ELSS Funds – Best ELSS (Tax Saver) Mutual Funds to invest in 2020

Posted by Rushabh Mehta | Published on 17 Feb 2020
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ELSS Funds – Best ELSS (Tax Saver) Mutual Funds to invest in 2020

As another financial year is coming to an end, most of you would be busy with tax planning and looking for the most tax-efficient investment avenues. Though there are many tax saving options available for investments, Equity Linked Savings Scheme (ELSS) is one of the best options, as it has the potential to offer higher returns along with tax savings. Under Section 80C of the Income Tax Act, the maximum limit for tax benefit is Rs 1.5 lakh per year so that investors can invest up to Rs. 1.5 lakh in ELSS funds for tax exemption.

ELSS is an open-ended diversified equity fund that invests more than 80% of the corpus in equities, and they come with a mandatory lock-in period of 3 years. Compared to other tax saving investment options, ELSS funds have the shortest lock-in period, and they also have the potential of higher returns as ELSS  invest in equities, which can generate higher returns over the long-term. In short, ELSS offers dual benefits of tax exemption and also capital appreciation.  Investments in ELSS funds can be done either in lump-sum or by starting a SIP.  You can start a SIP with a minimum amount of Rs 500 per month. Even though the tax-exemption is only for Rs 1.5 lakh, there is no maximum limit for investment, which can be made in ELSS.

 

Advantages of investing in ELSS, tax-saving mutual funds

  • Amongst all the investment options available under Section 80C, ELSS mutual funds have the shortest lock-in period of 3 years
  • As these funds are invested in equities, they have the potential to generate higher returns as compared to other instruments like PPF, NSC, etc
  • There is no upper limit for investment
  • Experts professionally manage the funds so investors need not have to worry about gaining expertise of equity markets

Some of the essential points to consider at the time of choosing the best ELSS funds are:

 

Past performance of the fund

At the time of investing in ELSS mutual funds, it is vital to take into account the past performance of the scheme. However, at the time of seeing the past performance, you should go for schemes that have consistently given higher returns and beaten the benchmark and its peers over the longer-term.  So, instead of looking for the performance over 1 or 2 years, choose funds with consistent returns.

Ratings of Fund

It is essential to look at the ratings of the funds, but a 5-star fund may not always be the best fund to invest as ratings change over time depending on any changes in the scheme's portfolio, and it may not provide the desired returns.

 

Diversification

Equities give the best returns if you stay invested for a longer-term. As ELSS is an equity scheme, you should invest your money in well-diversified schemes that invest their corpus across different industries and sectors for best returns.

 

The expense ratio of the fund

It is the cost of managing the fund and has a significant impact on the overall returns of the fund. A lower expense ratio translates into a higher return. So, it is essential to choose a fund with a lower expense ratio along with returns.

 

The time horizon for investment for tax-saving funds

The lock-in period for ELSS mutual funds is three years, which is the shortest as compared to other tax-saving options. However, staying invested in equities for a longer-term fetches the best possible returns. So, even though it has a lock-in period, you can remain invested in them and let your investment grow and if need be, you can withdraw your units partially or fully after three years.

 

To invest lump-sum or through SIP

ELSS mutual funds give you the flexibility to plan your tax-saving investment either in a lump-sum amount or through SIPs. SIP route is recommended for someone who carries out his tax planning all through the year.

 

Top 10 tax-saving mutual funds to invest in 2020

Here is the list of top 10 ELSS funds which experts at IndiaNivesh recommend for investment in 2020

Source: Moneycontrol. (Data as on Feb 2020)


ELSS investments are important for your tax planning and also for wealth creation in the long term. Open a Demat account with IndiaNivesh and get our expert advice and guidance for all your investment needs.

 

Disclaimer: Investment in securities market / Mutual Funds are subject to market risks, read all the related documents carefully before investing.

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SIP – Different Types of Systematic Investment Plans in India

Posted by Mehul Kothari | Published on 15 Jan 2020

Mutual funds now are a household name and building a mutual fund portfolio is synonymous with wealth creation. As the mutual fund industry continues to grow leaps and bounds, SIPs are considered one of the key growth drivers for this industry. SIPs help the investors to invest in a systematic and disciplined manners. Online SIP investments starting with Rs 500 per month (for few schemes min SIP amount is as low as Rs. 100 per month); digital distribution and hassle-free onboarding of investors, all have resulted in making an investment for SIPs most favoured investment option. To stay relevant with times and improvise their offerings, AMCs now offer many different types of SIP so that investors can choose the most suitable type of SIP for investment best suited to their individual needs and profile. Here are the different types of SIP investment available for investors- 1. Regular SIP One of the simplest and easiest forms of SIP investment is a regular SIP, wherein you invest a fixed amount at regular intervals. The time interval can be monthly, bi-monthly, quarterly or semi-annually. You can also choose daily or weekly SIPs, though it is not recommended in most cases. When you make your first SIP payment, you are required to choose your desired time interval, amount of the SIP and the tenure of the SIP. In a regular SIP, you cannot change the amount during the tenure of the investment. If you are a salaried employee, choosing a monthly SIP, usually in the first ten days of the month, once your salary is credited to your bank account is highly recommended. 2. Step-up SIP Without a doubt, SIPs help brings about financial discipline in your life. Over time, as your earnings increase, it is important to increase your investments as well so as to keep them aligned with your income level and financial goals. A step-up SIP, also termed as a top-up SIP, is an automated solution to increase your SIP contribution either by a fixed amount or a fixed percentage after a specific time. Using Step-up SIPs will help you reach achieve your goals faster and also help in long-term wealth creation. 3. Flexible SIP For investors with irregular income, even after being well aware of the benefits of SIPs, the biggest reason for not starting a SIP is not being able to keep up with the fixed periodic investments. A flexible SIP is a perfect solution for such investors as it gives the flexibility to start, pause, decrease or increase your SIP. Depending on your flow of funds, you can change the SIP amount seven days before the SIP date. In case, there is no intimation of change, then the default amount entered is deducted for the SIP. 4. Perpetual SIP Normally, when you choose a regular SIP, it has a fixed tenure, with a starting date and an end date. But, if you are unsure about how long you want to continue the SIP, you can opt for a perpetual SIP. In case of a perpetual SIP, you leave the end date column blank and you can redeem your SIP once you have reached your financial goal. If you opt for a perpetual SIP, then it is important that you monitor the returns of your investment, to keep a track of the fund’s performance over time. 5. Trigger SIP A trigger SIP is for seasoned investors, who have sound knowledge of the financial markets and are accustomed to tracking the market performance daily. Using a trigger SIP, an investor can choose an index level, a particular event or NAV to start the SIP. An investor can set trigger points for upside and downside conditions and can redeem the amount on achieving the pre-specified target. Investors can oscillate their investments between debt and equity schemes within the same fund house. A trigger SIP is recommended only for investors who have a thorough understanding of financial markets. 6. SIP with Insurance Insurance is an important part of financial planning. In order to make mutual fund offerings more lucrative, certain fund houses offer free insurance cover if you opt for SIPs with a longer duration. The initial cover is usually ten times the first SIP and gradually increases over time. This feature is only for equity mutual fund schemes. The term insurance offered is just an add-on feature and does not impact the performance of the fund. 7. Multi SIP The multi-SIP enables starting SIP investment in multiple schemes of a fund house through a single instrument. This facility can help investors to build a diversified portfolio. Investors can start SIP in various schemes using a single form and payment instruction, thereby reducing the paperwork involved.   CONCLUSION Over the last few years, SIP returns have earned investor confidence and are the most preferred investment option of retail investors. If you are unsure on how to choose the right SIP for you and want correct guidance, then consult our expert financial advisors at IndiaNivesh for best-suited SIPs for investments.

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डीमैट खाता - अर्थ, सुविधाएँ और लाभ | इंडियानिवेश

Rushabh Mehta द्वारा पोस्ट | 27 Feb 2020 को प्रकाशित |

<p><strong>डीमैट खाता परिचय:&nbsp;</strong></p> <p><span style="font-weight: 400;">शेयर बाजार में निवेश और व्यापार इन दिनों बहुत लोकप्रियता हासिल कर रहा है। लेकिन आप उचित सदन के बिना शेयर बाजार में निवेश या व्यापार नहीं कर सकते। स्टॉक मार्केट में निवेश करने के लिए आपको डीमैट अकाउंट या डीमैटरियलाइजेशन अकाउंट की जरूरत होती है। शेयरों को खरीदने और बेचने के लिए इस खाते का होना प्राथमिक आवश्यकता है। भारत में, दो डिपॉजिटरी हैं जो डीमैट खाते की सेवा प्रदान करते हैं: नेशनल सिक्योरिटीज डिपॉजिटरी लिमिटेड (एन एस डी एल) और सेंट्रल डिपॉजिटरी सर्विसेस लिमिटेड (सी डी एस एल)। आप इंटरमीडीआईएस या डिपॉजिटरी प्रतिभागियों या स्टॉक ब्रोकॅस के माध्यम से इन दो डिपॉजिटरी द्वारा प्रदान की गई सेवाओं का लाभ उठाकर खाता खोल सकते हैं। इस लेख में, आपको डीमैट खाते और उससे संबंधित जानकारी सीखने को मिलेगा!</span></p> <p><span style="font-weight: 400;">सबसे पहले, हम डीमैट खाते के अर्थ के बारे में जानेंगे।</span></p> <p><strong>डीमैट अकाउंट क्या है</strong></p> <p><span style="font-weight: 400;">डीमैट अकाउंट या डीमैटरियलाइज्ड अकाउंट एक ऐसा अकाउंट होता है, जो उन शेयरों और सिक्योरिटीज को होल्ड करता है, जो आपके पास इलेक्ट्रॉनिक रूप में होती हैं। आप </span><span style="font-weight: 400;">ऑनलाइन डीमैट अकाउंट</span><span style="font-weight: 400;"> के माध्यम से शेयर खरीद या बेच सकते हैं। यह एक बैंक खाते की तरह है जो एक जगह पर आपका पैसा रखता है। इस खाते में, आपके सभी शेयर, म्यूचुअल फंड, सरकारी प्रतिभूतियां, बॉन्ड और एक्सचेंज-ट्रेडेड फंड एक ही स्थान पर होते हैं।</span></p> <p><span style="font-weight: 400;">डीमैट खाते की जानकारी को समझते हुए, आप "डिमैटेरिएजेशन" शब्द के पार आ गए होंगे, आगे अब इसके अर्थ को समझते हैं।</span></p> <p><strong>डिमटेरियलाइज़ेशन का अर्थ:</strong></p> <p><span style="font-weight: 400;">इन्वेस्टर्स के पास जो बोथिक रूप के शेयर सर्टिफिकेट्स को इलेक्ट्रॉनिक फॉर्म में कन्वर्ट करने की काम को देमाटेरिअलिसशन कहते हे! डीमैटरियलाइजेशन के साथ, आपको भौतिक रूप में शेयरों या प्रतिभूतियों को रखने की आवश्यकता नहीं है। डीमैटरियलाइजेशन करके, आप दुनिया भर में कहीं से भी आसानी से अपने डीमैट खाते तक पहुंच सकते हैं।</span></p> <p><span style="font-weight: 400;">आइये अब इस खाते द्वारा दी जाने वाली सुविधाओं के बारे में पढ़ते हैं।</span></p> <p>&nbsp;</p> <p><strong>डीमैट अकाउंट द्वारा दी जाने वाली सुविधाएँ:</strong></p> <ul> <li><span style="font-weight: 400;"> डिलीवरी इंस्ट्रक्शन स्लिप (DIS) की सहायता से, आप आसानी से अपने शेयर दूसरे व्यक्ति को ट्रांसफर कर सकते हैं। लेन-देन की कोई परेशानी नहीं है क्योंकि पर्ची में सभी प्रासंगिक विवरण शामिल हैं।</span></li> <li><span style="font-weight: 400;"> डीमैट खाते में रखे गए शेयर आपको बैंक से ऋण सुविधा प्राप्त करने में मदद कर सकते हैं। आप डीमैट खाते में रखे शेयरों को कोलैटरल (collateral) के रूप में रख सकते हैं और इसके खिलाफ ऋण प्राप्त कर सकते हैं।</span></li> <li><span style="font-weight: 400;"> इस खाते के साथ, आप अपने शेयरों और प्रतिभूतियों को भौतिक रूप से इलेक्ट्रॉनिक रूप में आसानी से बदल सकते हैं।</span></li> <li><span style="font-weight: 400;"> ऑनलाइन डीमैट खाते की उपलब्धता के साथ, आप दुनिया भर में कहीं से भी डेस्कटॉप, लैपटॉप या स्मार्टफोन का उपयोग करके इस खाते के माध्यम से पहुंच और लेन-देन कर सकते हैं।</span></li> <li><span style="font-weight: 400;"> यह आपको इस खाते में रखे गए शेयरों से जुड़े कॉर्पोरेट लाभ उठाने की सुविधा प्रदान करता है। जैसे डिविडेंड, धनवापसी, ब्याज, स्टॉक विभाजन, अधिकार जारी करना, बोनस शेयर आदि कूद बा कुढ़ से अपडेट की जाती हैं।</span></li> <li><span style="font-weight: 400;"> जब खाते के धारक के पास शेयरों और प्रतिभूतियों की एक विशिष्ट मात्रा होती है, तो वह डीमैट खाते को फ्रीज करने की सुविधा का लाभ उठा सकता है। यह किसी भी डेबिट या क्रेडिट से बचने के लिए किया जाता है।</span></li> </ul> <p><span style="font-weight: 400;">यह डीमैट खाते द्वारा दी जाने वाली सुविधाओं के बारे में था, आइए ऑनलाइन डीमैट खाता खोलने के लाभों के बारे में जानें।</span></p> <p><strong>इन्वेस्टर्स को ऑनलाइन डीमैट खाता खोलने के लाभ :&nbsp;</strong></p> <ul> <li><span style="font-weight: 400;"> यह व्यक्तिगत इन्वेस्टर्स को दुनिया में कहीं से भी व्यापार करने की सुविधा प्रदान करता है।</span></li> <li><span style="font-weight: 400;"> इस खाते के साथ, व्यक्तिगत इन्वेस्टर को लेन-देन के व्यापक से कागजी कार्रवाई को बनाए रखने और ब्रोकर को नियमित रूप से देखने की आवश्यकता नहीं है।</span></li> <li><span style="font-weight: 400;"> यह बहुत सुरक्षित है, तेज है और विलंबित बस्तियों जैसी अक्षमताओं को दूर करने में भी मदद करता है।</span></li> <li><span style="font-weight: 400;"> चूंकि इस खाते से व्यापार कहीं से भी किया जा सकता है, यह अधिक ब्याज उत्पन्न करता है और शेयर बाजार में निवेशकों की भागीदारी को बढ़ाता है।</span></li> <li><span style="font-weight: 400;"> इस खाते में रखे गए शेयरों को ऋण प्राप्त करने के लिए कोलैटरल के रूप में स्वीकार किया जाता है।</span></li> </ul> <p><span style="font-weight: 400;">आइए अब इस खाते के लाभों के बारे में किसी कंपनी के दृष्टिकोण से पढ़ें।</span></p> <p><strong>डीमैट खाते का कंपनी को लाभ:</strong></p> <ul> <li><span style="font-weight: 400;"> इस खाते के साथ, कंपनियां एक अधिक पारदर्शी व्यापारिक प्रणाली बनाए रखने में सक्षम हैं जो उन्हें शेयरधारकों को इलेक्ट्रॉनिक रूप से शेयरों को कुशलतापूर्वक स्थानांतरित करने में सक्षम बनाता है।</span></li> <li><span style="font-weight: 400;"> यह कागज के उपयोग को समाप्त करता है जो एडमिनिस्ट्रेटिव फ्रंट का काम आसान बनाता है और कागज पर डेटा को ऑनलाइन संग्रहीत करना आसान होता है।</span></li> <li><span style="font-weight: 400;"> ऑनलाइन डीमैट खाते के कारण, कंपनियों को अब शेयरों को प्रिंट और वितरित करके निवेशकों को देने की आवश्यकता नहीं है। इससे उनका बहुमूल्य समय बचता है।</span></li> <li><span style="font-weight: 400;"> क्युकी शेयरधारकों अब इस खाते का उपयोग कर रहे हैं, कंपनियां आसानी से शेयरधारकों के साथ संवाद कर सकती हैं और आवश्यक जानकारी इलेक्ट्रॉनिक रूप से पारित कर सकती हैं।</span></li> </ul> <p><span style="font-weight: 400;">आइए अब हम स्टॉक ब्रोकर के दृष्टिकोण से इस खाते के लाभों के बारे में पढ़ते हैं।</span></p> <p><strong>ब्रोकरों को डीमैट अकाउंट से लाभ:</strong></p> <ul> <li><span style="font-weight: 400;"> इस खाते की शुरुआत के साथ, ब्रोकर ग्राहकों को बेहतर सेवाएं प्रदान करने में सक्षम हैं क्योंकि अब उन्हें चोरी, खराब डिलीवरी या धोखाधड़ी के बारे में चिंता करने की आवश्यकता नहीं है।</span></li> <li><span style="font-weight: 400;"> इसने निवेशकों की रुचि और भागीदारी को बढ़ाया है। इससे ब्रोकर की कमाई और मुनाफे में बढ़ोतरी हुई है।</span></li> <li><span style="font-weight: 400;"> डीमैट शेयरों के तुरंत और आसान ट्रान्सफर के कारण ब्रोकरों पर भरोसा किया जा सकता है। यह विश्वास बनाने और निवेशकों का विश्वास बढ़ाने में मदद करता है।</span></li> </ul> <p>&nbsp;</p> <p><strong>निष्कर्ष:&nbsp;</strong></p> <p><span style="font-weight: 400;">डीमैट खाता निवेशकों को भारतीय शेयर बाजार में व्यापार और निवेश करने का अवसर प्रदान करता है। इस खाते को खोले बिना कोई भी शेयर बाजार में भाग नहीं ले सकता है। शेयर बाजार में निवेश करने की प्राथमिक आवश्यकता होने के नाते, शेयर बाजार से जुड़े कई प्रतिभागियों के लिए इसके कई फायदे हैं।</span></p> <p><span style="font-weight: 400;">डीमैट खाता शेयरों और प्रतिभूतियों में लेनदेन करने का सबसे सुरक्षित, विश्वसनीय और तेज तरीका है। आप इस खाते को बिना किसी शेयर के खोल सकते हैं और जीरो बैलेंस भी अपने काथे में रख सकते है! डीमैट खाता खोलने के लिए, बस इंडियानिवेश जैसे प्रतिष्ठित स्टॉक ब्रोकर की वेबसाइट पर जाएं और सेवाओं का आनंद लेने के लिए औपचारिकताएं पूरी करें।</span></p> <p>&nbsp;</p> <p><strong>अस्वीकरण</strong><span style="font-weight: 400;">: </span><span style="font-weight: 400;">प्रतिभूतियों के बाजार में निवेश / म्यूचुअल फंड बाजार के जोखिमों के अधीन हैं, निवेश से पहले सभी संबंधित दस्तावेज़ों को ध्यान से पढ़ें।</span></p>

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  • What is Side Pocketing and How it affects Mutual Funds
    Posted by Rushabh H. Mehta | Published on 06 Mar 2020

    What is Side Pocketing, and How it affects Mutual Funds? The mutual fund industry in India is growing at an exponential pace, and as an industry, it is continuously widening its investor base and also increasing its geographical spread. The market regulator SEBI plays an important role in the regulation of the mutual fund industry, protecting the interest of investors at all times and taking adequate measures as and when needed to boost investor confidence in both equity and debt mutual fund schemes. Side pocketing in mutual funds is one such measure taken by SEBI to protect the interest of investors in debt mutual fund schemes in case of troublesome debt in the portfolio of the scheme. What is side pocketing in mutual funds? Side pocketing in mutual funds is the creation of a separate portfolio within the fund&rsquo;s portfolio for assets that are illiquid, risky or distressed at the moment and have been downgraded by rating agencies below investment grade. Such assets are ring-fenced from the other high quality, liquid assets in the portfolio to protect and treated differently for investment and redemption to safeguard the interest of old as well as new investors in the scheme. Side pocketing was introduced by SEBI in December 2018 after the IL&amp;FS fiasco, where it failed to meet its debt obligations and repay its lenders and creditors. This, in turn, put significant pressure on various mutual fund schemes that had IL&amp;FS papers as a part of its holdings. The complete mayhem resulted in substantial volatility in the debt and money market instruments resulting in redemption pressure in mutual fund schemes. High-quality, liquid assets in the schemes were sold by the funds to meet redemption requests resulting in increasing the exposure of remaining investors in the illiquid assets. &nbsp;Side pocketing mechanism is allowed only in debt mutual fund schemes. How does it side pocketing work? Whenever a debt instrument is downgraded by credit rating agency from an investment grade to a non- investment grade, the mutual funds have an option for creating a side pocket and segregating illiquid assets from the high-quality liquid assets. The existing investors are allotted units in the leading portfolio and segregated portfolio on a pro-rata basis. No redemption and subscription are allowed in the segregated portfolio. Moreover, SEBI makes it mandatory for the fund to list the segregated portfolio on the stock exchange within 10 days to provide an exit window to the existing unitholders. Depending upon their outlook, investors can either continue to hold their investment in the segregated portfolio or choose to exit at the prevailing rate. Any future recovery from the illiquid assets is credited in the side pocket portfolio and paid to the unit holder in proportion to his holdings. Side pocketing impact on mutual funds and AMCs Side pocketing aids mutual fund schemes from selling quality assets in its portfolio to meet sudden redemption pressure in a panic situation. Creation of side pockets help insulate the remaining portfolio from troublesome debt To ensure that mutual funds do not misuse side pocketing, SEBI also suggests a list of safeguards that AMCs may implement. &nbsp; Benefits of side pocketing in mutual funds Over the last few months, many debt mutual fund schemes have side pocketing a portion of its portfolio if the ratings of the investment paper in its holdings have been downgraded by the credit rating agency. Side pocketing is important to protect the interest of retail investors in case of illiquid assets because credit defaults accompanied by information asymmetry, results in institutional investors taking advantage of the situation. The benefits of side pocketing in mutual funds include- It is an important mechanism to ensure stability and reduce volatility in the debt market by addressing the issue of redemption pressure in case of troubled assets It prevents distressed assets from hampering the returns generated by high quality, liquid assets At the time of selling the segregated assets, only those investors who have units in segregated assets on the record date are entitled to the proceeds, thus ensuring a fair treatment To avoid unfair advantage of lower valuation, fresh inflows are allowed only in the non-side pocketed portfolio As side-pocketing helps curb redemptions, it helps in stabilizing the net asset value (NAV) of the scheme In case of a situation arising due to sudden illiquidity, it provides cushioning to the portfolio. The most significant benefit of side pocketing is that all investors, retail or institutional are treated at par CONCLUSION Globally, side pocketing is one of the best mechanisms to protect the interest of investors, and SEBI as a regulator ensures that it takes timely measures and imposes adequate regulations for the AMCs to safeguard the interest of investors at large. If you have any specific query or doubt about side pocketing in mutual funds schemes, contact our experts at IndiaNivesh for guidance. &nbsp; Disclaimer:&nbsp;Investment in securities market / Mutual Funds are subject to market risks, read all the related documents carefully before investing.

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  • Money Market Mutual Funds
    Posted by Rushabh H. Mehta | Published on 02 Mar 2020

    Mutual fund investments are one of the most preferred choices of investments for investors as it is the easiest and most comprehensive way to create a diversified portfolio. There are different categories of mutual funds to meet the specific requirement as per the time horizon, risk appetite, and investment purpose. Broadly, mutual fund either in invest in equities, debt, or both debt and equity. Additionally, they can either be open-ended or closed-ended schemes. What are Money Market Mutual Funds? Money Market Mutual Funds are open-ended mutual fund schemes that invest in short-term debt instruments. As the name suggests, Money Market Mutual Funds invest in high- quality money market instruments/securities such as commercial papers, treasury bills, certificates of deposit, etc. with short-term maturity usually less than a year.&nbsp; Money Market Funds aim to serve a cash-like position for investors with very low volatility to ensure capital protection. These mutual funds are a stable investment vehicle for investors for short-term income generation with an investment horizon ranging from three months to one year. What are Money Markets and different types of money market instruments? Money Market&nbsp;is an important segment of the Indian Financial Market for borrowing and lending of short-term funds. The maturity of money market instruments ranges from one day to one year. Transactions in money markets are high, and the market is predominantly for large players.&nbsp; After understanding the money market mutual funds meaning, one needs to know the different types of money market mutual funds. As retail players have limited scope for direct participation in money markets, the different types of money market instruments are the best way to invest in such investments. 1. Treasury Bills:&nbsp;Treasury bills, also known as zero-coupon bonds, are issued by the RBI on behalf of the central government to fulfill short-term fund requirements. T-bills are issued at a discount and paid at par on maturity. These are the safest as they are backed by the government. 2. Commercial Papers:&nbsp;Commercial Papers are unsecured promissory notes issued by companies and other financial institutions with a maturity period of 15 days to a year. As they are unsecured papers, these are issued by companies with high credit ratings. These papers are issued at a discount and redeemed at face value.&nbsp; 3. Certificate of Deposits:&nbsp;Certificate of deposits are short-term instruments which are issued by commercial banks and other financial institutions to individuals and companies, when the demand of credit is high, but the growth in deposits is slow, thus resulting in tight liquidity of the financial institutions 4. Repurchase Agreements (Repos):&nbsp;Repurchase Agreements is an agreement to facilitate short-term loans under which RBI lends money to other banks. The agreement can also exist between two banks. Simultaneous sales and purchase of agreement are involved in the case of the repurchase agreement.&nbsp; These are the four types of money market mutual funds available in India. Key features of Money Market Mutual Funds 1. Short-term debt instrument: These funds invest in very high-quality, short-term money market instruments, and cash equivalents. 2. Low-Risk Investment: As these funds carry very low risk, so the rate of return is near the risk-free rate of returnBetter returns than Bank Accounts: The returns offered are better than those offered by bank FDs or savings account 3. Allow retail investors to participate in Money Markets: They provide retail investors an opportunity to invest in money market instruments which are other inaccessible to them due to high ticket size4. Liquidity: Money market mutual funds are highly liquid and ideal to park short-term emergency money Factors to consider before investing in the different types of Money Market instruments 1. Investment Horizon: For any investment time horizon of investment is very important. Money market mutual funds are specifically designed to meet the short-term investment needs of investors. So, you should invest in these funds only if your investment horizon is of three months to a year. 2. Risks: Money market mutual funds are safe investment options, but these funds are subject to interest rate risk affecting the price of the underlying instrument due to an increase or decrease in the interest rate. Money market instruments such as CD are unsecured loans, and hence creditworthiness of the issuer is essential. 3. Returns:&nbsp;Money market mutual funds have the potential to offer higher returns than a regular savings account, especially when the interest rates are falling. The NAV of the fund depends on the prevailing interest rate. A fall in the interest rates means that the price of the underlying assets will increase resulting in higher returns from the funds. 4. Expense Ratio: Cost plays an important role as it affects the overall returns generated by these funds. The expense ratio is the fees that the fund charges to manage the portfolio. The maximum limit for expense ratio as prescribed by market regulator SEBI is 2.25%.&nbsp; CONCLUSION If you are looking at investing your surplus in a safe investment for better returns than traditional bank deposits and also highly liquid instruments, then money market mutual funds are the best option for you. A good investment broker like IndiaNivesh provides a complete list of top-performing money market funds. Here is the list of top-performing money market funds: Aditya Birla Sunlife Money Manager FundKotak Money Market SchemeL&amp;T Money Market Fund IndiaNivesh provides the ideal platform to meet your investment needs. Open your Demat account with us by completing the simple documentation and KYC form and get started now. &nbsp; Disclaimer:&nbsp;Investment in securities market / Mutual Funds are subject to market risks, read all the related documents carefully before investing.&nbsp;

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  • NFO – All about New Fund Offer (NFO) in Mutual Funds
    Posted by Rushabh H. Mehta | Published on 28 Feb 2020

    Fund raising is an important aspect of financial planning for any company. There are many ways through which a company can raise capital from the market. However, in the case of an Asset Management Company, they can raise the capital through New Fund Offer (NFO). In this article, you will learn all the important details about NFO and its related concept. Let us begin by learning NFO meaning. What is NFO? When an Asset Management Company launches a fund, a New Fund Offer is launched to raise capital in order to purchase securities. The securities include equity and bond. During an NFO, mostly new mutual fund schemes are launched. NFO is similar to IPO expect for the fact that it is launched by an Asset Management Company. The NFO remains open for a specific period of time and the investors can apply for it during the stipulated price. On conclusion of the NFO period, the investors get the funds at the prevailing Net Asset Value (NAV) of the fund. Many times investors get confused between an NFO and IPO. In this section of the article, we will clear all your doubts regarding the same. Difference Between NFO and IPO Since IPO and NFO both aim to raise money, the investors often get confused between the two. A company brings IPO to raise capital for improving its operational efficiency. On the other hand, an Asset Management Company brings NFO for purchasing the stocks of the company, commodities, bonds, etc. The price of the IPO is much higher than its face value. But in the case of NFO, the fund's price is Rs.10 per unit in general. Let us now learn about the types of NFO. Types of NFO A New Fund Offer is of two types; Open-Ended Funds As the name suggests, the investor can enter or exit the open-ended fund at any point in time after its launch. These funds are launched when the NFO ends. When there is a New Fund Offer, the open-ended funds announces the purchase of new units on a specific date. You can purchase any number of units of these funds. The NAV of the open-ended mutual funds is reported regularly after the closure of the stock market. &nbsp; Close-Ended Funds A close-ended fund is one that does not allow you to make an entry or exit after the NFO period is over. They have a fixed maturity period that ranges from 3 to 4 years from the launch date. Theoretically, you can buy or sell these funds in the market, but it is not possible to do so because of lower liquidity. Let us now learn about the advantages of investing in NFO. Advantages Of Investing In NFO Close-ended funds provide you with the opportunity to invest in new and innovative products that are not available in the case of other funds. The close-ended funds come up with hedging strategies that protect you from the downside in the market by using the put options. However, being a close-ended fund, you can invest only when the NFO period is open. The close-ended NFO mutual funds often outperform other investment avenues. This is because when an NFO is launched during the peak of the market and you invest in it, the fund manager has the authority to hold the funds and invest when the markets are favourable or more attractive. Since close-ended NFO mutual funds have a lock-in period, the fund managers are not required to sell their stocks out of panic leading to losses to the unitholders. The fund managers in close-ended funds have the time to carry out research for stock selection and accordingly invest in securities. The lock-in period of NFO immunes the investors from market panic. With a lock-in period in place, the investors would not fall for bad investment decisions. Therefore, as an investor, you would make higher returns in these funds as you remain in the market for the long term. Since there are many advantages of investing in the NFO, you must select it carefully. To help you with the NFO selection, we list down certain points that you may follow. Things to Consider Before Investing in NFO You must make a background check of the fund house. You must ensure that the NFO has a positive history of mutual fund investments and has the potential to offer good returns in the long run. Before selecting any fund for investing, you must read about the risk, returns, allocation of the asset, etc. of the NFO. Always make sure that you read the offer document carefully and understand the fund manager&rsquo;s investment process. The minimum amount for NFO subscription ranges from Rs. 500 to Rs. 5,000. So choose your funds accordingly. Some of the NFOs have a lock-in period. So invest in them after considering that factor. The above mentioned are a few things to consider before investing in New Fund Offer. Investing is all about selecting the right avenues and making good returns in the long run. If you are a beginner in the market or seek any assistance in investing, you can contact IndiaNivesh. We understand your financial needs &amp; goals and accordingly suggest the right investment option for you. &nbsp; Disclaimer:&nbsp;Investment in securities market / Mutual Funds are subject to market risks, read all the related documents carefully before investing.

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