Tagged: Investor

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

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

ATM

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

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

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

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

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

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

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

The writer is MD & CEO, ICICI Prudential AMC

Source: https://goo.gl/rGto7F

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

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

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

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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.

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Why Invest in International funds

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

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

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

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

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

The calendar Year Index Returns (INR)

calendar

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

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

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

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

Source: https://goo.gl/MUx88e

ATM :: To realise your crorepati dream, all you need is Rs 5,000 per month

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.

ATM

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.

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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).

Source: https://goo.gl/tdwAhC

ATM :: Expect the unexpected: Brace for volatility in 2017

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

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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.

Source: https://goo.gl/5O9I8Q

ATM :: Should equity mutual fund investors worry about likely long-term capital gains tax?

By Madhu T | ECONOMICTIMES.COM | Updated: Dec 26, 2016, 02.34 PM IST

ATM

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.

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

ATM :: Worried about volatility? These equity MF picks can help in 2017

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

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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.

Source: https://goo.gl/Or5Jg3

ATM :: How does an urban internet user in India save and invest?

Find out in the ET Wealth RICS report
Updated: Dec 16, 2016, 05.37 PM IST | Economic Times

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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:

How does an urban internet user in India save and invest? Find out in the ET Wealth RICS report

Source: https://goo.gl/4OAVLI