Tag: mutual funds

Here’s what experts have to say about zero expense mutual fund schemes

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

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Like Fidelity Zero Index Funds, can zero expense mutual fund schemes work in India?

Recently, Fidelity Investments launched new mutual fund schemes with zero expenses for retail investors in the US. These schemes are known as Fidelity Zero Index Funds. According to a company press release, these are the first-ever zero expense ratio self-indexed funds for retail investors available in the market.

At Moneycontrol, we spoke to some of the experts in mutual fund industry to know whether Indian AMCs are equipped to launch such zero expense mutual fund schemes or spin-off something similar in near term for retail investors. Let’s look at their opinions on this subject.

Expert Take: Zero-fee mutual funds are a non-starter and unsustainable in the long run

In India, Sebi has been making efforts to make mutual fund investment a viable proposition in India. Archit Gupta, founder and chief executive officer ClearTax said, “The fund houses are working hard to bring down the expense ratio and to increase the take-home returns of investors. As regards Index funds, coming up with zero expense mutual funds can be thought of as practical thing. But applying the same in case of actively managed funds would be challenging and might even be unsustainable in the long run.”

Kunal Bajaj, founder and chief executive officer, Clearfunds said, “The revenue model for zero expense mutual funds is to earn stock lending fees on the underlying holdings. The stock loan market is practically non-existent in India, so zero-fee mutual funds are a non-starter.”

Kaustubh Belapurkar, director manager research, Morningstar added, “We don’t think we will be seeing zero expense mutual funds from an Indian context anytime soon. This funds would typically be launched for passive strategies like index funds or ETFs. That said there are already several index ETFs that have an expense ratio in the range of 5-10 bps which can be considered as an alternative to zero-fee mutual fund schemes to invest in Indian market.”

In case Indian AMCs do offer zero expense funds. Should investors invest?

Anyhow, even if the fund houses come up with such a proposition, investors should not take impulsive decisions to invest in zero-expense funds. Navin Chandani, chief business development officer, BankBazaar.com said, “Investment decisions should be based on a number of factors, the most important being the investment goal, the investment duration, the risk appetite, and the historical performance of the fund. While the expense ratio is a criteria, it should under no circumstance be the over-riding factor for an investment decision.”

Expenses are an important consideration, but firstly you need to consider the return net of expenses that a fund can generate. Belapurkar said, “Indian Mutual Funds have traditionally produced a significant amount of alpha over the benchmark. Thus, active investing is more prevalent in India as compared to markets like the US where passive investing is garnering a lion’s share of flows. Thus from an Indian context currently as things stand evaluating funds from a risk adjusted basis is a more useful barometer.”

For parameters, an investor should evaluate while investing in mutual funds Bajaj recommended: “The right way to invest in a mutual fund is first to pick the right fund, and then select the lower-fee direct investment option not the other way around.”

For Indian investors preferring to invest in passively managed funds, Manish Kothari – director and head of mutual funds, Paisabazaar.com recommended Indian index funds and ETFs over zero expense funds for two reasons.

First, zero cost funds like those launched by the Fidelity follow their own in-house indices whereas Indian index funds and ETFs follow broader market indices. This makes existing Indian ETFs and index funds more transparent than Fidelity’s exchange funds. Second, the expense ratios of many Indian ETFs and direct plans of index funds are already as low as 0.05 percent, making them as good as zero cost funds.

Also, a newly-launched fund would lack a track record and you would have to rely on the past performance of the fund manager. Gupta explained, “If the newly launched ‘zero expense ratio fund’ is offering you a unique benefits which are not available in existing funds, then you may think of giving it a shot. Otherwise, you would be better off in sticking to the existing fund which has a known track record and good performance history.”

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

Mutual Funds Performance Last Week: All you need to know

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

Listen to the Article (6 Minutes)

It was an eventful week for the markets. BSE (Bombay Stock Exchange) announced that it’s Mutual Fund platform BSE StarMF processed 98 lakh transactions totaling Rs. 50,400 Crore in the first 4 months of the ongoing Financial Year. RBI hiked repo rate by 25 basis points (bps) to 6.5%. This was second continuous rate hike by the Central Bank. India’s June infrastructure output grew at a 7-month high of 6.7%.

WHAT WORKED BEST?
The Equity markets continued there positive trend this week. BSE Sensex and NIFTY were up by 0.59% and 0.74% respectively over the week. Small Cap and Mid Cap Indexes outperformed the large-cap index and were up by 2.33% and 1.85% respectively. Pharma & healthcare was the sector of choice as 4 of the Top 5 performing funds were from that sector.

Top 5 Best Performing Funds Last Week:

WHAT INVESTORS BOUGHT?
We saw the most inflows last week in these 5 schemes

Manvendra Singh Rathore is an analyst at Kuvera.in., a free direct plan mutual fund investing platform

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

All that you need to know that happened last week in Mutual Funds

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

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History was made this week as BSE Sensex made another all-time high crossing the 37,000 level on the way. Recovery in SmallCap and MidCap stocks came as a relief to investors. HDFC AMC IPO was the other hot topic of the week – the issue was 83 times oversubscribed beating all market estimates. This further signifies the overall positive outlook for Mutual Fund Industry in India.

What worked best?

It was a positive week for Equity Markets. BSE Sensex and NIFTY went up by 2.30% and 2.44% respectively over the week. Smallcap and Midcap Indexes outperformed the large-cap indexes as Bse Smallcap was up by 4.64% and BSE Midcap was up by 4.71%.

Source- BSE/NSE

Top 5 Best Performing Funds Last Week:

Source – Kuvera.in

What investors bought?

We saw the most inflows last week in these 5 schemes –

Source – Kuvera.in

Movers and shakers at Fund House:

1. Invesco announced that its India Liquid fund will now be co-managed by Krishna Cheemalapati and Abhishek Bandiwdekar.

2. DSP BlackRock Mutual Fund announced Mr Gopal Agrawal’s appointment to the post of Senior Fund Manager and Head, Macro Strategy.

In other news:

1. Much awaited, HDFC AMC’s IPO was a great success as the issue was oversubscribed by 83 times.

2. SENSEX reached an all-time high during the week and crossed the 37,000 mark for the first time. The index ended the week at 37,336.85

3. Reports emerged that Samco Securities and Equity Intelligence India have applied with SEBI (Securities and Exchange Board of India) for license to launch their own Mutual Fund businesses.

Quote of the week

“Invest for the long-term.” – Lou Simpson

Manvendra Singh Rathore is an Analyst at Kuvera.in: India’s first completely free Direct Mutual Fund investing platform. He is on a mission to make wealth management accessible to all. He is passionate about Mutual funds, Equity Markets and Technical analysis.

Gaurav Rastogi is the CEO of Kuvera.in: a free direct mutual fund investing platform. Gaurav managed a pan-Asia quantitative portfolio for Morgan Stanley before he started Kuvera.

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

Five things you need to know before investing in ELSS

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

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Among the various options that are available to save tax, one of the most promising is equity-linked savings schemes (ELSS).

ELSS are diversified equity mutual funds that invest a major chunk of your money in equity and equity-related securities. The fund manager looks for securities of companies which have a strong growth potential and a resilient business model.

ELSS funds offer you a convenient way to avail tax advantage coupled with trying to generate higher returns by harnessing the potential of the equity markets.

Investing in ELSS funds makes you eligible to avail tax deduction of up to Rs 1.5 lakh under section 80C of the Income Tax Act, 1961.

Things to keep in mind as an investor

ELSS funds happen to be the most efficient way to grow wealth and enjoy tax benefits. However, there are certain things you need to keep in mind before investing in ELSS.

1. Good way to get exposure to equity markets

It might be possible that you desire to invest in equities but don’t know where to start. Try ELSS funds as your first step. As compared to directly investing in stock markets, ELSS funds are an ideal way to get exposure to equities.

Along with professional fund management, you get the benefit of a well-diversified portfolio at a nominal initial investment. You may initiate a systematic investment plan (SIP) of as low as Rs 500 and stay tension free from timing the market.

One thing that you need to be aware of is that ELSS comes with a lock-in period of three years. In case you can block your surplus funds for such period, ELSS funds is a wonderful way to enjoy potential of equity stocks.

2. Lock-in period of investment

Among all other tax-saving products offered under Section 80C, equity linked savings schemes (ELSS) has the shortest lock-in period. It has a lock-in period of 3 years which means that you cannot redeem your investment before completion of 3 years. Comparatively, a Public Provident Fund (PPF) has a lock-in period of 15 years and National Savings Certificate (NSC) comes with a lock-in period of five years.

Having said that, you should not perceive ELSS funds as a short-term investment haven. ELSS, being an equity investment, need you to have a long-term investment horizon of at least 7 to 10 years. Additionally, you have to be goal-oriented while investing in ELSS funds to ensure that you can make the most of the investment.

3. Risks involved in investment

ELSS funds invest mostly in equity stocks of companies. Equity funds carry a higher risk of fluctuation in Net Asset Value (NAV). Owing to this, ELSS funds may seem a risky proposition to a budding investor. However, this should not deter you from taking the benefit of such investments.

All you need to do is stay invested for a longer investment horizon. As compared to other asset classes, equity funds have found to give above average returns in the long run. It does this by overcoming the volatility which the fund returns undergoes in the short run.

4. Maximum tax exemption limit

Section 80C is an extensive section which includes numerous investment avenues, like Employees Provident Fund (EPF) and life insurance policy, that are eligible for tax deduction. The maximum tax exemption limit available under Section 80C is Rs 1.5 lakh. If you have already claimed some of the exemption via other investments, then your entire investment in ELSS may not be available for deduction. Thus, before finalising your investment amount do remember to perform some basic calculations to make an informed decision.

5. Expectation of maximum returns

Being an equity-oriented investment, ELSS funds have the potential to generate higher returns than other investment avenues. But you cannot be unrealistic about returns on investment. Moreover, there are no guaranteed returns in equities. The fund performance may vary across different time horizons. Only when you stay invested for a longer investment horizon, could you hope for higher returns.

Conclusion

The best way to approach ELSS funds is to make a detailed plan at the start of the financial year. Don’t postpone your tax-saving investments late in the year. A goal-oriented and planned approach will help you to select the right ELSS fund that suits your requirements.

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

37,000 and counting: Five factors that are pushing Sensex to record highs

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

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It is redeeming to see that the Nifty and the Sensex are cruising at record highs, something we predicted quite early in July 2018. The new highs have come about on the back of sustained inflows into mutual funds.

This asset class has replaced FIIs as the prime movers of the markets. MF SIPs are handy to absorb the selling pressure by FIIs, who have been net sellers in this calendar year.

It is interesting to see retail investors displaying maturity by continuing with their SIPs despite the turmoil in mid and small-cap stocks.

With the assets under management (AUM) of MFs being less than 12 percent of our GDP, there is ample room for them to increase. A developing economy like South Africa has an AUM to GDP ratio of 54 percent.

Here are some reasons for why Indian markets are at record highs:

Financialisation of savings:

Technology has enabled the banking and financial services sectors to penetrate rural areas, and the trend of moving from physical assets to digital/financial assets is fast catching on.

This should channelise more savings into equities, as the percentage of money going into this asset class rises from the current 1.2 percent of the Gross National Disposable Income.

Earnings catching up:

Earnings are also catching up fast. The Nifty earnings, which grew at a CAGR of 3 percent between 2013 and 2017, increased by 8.5 percent in FY18, and this year, the growth is likely to be in high teens. This should make valuations look comfortable.

Crude Oil:

Crude oil has fallen 8 percent from its recent high of $ 80 a barrel. This augurs well for our economy. The rupee remains a concern but is likely to be tethered if crude continues to behave.

Mid-cap and small-cap recovery:

The mid-cap and small-cap space has borne the brunt of re-categorization of MF schemes, additional surveillance measures, and stretched valuations in recent times. With the improvement in earnings, we believe select mid-caps and small-caps are on track for decent recovery in the next 12 months.

Political Jitters:

Political jitters have also reduced after the no-confidence motion against the government fell through earlier this month.

What is the way ahead?

Investors should remain in large-cap stocks with low or no debt, cash flow-positive companies, or invest through SIPs in ETFs or select MFs.

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

Concerned about your SIP returns? Here’s what you need to know

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

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With the Sensex and Nifty touching new highs over the last few days, your equity portfolio may not reflect the same. There is a high probability that your Systematic Investment Plans (SIPs) in equity mutual funds over the past 8-12 months may show negative returns. Worried? Don’t be, as this could be the best thing that has happened to your portfolio if you are investing for the long-term.

The last few quarters have seen a deep correction in the mid-cap and small-cap segment, and overall stock market indices have been achieving new highs. This has resulted in investments (including SIP’s) showing low or negative returns, especially if the SIP’s were initiated in the last 3-4 quarters.

The correction in 2018 is mainly led by mid- and small-caps, the Nifty Mid and Small Cap indices have fallen more than 11 percent and 19 percent from their peaks, respectively. Broader indices (such as the Nifty 50, have on the other hand, been in more of a “consolidation” mode, generating flat to positive returns on a point-to-point basis.

As investors, we all hate to see our portfolios give negative returns. While investing is easy these days, creating wealth is extremely tough as we go through such market cycles. There is a saying that “the stock market always rewards patient investors” and it’s at times like this our patience is tested.

The silver lining here is that such market cycles help you create wealth for yourself. The investments you are making (in equity mutual funds) and the way of investing (SIP’s/STP’s) are best suited for you to take advantage of market volatility, especially taking into consideration the time frame of your financial goals (the further away your goal in number of years the higher allocation you would have towards aggressive small and mid-cap funds).

We firmly believe that this is not the first or the last time you will be seeing high market volatility and as financial advisors, we are equally confident that being patient and continuing your investments will ensure you meet your financial goals.

Remember, only when the markets fall is when the opportunity is created for higher returns in the future. With SIP’s you are ideally placed to take advantage of this situation as every time the market falls your monthly investments buy more units in your mutual fund. This will ensure larger returns when the market returns to growth mode.

Consider this real life example of an investor who started a SIP of Rs 10,000 per month in Franklin India Prima Fund in January 2010 (fund value today: 21.76 lakhs versus a total invested principal of Rs 9.6 lakhs). The following is only one of several examples of how depressed equity markets during an accumulation phase have paid off richly by creating wealth over six to eight-year time frames.

Market movements are not in our control, however, by making sure your investments are in the right mutual funds as per your risk profile, and through SIP modes, not only reduce risk but ensure that you meet your important financial goals by averaging out (by buying more units when the markets fall).

Although it doesn’t sound good, the best thing to happen to your investments in the initial (accrual) stage is low market returns because that will make a significant difference to your portfolio in later stages when you are close to achieving your goals.

This is where focusing on long-term investment goals provide strength and patience to not get carried away by short-term market movements. Greed and fear are your biggest enemies when it comes to meeting long-term goals. This is not the time to let fear ruin your investment decisions.

The key to success would be to get a good financial advisor who understands your finances and makes investments based on your investment goals.

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

Should you invest in the new mutual funds categories introduced by Sebi?

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

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Mutual funds re-categorisation by the Securities and Exchange Board of India (Sebi) is considered to be a step in the right direction. One of the good aspect of this re-categorisation is that the market regulator has clearly defined mutual funds categories. This makes investors easier to understand the risk return characteristics of a specific scheme they wish to invest.

However within this re-categorisation there is one aspect which may confuse investors. SEBI has introduced some new categories which were not there. In equity mutual funds now you have large and mid-cap category while in debt you have low duration fund or overnight money market funds. Investors may find it difficult to decide how these categories fit in their objective. Which of these categories are an option they should explore further and which one of them is good to give a miss?

Let’s understand few of these categories and see whether they need to be included in one’s portfolio:

Equity

In equity mutual funds you have now largecap, large and midcap, multi-cap, midcap and smallcap categories along with sector and equity linked savings schemes (ELSS) funds. SEBI has clearly defined where these categories of mutual funds scheme can invest. A largecap category will invest in top 100 stock stocks as per market capitalisation. Similarly, a midcap category will invest in 101-250th stocks while smallcap category will be invested in 251st company onwards as per market capitalisation.

Before re-categorisation we had largecap, multi-cap and midcap categories for investors. A largecap category predominantly invested in largecap stocks but the largecap universe was not well defined. A mutual fund company could include stocks beyond top 100 stocks. In a midcap mutual fund scheme a smallcap stock could find a place or vice versa. Thus the decision of involving a stock in a particular category was with asset management companies (AMCs) and that’s where it made all the difference. To enhance a scheme returns companies use to consider exposure in such stocks beyond the mandate of the scheme.

Now SEBI has defined each and every category along with the universe of stocks they can invest. So post re-categorisation a largecap mutual funds scheme has to hold minimum 80 percent in largecap stocks and the stock can be included only from top 100 companies as per market capitalisation. Thus it leaves no decision making to AMC going beyond this definition of largecap fund.

Within this re-categorisation one more category has been introduced i.e. large- and midcap fund. As per its definition, this category has to invest minimum 35 percent in largecap and midcap stocks each, while the rest can be invested either way. Beyond 75 percent a fund manager is free to vary the allocation. If you consider the allocation then it’s similar to a multi-cap fund. The difference within these two categories is that multi-cap fund is not restricted to a strict allocation between large- and midcap stocks. The only condition is that it has to adhere is to invest minimum 65 percent in equity-related instruments.

Debt

Similar to equities we too have some new categories in debt mutual funds scheme. We have now an overnight fund which will invest primarily in securities with 1 day maturity. Then we have a low duration fund which falls between an ultra-short term fund and short term funds. This fund mandated to invest in securities with Macleay duration of 6 months to 1 year. Before re-categorisation an ultra-short term funds was investing in securities up to one year maturity but now an ultra-short term fund is restricted to invest in securities up to six months maturity.

Should you invest?

Now comes the difficult question – should you invest in these new categories. Though it’s still early days to comment on the change in performance but surely the change will come in. We might see difference in returns of large cap mutual funds scheme from different companies reducing since the underlined investment universe Is strictly restricted now. On the other side multi cap funds may shine in the future since they will have all the flexibility to diversify among stocks from different categories. Similarly small cap funds will be the category to watch out for since they can invest in a wide list of stocks. But one category which may be good to miss is large- and midcap. One can create the same diversification with largecap and midcap schemes separately or invest in multi-cap if looking for better results.

Similarly, in debt mutual funds, investors should not rush to include new categories like low duration funds as an ultra-short term fund may still meet the objective.

In nutshell, every category is not made for inclusion in your portfolio. It’s wiser to stick to funds with performance track record and keep an eye on the performance of new categories before you make a decision.

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

HDFC Mutual Fund’s schemes vs HDFC MF IPO: Where should you put your money?

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

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After decades in the business, fund houses are moving forward with monetising their asset management businesses. Why now?

Reliance Nippon Asset Management hit the market last October with a Rs 1,500-crore IPO. HDFC Mutual Fund’s IPO is coming out this week and indications are that a UTI AMC IPO will be next.

Clearly, the asset management business (AMC) is booming, and managements are moving to unlock value for existing investors. The growth trajectory of the domestic mutual fund industry has accelerated in the recent quarters at the back of structural reforms, reduction of black money, lackluster performance in real estate, and investors are being nudged into equities.

Domestic investors have pumped money into financial assets, leading to rapid AUM growth for fund houses. Despite this recent acceleration, the penetration of mutual funds among households is still dramatically lower than developed markets, at less than 5 percent of financial savings.

Indian mutual fund’s share of financial savings is extremely low as well, at 3.5 percent of financial savings. The industry could grow at high growth rates of 20 percent over the next four years, in which case blue-chip names like HDFC should grow even faster.

Profitability growth is another matter, however, and we address that separately below.

The HDFC AMC IPO is all set to get a valuation of close to 8 percent of its AUM of Rs 3 lakh crore. This is at the extreme high end of the traditional band as AMCs have traditionally received valuations as low as 2-3 percent of their respective AUMs.

Reliance’s valuation today is Rs 13,341 crore, or roughly around 5 percent of its AUM. IDFC’s AMC is being negotiated at a valuation of around 5 percent of its AUM, at a premium to norms but a discount to HDFC, due to the latter’s superior market positioning, branding, and execution.

Promoters are monetizing their AMC businesses at high valuations amidst strong sentiment; on the other hand, the growth opportunity is huge, as financialization is likely to continue and AMC remain well positioned to garner a large share of the profits.

For an investor what is ideal? Is it better to own shares of HDFC Asset Management or units of one of HDFC Mutual Fund’s schemes?

HDFC AMC’s revenues have grown at a compounded annual rate of 19.3 percent and profits at 14.6 percent between fiscal 2013 and fiscal 2017.

One must keep in mind, though, that AUM growth is cyclical in nature. During bull markets, growth is accelerated by returns on existing asset base and new capital infusions.

However, AUMs tend to reverse sharply during bear markets and corrections. A reversal in investor appetite for investing in mutual funds is a key risk of ownership.

As a result, the stock price of an asset management company will be somewhat volatile and will have a tendency like a cyclical during cyclical downturns. From this perspective, owning a diversified growth portfolio clearly makes better sense.

We would also note that there are headwinds in the industry. With the increasing adoption of the direct code, profitability is in a declining trend. Industry disruption via fintech also creates uncertainty.

Continued underperformance of funds relative to the benchmark could also lead to a slowdown in asset growth.

Clearly, valuations are the key concern. HDFC Asset Management Company is seeking a valuation more than twice that of its close rival Reliance Mutual Fund in its offering last year at close to 8 percent of its AUM. High entry valuations will remain a headwind for investors.

Taking the various factors into account, for an investor with a long-term horizon, HDFC will likely grow into its valuations.

Cyclicality and valuation concerns are balanced by the prowess of HDFC in garnering assets, as well as its better financial performance relative to peers.

However, an investment in the mutual fund is a wiser investment for an investor. If the mutual fund owns a leader like HDFC AMC, even better.

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

Why liquid mutual funds are a better option than bank deposits

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

Listen to the Article (6 Minutes)

What are Liquid Mutual Funds?

Liquid Mutual Funds are a type of Debt Mutual Fund, that loans money against very short term high quality bonds issued by RBI, state governments, other banks, and even publicly listed corporates.

Indian TV audiences aren’t new to #MutualFundSahiHai campaign one of which ends with a well-wishing dude telling his friend how he can keep money in mutual funds for shorter time duration, like 3-6 months. That’s what a Liquid Mutual Fund is suited for.

Bank deposits are liable to income tax on interest earned

For a Bank FD or a savings bank account credit interest earned is liable to taxes (see line 26AS in the ITR form). The bank will deduct TDS on your behalf and you’re liable to pay tax as per slab rate (20 percent and 30 percent) and settle the difference with IT department as Self-Assessment Tax.

How does it feel to pay taxes from your own pocket, on paper gains, while the fixed deposit remains intact?

There is an alternative – Liquid Mutual Funds.

How are liquid mutual funds better?

1/ Past-tax annualised returns are higher:

Returns are usually in-line with bank FDs, but since there’s no tax until you redeem, post-tax returns are hands down better than most bank deposits.

Let’s run some numbers. We take category average of Liquid Funds in last 1-Year, which at the time of writing this, stands at 6.95 percent.  And, let’s assume you’re in 30 percent tax bracket had an FD of Rs 10,00,000 created 1 year ago, and your bank offered you 7 percent FD.

For your Bank FD you effectively got a post-tax return of 4.82 percent. The tax liability (TDS and Self-assessment Tax in the table above) affects compounding. The amount available in deposit for compounding is less than what’s available in the liquid fund. And as years go by, the gap widens more.

With liquid funds, only capital gains tax apply and that too at the time of redemption. If you withdraw your holdings after 3 years of holding period, you also get indexation benefit to reduce your tax liabilities.

2/ There is no exit penalty:

True to its name, it’s liquid, you can add any amount or withdraw any amount, without any exit penalty, unlike any Bank FD which has an early redemption fee. Some fund houses even offer instant redemption up to 50,000 or 90 percent of your total investment in the fund.

Top five liquid mutual funds by 3Y returns are:

INDIABULLS LIQUID GROWTH DIRECT PLAN

ESSEL LIQUID GROWTH DIRECT PLAN

BARODA PIONEER LIQUID B GROWTH DIRECT PLAN

JM LIQUID GROWTH DIRECT PLAN

PRINCIPAL CASH MANAGEMENT GROWTH DIRECT PLAN

The above benefits make Liquid Mutual Funds a better alternative to bank deposits to park short term money or emergency fund.

Risk disclaimer – Mutual fund investments are subject to market risks, and one should read all scheme related documents before investing in a fund.

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

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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