Category: Personal Finance

An explainer on what makes hybrid fund such a preferable option for investors

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Any investment fund that shows a mix of different asset classes is called as a hybrid fund.

A typical hybrid fund is a mixture of both equity and debt funds.

One of the key feature of a hybrid fund is the fact that it will provide investors with a portfolio that is extremely diversified.

The merit of having both stocks and bonds in your portfolio is that it will give you the option of achieving wealth growth in long term, but also the opportunity to generate quick income in the short term.

Hybrid funds can be classified based on which type of fund they favour.

If more investment is made on equity funds than debt funds, it is called an equity-oriented fund.

On the other hand, when the fund is more tilted in favor of debt funds, they are called as debt oriented fund.

While these types of funds have several merits including lower risk than pure equity funds and also a better returns than debt funds, they too have their risks.

The funds too can be affected by the fluctuations of the market, particularly if it has a higher share of equity funds in it.

So, hybrid funds are a great option for both conservative and novice investors, proper care should be observed when assessing the risk aspect.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

A brief explainer of how equity funds work

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Equity funds or stock funds are those types of mutual funds that focus mainly towards investment on stocks. Because of their focus towards investing on stocks, they are also called as growth funds.

The equity funds are good for ordinary individuals looking to grow their assets.

As they are managed by an efficient and professional management, it also gives the investor a safeguard as well.

They are a preferable option for people with limited knowledge about market functions.

Individuals with small resources can invest on larger stocks as the fund pools together funds from different individuals.

Equity funds can be classified in to several categories based on various aspects.

One main division of the funds is based on the catering of investment on stocks, i.e. active and passive.

In active funds, the investment is focused on a particular firm’s stock that is selected by the professional management after careful study of the market.

On the other hand, when the fund manager guides the investment in to a broader portfolio, then it is called as a passive fund.

Similarly, they are classified further into large cap, mid cap and small cap based on the market capitalisation.

If an equity fund is invested into various and diverse segments in the market, it is called as diversified equity fund.

On the other hand, if the investment is limited to a particular sector alone, then it’s called as a sectoral fund.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Risks and opportunities of investing in Capital Appreciation Fund

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Certain mutual funds will try to improve the value of their assets by way of aggressive investment. They will try to make investments heavily in to stocks that have high prospects of growth. These funds, in turn are called as Capital Appreciation Fund.

These funds will have high prospects of growth, thus scope of increasing the amount of returns.

So if an investor is willing to take some risks in order to achieve higher returns, these types of funds are the perfect tool for them.

As they are focused on investing on stocks with high growth prospects, they tend to focus towards equity funds.

They may also try to compensate their heavy interest towards high growth predicted stocks by also acquiring some conservative stocks.

However, one flip side of these investments are the high risk that comes alongside them.

With the financial management looking for stocks with high growth prospects, there is a possibility that they may enticed to take up stocks which are highly vulnerable. This in turn could lead to loss for the investor.

So in other words, individuals who put money in them should be careful and aware about the risks they carry.

So, unless one is having financial stability and extra money along with a willingness to take risk they should avoid such funds.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Robo advisors: The modern face of investing

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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India’s stock market capitalisation is nearing Rs 147 trillion, of which the assets being managed by equity mutual funds have topped Rs 8.5 trillion. This means equity mutual funds now account for 5.7 percent, an all-time high.

Clearly, retail investors are hoping to ride the market wave, thus giving rise to new avenues which can offer them maximum bang for the buck.

This is exactly the sentiment that Robo Advisory funds hope to exploit.

So, what exactly is a ‘Robo Advisory’ and how does it work?

Robo-advisors are digital platforms or apps which offer automated, algorithm-driven financial planning services with negligible human interference. Talk about removing the emotional aspect of investing!

A typical robo-advisor collects information from clients about their goals or investment objectives, risk profile, investible surplus and so on, analyses it according to hundreds and thousands of pre-defined parameters and offers tailor-made solutions-all in a matter of minutes.

Post the initial asset allocation, robo services also continue to monitor the health of the portfolio and suggest changes.

In many ways, these companies can be called the modern face of investing. They offer customised goal-based investing platforms, zero or almost nil commission models, 24×7 connectivity and transparency for ticket sizes as small as Rs 500.

Many of them offer institutional quality analytics, which has only been available to high networth individuals till now.

The process has even been called “easier than signing up for Facebook”.

Rohit Paul Mascarenhas, an investor with ‘scripbox’, says he got interested by the quality of research and the suggestions on funds, but was hooked by the hassle free process.

While robo advisors are still fledgling in India, they seem to be gaining quite a bit of traction across the world. Vanguard’s robo platform crossed $100 billion in assets under management (AUM) earlier this year. Betterment, Wealthfront and others collectively managed as much.

Back home, the key players seem quite focused on the growth potential. In a country with an ever expanding middle class, the need for cost effective, customised solutions is also exploding.

Subramanya SV of Fisdom, a digital investment platform with over 60,000 customers, says digital advisors who now account for 5 percent of the market could see their footprint expanding to 25-30 percent in mere five years.

BI Intelligence estimates that the Asia-Pacific region will record $2.4 trillion in robo-advisory assets under management by 2020.

Sharad Singh of Invezta, a leader in direct mutual funds, says a few companies like theirs could well land-up in the top 200 companies over the next decade.

Many of the apps have shut down in their gestation periods – blame it on bad planning, cash flow mismanagement or even the lack of funding.

But the truth is, the sailing isn’t smooth for anyone who wants a piece of the pie and competition is flooding in from all corners.

This is not to suggest that independent financial planners are not fighting back. Platforms like NJ Fundz or Prudent offer online aggregator services for mutual fund distributors, independent financial advisors (IFA) and PFAs, giving them the top of the line tech advantage.

Can Indians who have traditionally relied on neighbourhood PFAs ever truly trust an automated platform? Could these digital warriors pose a threat to the established AMCs?

Taking the Vanguard example, even in India, the established players are building their own robo platforms. So, it certainly looks like a change that was indeed needed.

Like with all major movements, which start small, struggle to gain traction and then suddenly snowball into your living room, robo advisors too are certainly shaking things up.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

What are pooled funds

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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When funds collected from many individuals and firms are brought together for investment such as mutual funds, then it is called a pooled fund.

Such funds benefit from the large volume of investment leading to a lower cost of trading and lower risks. Though large number of partners are involved in these investments, they are treated as one single unit making it strong and significant.

Another key merit of pool funds are that individuals with less resource could have the opportunity to reap benefits that are available only to  large scale investors.

However, on the flip side, investors will not be expected to gain large profits as profits from such funds will be distributed equally among all investors.

Besides, as there are a large number of parties involved, decision making can be a very tough process. This could be fatal when market is going through a volatile phase and involved individuals find it hard to reach a common ground regarding strategy.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

What are investment or fund companies

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

Listen to the Article (6 Minutes)

There are institutions that deal with the business of investment.

Firms that engage in the activity of investing the capital in to the market are called investment or fund companies.

These companies could be owned either by private or public entities.  Besides selling, these firms also handle and market funds in order to attract public.

In addition to the above mentioned functions, according to Investopedia, the investment companies also carry out additional functions such as portfolio management, record keeping, custodial, legal, accounting and tax management services.

After pooling capital from various individuals for investment, the company also distributes a share of the profit or loss the investment had incurred to.

There are three types of investment companies, i.e. closed-end funds, open- end funds and unit investment trusts (UIT).

Open-end funds are offered either as mutual fund or exchange-traded fund. There will be no restrictions on the number of shares that can be issued by the company. Investors will have the option of taking back their investment at any point in time in these funds.

Close-end funds, on the other hand raises capital by issuing a fixed number of shares. However they are not redeemable and are traded like stocks. UITs are similar to mutual funds and its shares can be solved back at any time to the investment company.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Your Stocks June 19: ‘I have Tata Motors at Rs 400 since 6 months, what should I do?’

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Your Stocks is a daily show where market experts answer your specific stock related queries.

In June 19 edition of Your Stocks, Gaurang Shah of Geojit Financial Services Ltd and Prakash Gaba of prakashgaba.com answer your queries on investments in the stock market.

Q: Palash Goklani writes to us from Mumbai. He holds 1,000 shares of IDFC Bank at Rs 52.50 since one and a half years. He is a long-term investor and wants to know whether to hold or sell?

Joshi: Even I have some IDFC Bank and it has really been a bit of a disappointment because the whole idea was that it is a new bank, it is approaching banking in a new way so expected the gains to be better. But the stock has been range bound at best. I just think that at this point in time the Capital First, the whole that, that deal, that merger has got Reserve Bank of India (RBI) approval it seems to be about 5-6 months down the line so definitely at this price the stock is a hold. To add more you just need to really keep your eyes on the news flow the next couple of months and if you really see that Capital First merger playing out for IDFC Bank in a positive manner there I think you add more. Otherwise, I think some of the other private banks very honestly in this last year and a half have given better returns than IDFC Bank. So on that front it has been a bit of a disappointment but at this price it is a hold.

Gaba: He wants to hold for couple of years. To me I need to see a trend for that. So, far I don’t see a trend so I won’t hold.

Q: Suketu Upadhyay writes to us from Ahmedabad. He holds 100 shares of BEL at Rs 137 since a year. He is a long-term investor and wants to know whether to hold or sell?

Joshi: He may well have to, I think the way things have been for the stock because honestly once again a bit of a disappointment. On the fundamental perspective at this valuation the stock looks alright. The disappointment has come in the numbers and the fact that really the execution of the – though they show a large order book the execution, margins etc. these are been issues and not just for BEL. I would say this has been an issue across the sector. That said, but I think going ahead looking at their order book as well as the fact that it is a niche player so a lot of the orders that are in the defence and that kind of government orders they are a surety for BEL and one expects that to have a bit of a pickup in the coming year as well as the fact that hopefully, their execution will also get back on track. With the expectation of that I would really hold on to the stock at this level and hopefully, you should be able to see levels at least of Rs 150-160 over the next couple of years.

Gaba: BEL can see some more downside. Possible support is in the vicinity of Rs 100 zone. Best is to hold now because he has been holding for a while. This is not a place to exit but hold it here. Might see a bounce from closer to these zones, if it happens where does it go? Maybe around Rs 140 zones that happens, one can exit there. So, hold.

Q: Augustin R writes to us from Kerala. He holds 2,500 shares of Tata Motors at Rs 400 for 6 months. He is a medium-term investor and wants to know whether to hold or sell.

Gaba: He has been holding for a very long time and now it is at a place where it is trading near the support zones. So this is not the place to exit. Here I would say that looks like Tata Motors is in the process of bottoming out. Very good chance that it can bottom out from here. If that happens, then this is a good place to buy. Only thing is to have a larger timeframe, increase your timeframe and buy. I would say since he is holding it, hold, and in case he wants to add, he can add.

Joshi: I feel it will continue to remain the cheapest auto stock. I think it is going to underperform the sector, unfortunately, but, yes, the numbers have turned positive. We have seen a very strong performance from JLR and that is actually the bigger piece. So if you want to track the stock, you should be actually seeing what is happening with the JLR rather than getting too concerned over CV and passenger vehicle cars in India though they are getting their act together even as far as that is concerned. My advice to retail investors who are there for the long term is always to get Tata Motors DVR. However, he can continue to hold what he has and as it is he has gone from being short term to long term, so, continue to hold.

Q: Sunil Kumar writes to us from New Delhi. He holds 1,000 shares of NMDC at Rs 120 for 3 years. He is a long-term investor and wants to know whether to hold or sell?

Joshi: If he has bought it as a dividend play then the dividend becomes only more attractive when the price comes down and the dividend yield goes up. So that logic is perfect. Even otherwise if you are looking at fundamentals, I think again because it is a government stock there is always a concern because policy changes, you may not get to increase ore prices in line with markets etc. but that is really not been the case over the last couple of years. I would say it is a hold for me at this level given the fact that I am positive on metals as a play so I think holding on to NMDC is a good thing.

Gaba: At 1:00 clock in the sister channel CNBC Awaaz there was some negative news being broken today. Looks like there was some iron ore price – some issue out there, and I have given a sell there. I think it is going even below Rs 100 zone. For me it is a sell.

Q: PK Sharma writes to us from New Delhi. He holds 2,000 shares of RCF at Rs 88 since 5 months. He is a long-term investor and wants to know whether to hold or sell.

Joshi: If you look at just the fertilizer business, then I think the stock is expensive at this level. So the whole story on this is whether they will sell that land and my guess is that it is not going to be any time soon. So I think if you really want to just look at a pure fertilizer play, I would just exit the stock and get into something else. So my advice would be to sell the stock at this level. In any case I am not too in favour of holding stocks where you are not comfortable with the business that they are in, but you are holding onto them because they have some land parcel which they can sell. I think that we can always buy for a trading pop when and if we get that news.

Q: Kuldeep Singh writes to us from New Delhi. He holds 2,000 shares of Bombay Dyeing at Rs 88 since 2 years. He is a long-term investor and wants to know whether to hold or sell?

Joshi: We were talking of RCF earlier and you had a landmine story and here to there is an expectation that they have land at various location and in this case they probably have monetised a bit of also. I think he has made decent gains from where he has bought it at so I would think that he should book his profits and really sell this because in that sense the story for Bombay Dyeing has played out.

Gaba: Just hold on, he is making money. His cost is so low, he can take a lot of beating if he wants to basically the structure is positive. See some correction. Rs 180-200 is the strong support zone to work with. I think it might start its up journey once again. Rs 180 is a very strong support.

Q: J Ram writes to us from Andhra Pradesh. He holds 2000 shares of Mangalam Drugs and Organics at Rs 300 since 1 year. He is a medium-term investor and wants to know whether to hold or sell.

Joshi: I looked at it just before I came here and I am not particularly impressed with this last quarter numbers. So I think just judging by that and the price that it is at, I think for me the stock is a sell.

Gaba: It is a clear cut sell; weak structure.

Disclaimer: The views and investment tips expressed by investment experts on CNBCTV18.com are their own and not that of the website or its management. CNBCTV18.com advises users to check with certified experts before taking any investment decisions.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Three credit card mistakes you must avoid before applying for home loan

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The home loan is the biggest liability one takes in his/her lifetime. Getting it right is a must as it helps you in achieving your dream of owning your house with minimal trouble. Borrowing money is a big task and the first exposure to credit for many comes through the use of credit cards.

Here are three mistakes associated with credit card usage that you must avoid if you intend to apply for a home loan.

Defaulting on your credit card bill

This could be the worst possible thing that can happen to you. If you default paying the credit card bill, it will show that you do not have money to even service your short-term liabilities. When you are going to apply for a large loan such as home loan even a ‘I simply forgot to pay’ can cost you dear. The credit officer may simply choose to play safe and deny you home loan.

“Do pay your entire bill outstanding before the due date,” says Sukanya Kumar, founder and chief executive officer of RetailLending.com. Timely payment of your credit card bills and other loans also boost your credit score, popularly known as CIBIL Score. A high credit score fetches you better terms of housing loan. A low credit score may deny you a home loan or may make you borrow at a high rate of interest.

High credit utilisation ratio

“A high credit utilisation ratio indicates credit hungry behaviour. Also, high usage of credit card limit reduces your home loan eligibility,” says Ranjit Punja, co-founder and chief executive officer of CreditMantri. Credit utilisation ratio is arrived at by dividing the credit outstanding by the credit limit. A number in excess of 30 percent is seen as high usage of credit.

Sustained high credit utilisation ratio is pursued as need for credit even to meet daily expenses. It also affects your credit score. “When you intend to go for a home loan, try to cut down your credit card outstanding and other loans. It will improve your eligibility for the home loan,” says Ranjit Punja.

Cash withdrawal

This could be the worst possible thing you can do while using a credit card. Cash withdrawal on a credit card is the costliest resort to raise cash. “If you have withdrawn cash using a credit card, then the credit officer of the bank may deduce that you are going through a massive cash crunch,” says Sukanya Kumar. Your home loan may be denied.

Cash withdrawal on credit cards attract one-time charge. The interest calculation begins from the date of withdrawal. This is a double whammy and should be avoided at any cost.

You should be utmost prudent while using your credit cards and repaying other loans for many months before you apply for home loan.

Disclaimer: The views and investment tips expressed by investment experts are their own and not that of the website or its management. Users are advised to check with certified experts before taking any investment decisions.

Source: Moneycontrol.com

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Three factors that ask for a switch away from small and mid-cap funds

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

Listen to the Article (6 Minutes)

Small and mid-cap funds have been the preferred choice of many when it comes to mutual fund investing. By the end of CY2017, returns in excess of 30 percent ensure top of the returns-chart placement for these funds which in turn ensured sustained inflows from investors, especially first timers. No wonder some of them have loaded up their portfolios with small and mid-cap funds to the hilt.

Here are three parameters that indicate that you have gone overboard with the small and mid-cap funds and some expert advice on how to handle the situation.

You have invested more than 30 percent of your money in small and mid-cap funds

“Sometimes investors get influenced by the short-term performance and load up a particular type of scheme in their portfolios and sometimes market movements change the portfolio mix,” says Nishant Agarwal, Managing Partner & Head – Family Office, ASK Wealth Advisors. As mid cap funds offered much higher returns than the large cap funds the weight of mid and small cap funds rose against the weight of large cap funds. In CY2017 large cap funds as a category delivered 30% returns, whereas mid cap funds on an average delivered 43% returns.

The relative outperformance has attracted many novice investors to the mid and small cap funds. But it is followed by increased anxiety in investors’ minds. Agrawal recommends limiting the exposure to mid and small-cap funds to 30 percent of the total corpus.

One should do his risk profiling before investing in equity mutual funds. “An aggressive investor should allocate 70% of his money in equity and rest to debt. Out of his equity exposure maximum 20% can be invested in mid and small cap funds,” says Renu Pothen, head of research, fundsupermart.com.

So put it straight, if you have more than 30% of your money in mid and small cap oriented mutual funds and you are worried about your portfolio, it is time to review your portfolio.

“Given the recent weakness in mid and small cap stocks, it does not make sense to sell off. Instead make up your mind to hold on to them,” advises Renu Pothen. She recommends stopping some of your systematic investment plans (SIP) in small and mid-cap funds, if all your money is going into more than two such schemes. Instead initiate SIP in large cap and multi cap funds. Large cap oriented equity mutual funds make the core of any equity portfolio, Renu Pothen reiterates. She is not alone.

“If your portfolio tilts towards mid and small cap funds. New SIP can be started in large cap funds to correct the imbalance,” says Agarwal.

You have invested short term money in small and mid-cap fund

By now, you must have realised that it is a dangerous idea to fund any short term goal with investments in volatile investment avenues such as equity funds. “If you are keen to invest in small and mid-cap funds you should ideally have a time frame of around 10 years,” says Tanwir Alam, founder and CEO of Fincart.com.

If you have saved money to pay for your child’s school fee due next year, do not dabble with that money in small and mid-cap funds, for that matter any equity fund. That money should be parked in a liquid fund or a bank fixed deposit.

“You should be matching your investments with your financial goals. Invest money in equity mutual funds if and only if you have a long term financial goal such as retirement, child’s higher education etc. which is due more than 10 years from now,” says Tanwir Alam. Even in that case he asks investing at least 60% of one’s money in large cap oriented equity funds.

You have lost sleep at night because of your investments in small & mid-cap funds

If the recent fall in the market has led to loss of peace of mind, then you may not be cut for it. Not that all successful investors do not get worried when the market falls, but they may not be losing their sleep at night. All the investments and financial planning is aimed at achieving financial freedom and peace of mind.

If you have lost your sleep due to the volatility in the small and mid-cap space, it is definitely time to act. The best expert to go to on this issue is Jesse Livermore, the legendary trader in USA. In the thinly disguised biography of Jesse Livermore – ‘Reminiscence Of A Stock Operator’ the best advice comes by, “Sell Down To The Sleeping Point.”

Small and mid-cap funds make a strong case for inclusion in aggressive portfolios, provided one lets them run for long term.

Source: Moneycontrol.com.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow