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Mutual Funds Archives - Shah Financial

Category: Mutual Funds

  • Investing in Mutual Funds at 67,000 SENSEX: What to Consider

    Investing in Mutual Funds at 67,000 SENSEX: What to Consider

    The SENSEX has been on a tear lately, reaching new heights of 67,000. This has many investors wondering whether to invest, book profits, or top up their mutual fund investments.

    In this blog post, we will discuss five factors to consider before making a decision about your mutual fund investments.

    1. Understand the market scenario.

    While it’s important to consider the overall market condition, focusing solely on the SENSEX level may not provide a comprehensive picture. The stock market is influenced by a multitude of factors such as economic indicators, corporate earnings, global events, and investor sentiment. Therefore, it is crucial to analyze these factors to make an informed decision.

    2. Assess your investment goals and risk tolerance.

    Before making any investment decisions, it’s vital to assess your financial goals and risk tolerance. Consider the time horizon for your investments and determine whether you are investing for the short, medium, or long term. Additionally, evaluate your risk tolerance and ability to withstand market fluctuations. Investments should align with your goals and risk appetite.

    3. Diversify your portfolio.

    Diversification plays a vital role in reducing risk and optimizing returns. Instead of making decisions based solely on the SENSEX level, consider diversifying your portfolio across different asset classes and sectors. Mutual funds offer a variety of options such as equity funds, debt funds, hybrid funds, and international funds. By diversifying, you can mitigate the impact of market volatility and potentially achieve stable returns.

    4. Analyze fund performance.

    When evaluating your mutual fund investments, focus on their performance rather than the SENSEX level alone. Analyze the historical returns of the funds you are invested in and compare them with their benchmark indices. If your funds have consistently outperformed their benchmarks and demonstrated strong fundamentals, it might be worth considering a top-up or staying invested.

    5. Seek professional advice.

    If you find it challenging to make a decision about investing, booking profits, or topping up your mutual fund investments, it is advisable to consult with a qualified financial advisor. They can provide personalized guidance based on your financial goals, risk tolerance, and market analysis. A professional’s expertise can help you navigate through market fluctuations and make informed investment decisions.

    Conclusion

    Investing, profit booking, or topping up your mutual fund investments is a decision that should be based on careful analysis and consideration of multiple factors. While the SENSEX level is one aspect to consider, it’s crucial to evaluate your investment goals, risk tolerance, asset allocation, and the performance of your mutual funds. Ultimately, seek professional advice if you require assistance in making an informed decision. Remember, investing in mutual funds is a long-term commitment, and a well-planned strategy can help you achieve your financial goals despite market fluctuations.

  • Jaan Hai Toh Jahaan Hai

    Jaan Hai Toh Jahaan Hai

    Jaan Hai Toh Jahaan Hai” was the war cry against Covid 19 when the Prime Minister announced the lockdown.
    Staying at home brought the people protection although at the cost of loss of income.Investing - Covid19

    This action was needed but was not sustainable. Staying at home was safe but not good for livelihood and certainly not tenable for the long haul.This “staying at home” may be compared with ‘Savings’ in which our ‘Savings’ kind of stay at home.Home for our Savings can be our cupboard, our Locker or even our Current Bank Account which earns less than the rate of Inflation.

    After a few months of Lockdown came the term ‘Jaan Bhi Jahaan Bhi”.
    People were asked to go out and get back to work. This was felt necessary to kickstart the economy and for wealth generation and sustainability.

    Although this necessary action of going out to work was accompanied by some risk.However, by taking some precautions this risk was manageable.This going out to work can be compared to ‘Investing’.

    While in the case of Covid, citizens were asked to step out and work, in the case of investing, Money is asked to step out and work.When money steps out to work, this money too is exposed to some amount of risk.

    But this risk too is manageable if the investor follows the guidance of a professional Financial Advisor who with his professional practices manages the risk associated with investing.

    While Masks and Hand Washing are the Practices to keep risk at bay for People, Diversification & Asset Rebalancing are the Practices to keep Risk at bay for our Money.

  • How a monthly SIP of Rs 5,000 fared over the last 15 years?

    How a monthly SIP of Rs 5,000 fared over the last 15 years?

    SIP Investment Rs 5000 Per Month
    It is often said that one should invest in equities and equity-oriented investments such as equity mutual funds with a long term horizon. While there is no guarantee for a positive return in the equity asset class, an analysis by CRISIL shows that the risk of getting negative returns reduces over longer-term investing horizons. By investing systematically through the process of SIP – Systematic Investment Plan – an investor is able to build a habit of savings. SIP’s can work wonders if you have the right selection of equity MF schemes and are continued for the long term.

    It can be true to a large extent if the study done by CRISIL which has some interesting findings of SIPs can be relied upon. In the analysis, the CRISIL-AMFI Equity Fund Performance Index over the past 15 years to June 2019 for Rs 5,000 of monthly SIP was considered for the study. The CRISIL-AMFI Equity Fund Performance Index tracks the performance of the equity funds. The index consists of mutual fund schemes from large-cap equity, large and midcap equity, multi-cap, midcap, small-cap equity, focused equity and value and contra categories.

    The study showed that the instances of negative returns declined as the investment horizon increased. It means if one runs the SIP for a long term, the probability of generating negative returns declines. The table below shows SIP returns and is based on CRISIL-AMFI Equity Fund Performance Index figures.

    Instances of negative returns decreased with an increase in SIP tenure

    Min/Max Return Variation
    It was also seen that the difference between the minimum and maximum SIP returns also narrowed with the increase in the investment horizon. It means, even if there is a wrong selection of a MF scheme or that a specific scheme in your portfolio has not performed well, over a longer period, the difference is not much pronounced. Over short to medium-term, a scheme may generate less but over a longer period, the difference between the minimum and maximum SIP returns also narrowed.

    This gives a strong impetus to the often-repeated principle in equity MF investing which is to invest for the long term goals. By linking one’s investment in MF to a long term goal, the temptation to exit before the goal is met or during the market crisis is curtailed.

    Rather than ‘timing the market’, the investor should, therefore, consider the ‘time spent in the market’ as an important yardstick.

    Difference between min. and max. SIP returns narrowed with increase in the investment horizon

    Higher Corpus
    One another finding of the study was that investing through SIP for longer tenures can significantly increase the amount of wealth creation. An analysis of various equity categories shows that returns, and the subsequent wealth creation, for investors improve, in line with the increase in the investment horizon.

    Probability of wealth augmenting increases with the rise in SIP investment periods


    Monthly SIP contribution of Rs 5,000 has been assumed
    Fund categories are represented by respective CRISIL-AMFI Fund Performance indices

    For More articles:www.shahfin.com/blog

    Source: financialexpress.com

  • 5 Most Common Personal Financial Mistakes

    5 Most Common Personal Financial Mistakes


    5 Most Common Personal Finance MistakesFor better or worse, money is a big part of most people’s lives and it’s easy to get caught up in financial mistakes that will hurt you in the long run if you’re not careful.

    Certain financial mistakes can wreak havoc on your financial future, leaving both you and your loved ones under the shadow of uncertainty. If you are constantly putting off decisions relating to insurance and investment planning, you may be doing a disservice to your financial health.

    Read on as we discuss 5 such common financial mistakes that can have dangerous ramifications.

    1. Not buying insurance(Term/Medical)

    If you think buying insurance is a waste of money, you’re probably making a costly mistake. Insurance comes to the rescue to bail us (or our dependents) out of a serious crisis like no one else. One must ensure that they’re adequately covered. So that their family members are not left in the lurch after their demise. As far as life insurance is concerned, you’ll be well-advised to go for a policy with a sum assured that’s at least 10 to 15 times your annual income. You may also consider to go for a no-frills term insurance plan. It can get you adequate coverage without steep premiums, especially if you start the policy at a young age.

    Also, in the present times of high medical inflation, it’s always advisable to have a comprehensive medical insurance cover for the entire family.To prevent precious savings or investment returns from getting drained to fund hospitalisation expenses. And no, your office-provided group health insurance policy may not provide adequate coverage or complete protection in the absence of important add-ons (like critical illness cover, pre- and post-hospitalisation cover, etc.). You should consider going for a personal health insurance plan with sufficient coverage amount and choose a plan that meets the medical requirements of all the policy beneficiaries.

    2. Not having in place an emergency fund

    Well, you may have no control over life’s uncertainties (like a sudden job loss or a family emergency), but you can definitely try to immune your finances from their impact by being farsighted. And having in place an adequate emergency fund is perhaps your best bet to that end. Ideally, you should set aside at least 3-6 months’ worth your expenses in a separate savings account as your emergency fund. And, contrary to popular opinion, it’s okay even if you build your emergency fund in a fixed deposit account and let it earn more interest than a normal savings account. You can easily liquidate it in minutes through your mobile banking application in the face of an emergency by losing just 1% of the interest value.

    3. Not budgeting

    For most people the word budget evokes a negative feeling, something that restricts us from living life freely. However, truth be told, reckless spending can lead to depletion of savings, emergency fund or investment capital in no time. Worse, this may leave you in an avoidable debt situation (and sink your credit score) that can put breaks on your journey to attain financial freedom.

    It’s very important that you have in place a proper budget for your expenses and avoid random overspending to ensure you meet your important financial goals in time, like raising down payment fund for your home or setting up a retirement corpus (more on this in the point below). And yes, it’s better if you plan out even for your “desire spends” like vacations, gadgets, etc.

    Here are some helpful pointers:

    •  Allocate a realistic budget for your expenses (like groceries, conveyance, shopping, etc.) at the beginning of the month and try not to breach them
    • Take help of a budgeting mobile app if need be
    • Track all your expenses and look for ways to cut down on wasteful spends (like skip hefty gym memberships if you prefer to work out at home, ditch frequent cab rides if you can manage with public transport, start cooking at home if you spend a lot eating out, so on and so forth).

    4. Investing without predefined financial goals

    Setting precise short, medium and long-term financial goals provide direction to your investments. Once you have in place a specific goals, it becomes easier to channelize your savings and other investment returns to meet that goal within the time-frame. On the contrary, investing without proper goals may lead to confusion and you may have to struggle to arrange for funds to meet an important requirement at the last minute, something that could have easily been achieved if you had planned for it in advance.

    One more thing: investing just to save taxes shouldn’t be your only financial goal.

    5. Investing only in low-risk low-return instruments

    It’s a fact that no one likes to lose money, but investing only in low-risk and low-returns instruments (like only fixed deposits or recurring deposits) can jeopardise your financial goals. In other words, not taking any risks is risky too. So, depending on your age and financial goals, one must look to intelligently spread out their investments in a number of low-risk, medium-risk and high-risk instruments so that one ensures they grow their wealth over time while keeping the overall risk factor under control.And avoid some financial mistakes.

    This is important, especially to meet important goals like raising an adequate retirement fund. If you only invest in low-returns “guaranteed” instruments, you might find your fund inadequate to sustain your post-retirement life, especially when you consider inflation eating away value of returns and the rising cost of living. Things can complicate further as you might not have a regular source of income then.

    As a result, it’s better that you add slightly riskier instruments in your investment mix too, like equity mutual fund SIPs and even real estate. That being said, it’s superlatively important that you have complete clarity on how different investment tools work, what’s the inflation-and-tax-adjusted returns and other exit loads, etc. before making any investment decision. Do thorough research, seek professional help if need be, but don’t take the plunge based on hearsay or assumptions.

    These prudent strategies will go a long way to ensure you hold your ground in your journey to grow your wealth. 

    Source:financialexpress.com

  • Yoga For Your Financial Health

    Yoga For Your Financial Health

    Practicing yoga daily keeps our health on track, while a systematic investment plan helps us keep our financial health on track. It allows us to see the bigger picture and set realistic and achievable goals. With a proper financial plan, taking big financial decisions become easier and compatible.

    Yoga and investments have a lot of things in common and you could incorporate certain yogic techniques in your financial life to beat the stress associated with it.

    1. Discipline 
    Only if you are fully committed while doing yoga you will be able to reap rewards. Similarly, a disciplined and regular approach in investments can help you achieve your financial goals. Starting a disciplined investment through SIP even of a small amount in a lifelong journey would help in creating a big corpus for your sunset years.

    2. Practice 
    You will not become an expert at yoga overnight. Practice makes you perfect. Similarly an inexperienced as well as a seasoned investor learn and gain knowledge with respect to the field of investments as much they can. Right knowledge about the behavior of a particular asset class might also help to increase your risk appetite.

    3. Patience 
    With yoga, one cannot expect results overnight. Similarly one cannot expect to make money in a month. Warren Buffett once quoted, “Someone’s sitting in the shade today, because someone planted a tree long ago.” It is never too late to start investing, but the earlier, the better. If you want to enjoy the shade of a big tree, you need to plant the seed today!

    4. Lifelong investment 
    Yoga is a lifelong investment to achieve healthy mind, body and soul. In a similar manner, systematic investment towards the identified goal such as retirement, will help you achieve those goals in their defined time period. 

    5. Focus 
    While performing asanas in yoga you must focus on your breathing or else it could be detrimental. When it comes to investments, many people at some point experience equity market volatility and end up withdrawing their investment. By doing so you are locking losses and missing out on future potential profits. 

    By adopting a focused investment approach and gearing your assets towards meeting your financial goals, the day-to-day fluctuations will not affect your plan. For your long-term investment strategy to work, you need to stick to your investments.

    Conclusion:
    Investors who seek quick and easy returns on their investments are generally not successful. By understanding the process behind long-term investing, a mature and patient investor can avoid excess risk and become financially successful. As long as your money is working hard and taking you towards your pre-decided goals, there is no reason to look anywhere else. Just focus on your goals.

    Source:Moneycontrol.com

  • What is a FMP?

    What is a FMP?

    FMP (or Fixed Maturity Plan) is a closed-ended debt mutual fund.

    Unlike other open-ended debt funds, FMPs are not available for subscription on a continuous basis.A close-ended debt fund that invests for a specific period of time and has low risk.

    The fund house comes up with a New Fund Offer (NFO) for a specific duration. NFO will have an opening date and a closing date. You may invest in the NFO only during these days. After the closing date, the offer to invest ceases to exist.

    Such a fund invests only in instruments whose duration is similar to its own term i.e., it aligns its term with that of its underlying assets. 

    These FMP NFOs are generally open for 2 to 3 days and are marketed to corporate and well-heeled, high net-worth individuals. Nevertheless, the minimum investment is usually Rs 5,000 and so a retail investor can comfortably invest too.

    Investors looking for a debt exposure in their portfolio generally opt for traditional debt instruments like Bank FDs (Fixed Deposits), Bonds, NSC (National Savings Certificates), Post Office, etc. Very few investors are aware that these are not the most tax-efficient investment avenues. The income from these sources is fully taxable (except PPF and PF) and hence the real return (after tax) is often lower than the prevailing rate of inflation.

    How is FMP different from other debt funds?

    Unlike other debt funds, the fund manager of FMP follows a buy and hold strategy. There is no frequent buying and selling of debt securities like other debt funds. This helps to keep the expense ratio of FMPs at lower level vis-a-vis other debt funds.

    FMPs Vs FDs

    Being a debt instrument, FMPs and FDs are similar in many ways. Both require you to stay invested for a fixed duration. Both of them are available in varying maturities to suit your convenience.

    However, FMPs are a stark contrast to FDs when you look at it from a returns perspective. Unlike the guaranteed returns that reflect on the FD certificate, FMPs offer an indicative yield – the returns offered by FMPs are not assured but indicative in nature. It means that there is a chance of the actual returns being higher or lower than the returns indicated during the NFO launch. Please see the table below to understand this better. 

    Parameter

    FMP FD
    Returns Indicative Returns Assured Returns
    Tax 1. Dividend Option – DDT tax
    2. Growth Option – Tax on capital gains
    Interest earned is added to your income, and the income is taxed accordingly
    Liquidity Restricted liquidity Ease of premature redemption, higher liquidity

         Please find below example ..how FMPs are tax efficient compared to FD’s in above three years of duration:

    How FMPs are tax efficient compared to Fixed deposits

    So which is a better option:  FMPs or FDS? 

    Fixed maturity plans perfectly cater to individuals as well as corporate houses. They have the twin advantage of higher returns plus tax efficiency.The coupon rates of bonds have moved up but FD rates have remained low. In such a scenario, locking into high quality (AAA-rated) portfolio of FMPs can deliver superior returns to FDs.

     

    Resources: Clear Tax, Jago Investor.