM IST | Economic Times
MUMBAI | NEW DELHI: A sharp decline in property price appreciation in top Indian cities has pushed investors out of the housing market in India , which has turned into an end users’ paradise, thanks to stagnating prices and, in some cases, deeply discounted distress sales.
Investors say they are unable to exit multiple investments made over the last few years even at a loss, accentuating the pain for them. In Mumbai, for instance, the average residential property prices in the city and its suburbs witnessed an appreciation of only 3.3% in 2015 as against an average of 7% in 2014, showed a study by property consultancy JLL India. Similar was the case with the Delhi-National Capital Region, which is a big investor market, and Bengaluru and Chennai . All of these markets have seen prices appreciating around 2% in the last quarter of 2015.
“A sign of any residential market’s increasing maturity is evidenced by gentler price appreciation — a process which has been very much in evidence in the country’s financial capital. Fourth quarter price performance in Delhi-NCR, Bengaluru and Chennai is also representation of what happened through the year,” said Ramesh Nair, chief operating officer, business and international director at JLL India.
“The forecasted increase in Mumbai residential property prices in 2016 is expected to be 6%. While a price rise of 6-7% (yo-y) was predicted for 2015, the actual increase should come as a pleasant surprise to home buyers.”
Unlike the pre-global financial crisis (GFC) times — when prices saw double-digit growth (y-o-y) across the city and suburbs — the market has seen a rather subdued growth in prices over the last couple of years, showed the JLL India study. The subdued rise indicates the maturing residential market, which should be a good news for end users who wish to buy homes, but a turn off for several investors who are used to making super-normal profits.
For instance, Subhash Sarin, who supplies raw materials to the beer industry, has been investing in property for over a decade but of-late he has decided to stay away. “Even if you are getting a property 30% cheaper today, there is still no confidence to buy. We don’t know how much lower it can get. There is negative appreciation today, so it’s not prudent to invest in property now,” said Sarin.
He points out another reason why many investors are not putting in money into property. “It is very difficult to exit today from investment made earlier, even at a loss,” Sarin said.
Instead, he is now parking his money into the safety of fixed deposits and also lowrisk mutual funds as even gold has lost its sheen.
For investors, rental yields act as an additional return apart from the sale price of the apartment until the deal gets concluded. However, these yields are also not so attractive to make up for the shortfall in profits.
“Current market does not offer any incentive to investors, even our usual set of investors are not showing any interest in picking up properties. If annual appreciation is less than 5% and lease rental yield is around 1.5% per annum, then why would they be keen to invest?,” asked Yashwant Dalal, president, Estate Agents Association of India.
While there are select markets like Pune , Hyderabad and Kolkata that have still seen relatively better appreciation in home prices at 5-10%, most of this is attributed to demand from end users than investors.
Back in Mumbai, at sub-market level, south-central Mumbai and the eastern suburbs saw the maximum appreciation at 4.3% and 4% respectively, followed by north Mumbai and western suburbs at 3.9% and 3.5% respectively. Outside the city and suburbs, Thane saw a 3% appreciation in capital values, while the figure for Navi Mumbai stood at 6%. However, Navi Mumbai also has a lot of unsold inventory in many of its pockets and only few precincts are witnessing good demand.
Source : http://goo.gl/O0Vvnr
By Vivek Law | Last Updated: February 20, 2016 | 16:13 IST | Business Today
The Budget may not have much for you. So, it’s best to plan your finances in such a way that this does not matter. India is perhaps the only country where the Union Budget is almost like a carnival. What is otherwise meant to be a statement of the government’s finances is a lot more in India. It is also a vision statement of the government’s policies. But that is hardly the reason why every Indian citizen looks forward to it and why it is covered in a high-decibel manner across the media. The reason is: Tax.
Unlike in most countries, the government tweaks tax rates, exemptions and deductions, almost every year. Consistency is not our forte. It is, therefore, not surprising that we all stay glued to the TV to listen to the Budget speech to figure out whether we need to pay more taxes, which product will be cheaper or expensive and, above all, which new products will we now be able to invest in for saving tax. In India, it is the government that does our financial planning. It decides which products we should put our money in by identifying products that qualify for tax deduction. It keeps changing the list every year. And most citizens merely follow the direction given by the government as product manufacturers line up one product after another with one simple hook: “Save Tax”.
Never mind if the product is suitable for us or not. As long as it provides a tax break, we must buy it, we are told. And most of us take the bait and buy it too. Should we save tax? Of course we must. But should we focus on financial planning or merely on tax planning? Tax planning is an integral part of financial planning. The focus should be first on drawing up our financial plan. On finding out our earnings and expenses. On figuring out our Tax rates, exemptions and deductions are tweaked by the govt almost every year By Vivek Law goals in life. On figuring out our need for money in the short term (one-two years) and the long term (more than five years). Once this is done, we must figure out how much to put in equity and how much in debt. How much to set aside for buying our home and how much to set aside for gold. But before all this, have a health insurance policy, and if you have a dependant, a term insurance as well.
After this comes the bit about picking products. The remarkable thing about our successive governments has been how they have clubbed together everything in the bracket of products that allow us tax deductions and exemptions. So, for example, your children’s school fees as well as your provident fund are eligible in the same category. So are your insurance and equity-linked savings scheme (ELSS) investments. There is a separate category for health insurance as also for the National Pension Scheme.
In other words, once you have figured out your financial plan, putting aside money to make the most of tax breaks is easy. What can be dangerous is doing it the other way around. For example, if you do not need a ULIP or an endowment policy, and buy one just because your agent tells you that it gets you a tax break, it is disastrous for your financial plan. Similarly, putting all your money in a PPF account may not be prudent either. Sound financial planning is about asset allocation. Not putting all your eggs in one basket.
Financial plans are also not made for one year. Yes, one must look at one’s financial plan periodically but not change it every year just because the government decides to make changes to the tax-saving products’ list in every Budget. In fact, the government needs to get out of the business of deciding where we invest. It needs to segregate expenditure and investment and not put them in one basket. We are a nation of savers and are laggards when it comes to investments. So, what would I expect from the finance minister this Budget? Given the rather stressed condition of the finances, it would hardly be prudent to expect any great tax breaks from the finance minister. Instead, what would be easy to do is to simplify the sections under which we get our tax breaks. Put expenditure—school fee, home loan etc—in one basket and put core investment products—ELSS, ULIPs, PPF etc—in one.
(In association with Mail Today Bureau)
Source : http://goo.gl/2HrmoK
Sanjay Kumar Singh | New Delhi Feb 15, 2016 10:44 PM IST | Business Standard
With the Sensex down 20.64 per cent since the closing peak of January 29, 2015, investors, especially those who entered the equity markets for the first time in the post-election rally, are experiencing a lot of pain. But, panicking now would only hurt them further. Some tips on what they should do to survive this downturn.
Ignore volatility: Investors need to learn to ignore volatility – a part and parcel of equity investing. “If your investment horizon is long and you have made sound investments in a diversified portfolio, do nothing,” advises Amar Pandit, founder and CEO, My Financial Advisor.
According to Manoj Nagpal, CEO of Outlook Asia Capital, only tactical investors lose money in a downturn due to their short investment horizon. “Longer-term investors can just stay invested and ride out the downturn.”
This piece of statistic should reassure investors. “If you had invested in the Nifty on any day in the past 20 years and stayed invested for at least seven years, you would never have made losses,” says Kaustubh Belapurkar, director of manager research, Morningstar India. A long investment horizon is, thus, the best antidote to volatility.
Avoid market timing: Don’t exit the markets now, thinking you will get back in time for the next rally. It has been proven time and again that no one can time the markets to perfection consistently. The best course during a downturn is to stay invested. Nagpal says people try to time the market because they believe it is the smart thing to do. “Our experience says it is not smartness, but discipline that leads to wealth creation,” he adds.
Continue your Systematic Investment Plans (SIPs): Rupee-cost averaging (the purchase of more units at lower prices) boosts long-term returns; so stopping your SIPs during a downturn is the worst thing you can possibly do. “An SIP of one or two years won’t always fetch you positive returns; so you must run it for at least 5-10 years,” says Nagpal.
Rebalance portfolio: The weight of equities declines in your portfolio during a downturn. If you have the risk appetite, deploy more of your fresh money in equities and benefit from the lower entry prices. Do so gradually over the next three-to-six months. Only capital that will not be needed over the next five years should be deployed. Don’t invest borrowed money.
Reduce exposure to mid- and small-cap funds: Ideally, 50-70 per cent of your portfolio should be allocated to large-cap funds and 20-30 per cent to mid- and small-cap funds. Owing to the run-up in mid-caps over the past two years, the weight of these funds would have increased in your portfolio. Pare your allocation to these more volatile funds.
Don’t redeem now when net asset values have declined so much. “Allocate fresh money to large-cap funds to reduce exposure to mid-and small cap funds,” Belapurkar adds.
Invest across investment styles: Instead of investing only in growth funds, have some exposure to value and dividend yield funds, which invest in low-beta stocks and hence are more resilient during a downturn. “A 15-20 per cent allocation to these funds will help protect your capital to some extent,” suggests Belapurkar.
Diversify internationally: To reduce country-specific risk, invest at least 10-15 per cent of your equity portfolio in international funds. Do so via globally diversified international funds. US-focused funds, which invest in US-domiciled multi-national companies, are another good option.
ECONOMICTIMES.COM | Jan 25, 2016, 02.54PM IST
NEW DELHI: Domestic investors may have lost close to Rs 9 lakh crore on the BSE so far in calendar 2016, largely led by a global selloff in equities, but Madhusudan Kela, Chief Investment Strategist at Reliance Capital, says the long-term bull market in India remains 100 per cent intact.
“The long-term India story is intact. I can thump the table and say that the long-term India story is intact. The bull market is 100 per cent intact. If it was not, I would not be giving you interviews,” Kela said.
Kela said what the domestic market is going through is a structural correction, and it is not in a bear market as such. The current correction across the globe might look like similar to what we witnessed in 2008, but the situation is not the same at least for India.
“This is a structural correction which may last a couple of months because once markets fall, specifically globally, a consolidation can happen,” Kela said.
“We have to watch the global events. I am not saying whether it is 2008 or not 2008. At this point of time as things stand, it does not look like 2008 at least for a country like India,” he said.
Madhusudan Kela listed four investment mantras in an interview with ET Now, which he said can steer investors comfortably in a volatile market:
Stay put in equities
One cannot evaluate performance based on six months’ return, because equity investment is not supposed to be made for six months or 12 months, specifically by retail investors. It is more of a long-term play.
“When you buy equity, why are you gauging your performance. Let us mind it, a majority of the Indian public has not yet participated in the market. We know the numbers, not even 3 per cent of the savings has come in yet to the stock market,” Kela said.
“Even though inflows to mutual funds in the past 12 months have been very good, if I take a five-year cumulative view, there is still net outflow from equities,” he said.
The absolute saving has gone up, the absolute size of GDP has gone up, the absolute size of financial savings has gone up, but net-net no money has come into equity. So this kind of a correction which has kept the medium and long-term bull market intact is a fantastic opportunity (for investors who are looking to invest in equity markets).
Buy systematically for great returns
Long-term bull markets remain intact, and investors should look at buying Indian equity systematically. “Do not be afraid. Just because Madhu Kela said that 7,200 is a good point to buy, you don’t put all your money at 7,200,” explains Kela.
“What I am saying is that markets have their own reasons and we all make our assessments and judgements based on what are the variables which are available today. If the variables change, we will change our opinion, but I am saying anyone who systematically invests through this year, he will make money in the next three to five years” he said.
Kela expects the market to be much more volatile in the first six months.
Contra call: Buy banks for next 3-4 years
Banking stocks have been on the wrong side of the market so far in calendar 2016. The S&P BSE banking index has lost nearly 10 per cent so far, with some stocks registering a double-digit cut.
“There is definitely some absolute problem in the banking space, but I think the fears are significantly exaggerated. When I meet the analyst community, even for private sector banks, they want to tell me whatever is their corporate and international book, 30 per cent will be completely written off. You take 50 per cent might be bad assets,” Kela said.
“If I take 25-30 per cent off from the balance sheet, which is to be written off over the next three-four years, some of these banks are trading at very compelling opportunities from a three-four-year perspective. Investors who have a three-four years perspective should buy bank stocks than put money in bank deposits,” Kela said.
Hope for midcap investors
The fall in the Indian market was largely led by a double-digit fall in most of the smallcap and midcap stocks, which outperformed the market in the previous calendar.
“I would not say all midcaps have a problem. Wherever there was too much euphoria, all those have corrected now,” Kela said. “Some of the midcap companies have been seeing some kind of euphoria in the last two-three years, which got built into because a number of new investors have come in,” he said.
Source : http://goo.gl/ERVnCX
Interview with CIO, Equity, Sundaram Mutual Fund
Ashley Coutinho | Mumbai | January 4, 2016 Last Updated at 22:49 IST | Business Standard
India should view the coming rate increases in the US as positive, as they show the Federal Reserve’s confidence on US growth, says S Krishna Kumar, chief investment officer, equity, at Sundaram Mutual Fund. He tells Ashley Coutinho the trend of rising domestic investment is likely to continue, reflecting a conviction in the India story. Edited excerpts:
Equity markets have seen a sustained fall since March last year. What is your outlook for the year ahead?
India stands out purely on its macro credentials. This macro strength is visible in the rupee’s resilience, fourth among a pack of 24 emerging markets(EMs). Being the largest growing economy in the world, with inflation containment and fiscal prudence, India will continue to remain differentiated in the EM space.
Will EMs such as India be in trouble if the US Fed goes aggressive on rate hikes this year?
The Fed’s December policy statement broadly clarifies three aspects — the policy stance, policy pace and balance sheet size. First, it has announced an end to an early decade-long policy of near-zero interest rates and is looking to normalise. On the pace of rate rise, it indicates a rise of around 100basis points for the year, implying 25 bps each quarter. However, a cut of 50 bps over 2016 is more likely. Third, and more important, it indicated the balance sheet size would not see a contraction and there would be a rollover of maturing treasuries and reinvestment of principal payments. This is of greater importance, as any balance sheet contraction would mean liquidity contraction and a rise in the effective Fed funds rate.
The Fed rate rise comes as a big relief for Indian markets, removing a large cloud of uncertainty. In fact, India should view the moderate rate increases in the US as positive, as this is clearly reflective of the Fed’s confidence on US growth. And, as we all know, better US growth is good for global growth and certainly positive for India.
Your assessment of the third-quarter performance of Indian companies?
We expect it to be much better than the previous quarters, from a year-on-year growth perspective. Further, the profitability improvement due to input cost savings will play a much bigger role in offsetting the deflationary impact of revenue growth. However, we see the global cyclical like commodity players continuing to suffer earnings erosion.
It’s largely the domestic institutional players that supported the market last year. Do you expect this trend to continue in 2016?
The trend of rising domestic investment is likely to continue, reflective of conviction in the India story. More important, in this volatile phase, the average investor has shown remarkable maturity and resilience. The structural increase in households’ savings rate, on the back of falling inflation, coupled with the unattractive returns from physical assets, will continue to support the domestic equity flows.
Which sectors are you bullish on?
The economy is getting back on track, while benefiting from lower inflation and rates. As investors, we are positive on cyclical sectors that feed on the economic recovery theme, such as industrials, engineering & capital goods,transportation and financials. The potential rise in disposable income, on the back of softening inflation in urban India and the seventh pay commission largesse, will definitely help consumer discretionary sectors like automobiles, lifestyle products, durables, retail and entertainment. These represent our positive bias. We remain negative on pharmaceuticals, fast moving consumer goods, telecom, information technology and metals.
Your advice to retail investors?
Retail (small) investors appear to have as much conviction in the India story asus. Still, they need constant support and reiteration in these volatile times. Invest regularly with an asset allocation that is suitable to your needs and risk appetite. Discipline, patience and diversification are important to being successful in long-term wealth creation. After the recent correction, I would recommend investors to also look at lump-sum allocation to equities.
Niranjan Gidwani, the deputy chief executive of Eros Group, says ‘my rationale for saving is to balance out investments between here and in India’.
Rebecca Bundhun | Updated: November 21, 2015 01:45 PM | TheNational.ae
Despite living in Dubai for 25 years, Niranjan Gidwani still feels more comfortable keeping a portion of his wealth in India.
And the favoured investment of choice in recent years for the deputy chief executive of Eros Group, an electronics retailer, has been mutual funds.
“I started investing in mutual funds about eight to 10 years ago when my father was handling my savings for me,” says Mr Gidwani, 56, who is from Pune, in the west of India. “I invest in five to six separate funds and, on the whole, as an asset class, mutual funds have performed well for me.”
Mr Gidwani says the main advantage is the lack of capital gains tax for any equity funds held for more than a year. But the executive’s portfolio also includes fixed deposits and property in India because he feels it is important to have a basket of investments to spread any risk.
“My rationale for saving is to balance out investments between here and in India,” Mr Gidwani says. “This is linked to the fact that in the case of the principal bread-earner’s demise here, the process of getting assets released to next of kin in this part of the world is still not simplified and takes a lot of time.”
Mutual funds pool money from investors, which is then allocated to securities such as stocks and bonds by the fund manager. The investor is effectively buying shares in the mutual fund. In the case of an equity mutual fund scheme, the fund manager will pick and invest in a range of stocks to deliver returns to the investor.
There are more than 40 mutual funds in India, which grew at a compounded annual growth rate of 15 per cent between 2007 and 2013, according to a report by KPMG.
Raghvendra Nath, the managing director of Ladderup Wealth Management, based in Mumbai, says he has noticed growing interest among non-resident Indians (NRIs) based in the UAE wanting to invest in mutual funds.
He attributes the increase to the optimism surrounding India’s economic prospects compared to many other emerging market countries, and says the funds are a “safe vehicle” for expats because they are managed by professionals and are diversified.
However, he stresses that NRIs still only make up a small proportion of the investors in these investment vehicles.
“One reason for this is a lack of understanding and another reason is that a lot of NRI money was going into real estate in India,” Mr Nath says. “Obviously if somebody is investing a large amount of money in a property then their other risk investments take a back seat. That is changing now because the property market in India has been kind of subdued and other investments, such as equity investments, are going to take preference.”
Mutual funds in India are available for a range of risk appetites says Mr Nath, who advises clients to select a product based on their time horizon for accessing the money.
“For somebody who has a low-risk profile, I would advise them to invest in a fixed-income fund, so it could be a short-term bond fund or a corporate debt fund if it’s for a longer horizon,” he says.
Experts say NRIs should consider a well-managed mutual fund over investing directly into equities as the fund manager can dedicate time to research and pick stocks. Expats, on the other hand, are often too busy to do this themselves and may not have the same level of knowledge about the markets.
Diversified large cap funds in India have delivered returns of 100 per cent over the past five years, Mr Nath says.
But he adds that with such a wide range of funds available in India, choosing the right product can be daunting. He recommends NRIs consult experts such as a bank’s wealth manager or an independent financial planner and should beware of the pitfalls of investing.
What some NRIs fail to realise is that while the value of a mutual fund investment can go up, it can also decrease and there is an element of risk involved.
And anyone signing up for a new investment product must find out the management costs and fees involved and beware of unscrupulous fund agents or advisers pushing unsuitable products to secure a quick commission.
Ashish Mehta, a lawyer based in Dubai and founder of his own firm, Ashish Mehta Associates, experienced this for himself.
After investing in several funds for the past few years, he says he has “had enough” and is now “waiting for them to come up [to increase in value] so I can sell and exit”. “These funds have a large component of cost built in, so the fund manager earns money and charges a fee whether you gain or you lose,” he adds. “You don’t necessarily know how much the fund manager is siphoning out. If you buy bonds from banks or Indian state entities, you get a fixed return.”
While Mr Gidwani believes it is important to get professional advice before investing, he urges NRIs to tread carefully.
“I have been seeking professional advice from consultants who are good at this business,” he says.
“The key here is not just the functional expertise of the consultant, but also a little bit of research to be done to assess the honesty and integrity of the consultant or the consultancy firm. Some of my family, including my father, have been swindled by reputed consultants with very good knowledge but very low ethics.”
For those unsure if the mutual fund they have chosen is best for them, Jimeet Modi, the chief executive of Samco Securities, says NRIs should assess the track record of the fund manager.
“Mutual funds as an institution are well regulated by the Securities and Exchange Board of India. They have high-calibre professional fund managers who track and research stocks to invest in the best interest of the investors.
Such level of dedication is practically not possible for an NRI staying abroad, Mr Modi says, adding that investing in mutual funds, and India in general, is a good long-term play for NRIs given the county’s economic growth and prospects.
“The best solution for them would be to invest through mutual funds which have good track records. In the long term, equity investments outperform all other asset classes, and the best way to participate in the equities is through low-cost index funds for long-term inflation adjusted superior returns.”
Mr Modi tips growth-oriented or large cap mutual funds as attractive options. “Good funds” have delivered compound annual growth rate returns upwards of 17 per cent over the past 10 years, he says.
“Equity investments for the long term can be started any time in mutual funds without waiting for the so-called ‘right time’,” he adds.
“The best way is to invest fixed amounts systematically every month. However, in the current scenario, subject to risk profile and age of the investor, one should invest 50 per cent of savings in index equity funds and the balance of the amount to be staggered and invested over a period of the next six months.”
He also recommends restricting the investment spread to two or three funds.
“No purpose would be served with too much diversification as by nature the mutual fund schemes inherently have sufficient diversification and risk management,” Mr Modi adds.
A guide to investing in mutual funds
There is a vast array of different mutual funds, from domestic stock funds to sector funds, bond funds and blended funds. Choosing which is best for your individual needs can be difficult so here are some pointers to consider before you part with your hard-earned dirhams:
Assess why you are investing
Investors should consider what the money they are investing is ultimately for and when will they need it. Is it for their child’s education or part of a nest egg for retirement? This will help to determine which mutual fund might be most suitable.
Assess your risk profile
Mutual funds carry various elements of risk, with equity funds considered to be far riskier than fixed-income funds. Sector funds, which invest in a particular industry, such as technology or pharmaceuticals, are considered even riskier. These can deliver soaring returns or sharp losses, while a lower risk fund is designed to deliver steady returns. The risk level of the fund will normally be specified in the basic literature on the product.
The fund’s track record
Investors must assess the track record of the fund. What kind of returns has it delivered over the past few years? Remember though, a fund’s past performance is by no means a guarantee of its future performance so it is essential do careful research or seek the advice of a professional.
Open-ended funds can be bought and sold on a continuous basis, although there may be a fee to pay if you exit within a year. Close-ended funds have a maturity period, for example five years, and investors subscribe at the launch period.
How much to pay in
Investors can either pay a lump sump investment or most mutual fund schemes also offer the opportunity to invest on a monthly or quarterly basis, through what is known as a systematic investment plan. The minimum instalment amount is typically 500 rupees (Dh28). For a lump sum, the minimum would be 5,000 rupees.
Understanding the costs of any investment is crucial. For mutual funds, there are annual management fees and commission to be paid. For example, in the case of equity mutual funds schemes bought through ICICI Bank’s, upfront brokerage charges can go up to 3.25 per cent of the amount invested, while there is an annual management fee of up to 1 per cent.
How to invest
NRIs based in the UAE can invest through Indian banks, with the option to do this online, as well as through brokerages and fund companies. For example, at major Indian banks such as HDFC, existing customers who register can invest in mutual funds through the net banking service. The online portal FundIndia.com also allows users to invest in a wide range of mutual funds online. NRIs have to register by filling in a form and sending copies of various ID documents such as proof of address to the firm in Chennai.
Turn to a reliable financial adviser or do your research online. Websites such as Moneycontrol.com have useful tools for comparing the performance, fees and other details of mutual funds side by side. Experts generally advise investors against putting all their eggs in one basket and say that investing in two or more mutual funds can help to spread the risk.