Mutual Funds are the cynosure of the financial world. And rightly so! These investment havens pool in money from multiple investors and then invest the corpus across asset categories in line with the scheme’s objective. They are a great option for retail investors who would otherwise find it difficult to get exposure to such varied investment opportunities.
What makes Mutual Funds a good investment tool?
· Professional Management
The USP of Mutual Funds is that they are managed by a team of experts. They are equipped with the necessary resources and information to continuously monitor the markets, analyze market trends and conduct in-depth research. As a result, the fund managers can devise the best investment strategy for the investors and guide them regarding the best mutual funds to invest in.
· Financial Discipline
One of the common problems faced by investors is that they lack the rigour or discipline to stick to their financial resolutions. Mutual Funds take care of this issue easily. Systematic Investment Plans ensure that investors continue to invest regularly.
Mutual Funds offer a great deal of flexibility to investors. You can choose the frequency of contribution as well as opt to increase or reduce the investment amount as per cash flows.
Systematic Investment Plan (SIP) facility makes Mutual Funds affordable to everyone. One can start mutual fund investments with just Rs. 500. That is basically the cost of one pizza these days! They are perfect for novice investors who are overwhelmed or scared of equities but still want some exposure.
· Tax savings
ELSS are tax-saving Mutual Funds. Investment in these mutual funds qualifies for tax deductions (till Rs. 1.5 Lakhs) as per Section 80C. Owing to their potential of higher returns and shorter lock-in period, as compared to other tax-saving alternatives, ELSS have become a preferred choice for many investors.
Mutual Fund investment tips
Now that you know what makes Mutual Funds a great investment tool, here are some mutual fund investment tips to help you make the most out of your hard-earned money.
· Set a goal
It is rightly said that “Dreams do not come true. Goals do”. The same rationale applies to investments too. Investments bring the best results when they have a purpose. So, the first step in mutual fund investments should be setting an investment goal. You should consider factors like budget, investment horizon, financial ambitions and most importantly your risk appetite.
· Select the right fund type
When it comes to mutual fund investments, one size does not fit all. Just because your friend is investing in a fund does not mean it will benefit you as well.
Mutual Funds invest across a range of asset classes. Hence deciding which mutual fund to invest in can be slightly tricky. It is important to choose a scheme that is in sync with your needs and risk profile. For instance, if you are an experienced investor and can afford to take risks, you can easily go for equity funds. However, if you are a novice then most mutual fund tips for beginners will suggest going for debt or balanced funds. It is important to understand the risk-return relationship inherent in each asset category before making a decision. Rule of thumb being – higher the risk, higher the return! The asset allocation should be in sync with your risk appetite.
Also, ask yourselves why you are investing in mutual funds. Is it to save taxes? Then ELSS Funds are your best bet. If you have a short investment horizon and want a fund type with high liquidity, then you can go with Liquid Funds.
· AMC Credibility Check
The right fund house can not only help you decide which mutual fund to invest in but optimize the potential of your overall portfolio. It is important to look at factors such as the credentials of the fund managers, expense ratio, components of the portfolio and AUM (Assets Under Management) of the Fund House.
· Diversification is the key
You should not put all your eggs in the same basket. Diversification across asset categories and investment styles is important. It helps to lower the risk quotient as it gets spread over different investments. Even if one fund underperforms, the other can compensate for it. The value of the entire portfolio is not at risk.
· SIPs vs Lump-sum
One of the best mutual fund tips for beginners is choose the SIP way. Especially if you are venturing into equity or equity oriented mutual funds. A SIP will allow you to spread out your investments over a longer duration of time. You will invest at different points in the market cycle and hence even out the associated risk.
Also, the power of rupee-cost averaging in SIPs helps to generate higher returns in the long-term.
KYC has become a necessity these days. Government of India has mandated KYC for most of the financial transactions including mutual fund investments. So, ensure that you have documents such as PAN Card, valid address proof, etc. before you venture into mutual fund investments.
· Have a long-term view
Mutual Funds are like a committed relationship and not a one-night stand. You need to remain invested for a longer duration in order to get the best rewards. Especially in the case of equity funds. This is because markets tend to be volatile in the short run but tend to move up in the long-term. The best combination is to invest in a mix of debt and equity to get best of both the worlds. Debt Funds would help to lower the overall risk of the portfolio and could help meet emergency fund requirements in the short run. While your equity funds work on wealth appreciation in the long run.
· Ask the Expert
Just like KBC, Mutual Funds also come with a helpline – Ask the Expert! There are so many options available in Mutual Funds. It can become rather overwhelming for a new investor to select the right mutual fund to invest in. A professional expert will not only help to select the right funds and schemes but will also constantly monitor the market on your behalf.
One such expert is IndiaNivesh. They offer a wide variety of financial solutions related to broking and distribution, strategic investments, institutional equities, corporate advisory, investment banking and private wealth management. The team at IndiaNivesh has a combined experience of more than 300 years. With their cutting-edge technological and research capabilities, competent team and “client-first” approach, you can be rest assured that you are in safe hands.
Final WordsNow that the mystery is solved about how you can select the best mutual funds to invest in, what are you waiting for? Especially when you know that you have a guide like IndiaNivesh available at the click of a button.
Disclaimer: "Investment in securities market and Mutual Funds are subject to market risks, read all the related documents carefully before investing."
Stop Loss – What is Stop Loss & How to Use it in Share Market
The stock market is one investment avenue that can change your fortunes. The sky is the limit when it comes to making returns in the share market. While it gives you immense opportunity to earn profit, there are equally good chances of making losses and eroding capital if wrong trading decisions are made or if the market does not move as per your expectations. Often people lure with the idea of intraday trading as it has huge potential to make solid returns in just one day. However, things can go the other way than expected and you can end up making losses too. In such situations, by putting a stop loss in share market you can protect your capital. This article will help you in understanding the concept of stop loss and why it is important. Let us begin by learning what is stop loss? What Is Stop Loss? Stop loss can be said to be a specific price level at which an automatic order to buy or sell shares/securities is executed. Stop loss protects you from excessive losses and saves your capital for future trading by reversing or closing your positions with minimum losses. It also saves you from constant monitoring of the stock or securities price. Let’s take an example to understand how the stop loss works. Suppose you have purchased 100 shares of Reliance Industries for intraday trade at Rs. 1400 with a stop loss of Rs. 1385. This stop loss will close your trading position or sell the 100 shares when that specific price is triggered. The stop loss here saves you from the loss that could have occurred had you held the position and the price went down drastically. So if during the trading session, the price of Reliance Industries goes below or touches Rs. 1385, your stop loss would be trigged. Thus, in a sense, the stop loss safeguards your capital and always keeps you in the game to take a new trade. Stop loss can be put manually when you place an online order or you can instruct your broker to put a stop loss if you purchase stocks on telephonic communication. Let us now learn the benefits of putting a stop loss in the market. Benefits of Stop Loss in Market Stop loss trading can protect you from excessive losses. Stop loss makes you a better and disciplined trader. It helps you in managing your account more efficiently. By putting a stop loss in share market, you are no longer required to track each and every position. If the stop loss is hit, the position will square off automatically. Stop loss are easy to put. Stop loss trading helps you in knowing your risk appetite. As a trader, you get to learn about the amount of risk you can take without impacting your financial status. After learning the benefits of stop loss in share market, let us now learn how you can set up a stop loss order. How to Set Up A Stop Loss Order? Setting a stop loss order is very easy. When you place an online order to purchase or sell stocks, you will get the option to add a stop loss. You need to fill the exact amount where you want to place the stop loss. You can also place a bracket order. A bracket order is designed in such a way that a buy order will have two opposite orders, the first order is the price at which you would like to book profit on the higher side and other order is the price or stop loss where you would like to close your trade when the stock price goes down. Bracket orders for sell positions are just opposite to the buy order. One thing is clear that by putting stop loss in place the traders specially the smaller ones can protect their capital by limiting their losses. By carefully placing the stop loss, you can become a disciplined trader and take better trades. Stop loss minimises the risks and maximises your profits. If you are new to the world of the stock market or want to learn to trade using the stop loss, you can open a demat account with IndiaNivesh Ltd. We are one of the most trusted and professional financial services group in India.Disclaimer: "Investment in securities market and Mutual Funds are subject to market risks, read all the related documents carefully before investing."
SME IPO – Meaning, Procedure & Benefits of SME IPO Listings
All over the world, the SME sector is playing an important role in the social and economic development of a country. Growth of the SME sector is crucial for the growth of our country to curb the problems of poverty, income inequalities, unemployment, and regional imbalances. In India the SME sector contributes a high proportion in the national income and is witnessing rapid growth and more and more efforts are being taken in the development and promotion of this segment. Various government initiatives such as Skill India, Make in India, Start-up India, Pradhan Mantri MUDRA Yojana, Public Procurement Policy to encourage growth and innovation in the SME sector has led to favourable growth in the agricultural, manufacturing and service industry. Even though the SME sector contributes significantly to the GDP of our country, numerous challenges that impede the growth of the SME sector which include- Inadequate funds and timely access to credit is one of the biggest hurdles in the growth of SMEs. Lack of resources and infrastructure Lack of skilled manpower Inability to market their products/services Technological and digital barriers All these challenges create a serious problem for the growth and development of the SME sector in India to its full potential. All the above challenges are more or less due to a lack of capital and access to raise money from the public like the bigger companies. To overcome this challenge, SME platforms BSE-SME and NSE Emerge were launched by the BSE and NSE respectively, to allow small and medium enterprises to fulfil their dreams of growth and expansion by raising capital from the public. Meaning of SME IPO: BSE SME exchange platform is a trading platform dedicated especially for the trading of shares of small and medium enterprises. In order to get listed on the exchange, the companies have to come out with their IPO. The eligibility criteria and norms of the SME IPOs are different from that of the main board of BSE and NSE. The listing requirements for BSE SME IPO It must be a public limited company. Proprietorships, Partnership Firms, Private Limited Companies need to change to convert to a public limited company. The company’s net worth in the latest audited financial results should be at least 3 crores. The company’s net tangible assets in the latest audited financial results should be at least Rs 3 crores. The companies post paid-up capital should be at least Rs 3 crores and not more than Rs 25 crores. If the paid-up capital is more than Rs 25 crores then it has to be listed on the main board. Distributable profits for at least two years out of the immediately preceding three years. The company must have its own website with financial statements of 3 years. It must enter into an agreement with both depositories and mandatorily facilitate DEMAT trading of securities. There should be no winding-up petition by the applicant company which has been admitted by the court. The issue should be a 100% underwritten issue and 15% of the issue must be underwritten by the Merchant Banker in his own account. A minimum of 50 allottees is needed by the company at the time of listing through IPO. The minimum lot size for trading and application is Rs. 1,00,000. The company has not been referred to BIFR( Board for Industrial and Financial Reconstruction). The listing criteria for EMERGE- NSE SME IPO The applicant must be registered as a company under the Companies Act 1956 or Companies Act 2013. The companies post paid-up capital should not be more than Rs 25 crores. Distributable profits for at least two years out of the immediately preceding three years. It must have certified copies of the annual report for 3 years. A business plan of 5 years along with balance sheets and profit and loss statements. The promoters must have relevant experience of 3 years in the same field. It must enter into an agreement with both depositories and mandatorily facilitate DEMAT trading of securities. There should be no winding-up petition by the applicant company which has been admitted by the court. An auditors certificate stating there is no default in payment of interest by the promoter or by the promoter’s holding companies. If there is any litigation case filed against the applicant, promoter or promoter held companies then it must be disclosed along with the nature and status of the litigation. If there are any criminal cases filed against the director or directors then the nature and status of such investigations which can have a direct impact on the business must be disclosed. A minimum of 50 allottees is needed by the company at the time of listing through IPO. Procedure for listing on the SME IPO exchange Appointment of a Merchant Banker for advisory and consultation. The Merchant Banker is then required to conduct due diligence and documentation check of the company. It must check all financial documents, details of promoters, requisite government approvals, material contracts, etc. The documentation should also include share issuances, IPO structure and other financial documents. On completion of due diligence and documentation by the Merchant Banker, a draft prospectus and DHRP have to be submitted by the company in accordance with the SEBI guidelines. The BSE will verify the documents and on finding those satisfactory will process it. A site visit is also conducted by officials at the company’s site. The promoters will be called for an interview with the Listing Committee on satisfactory completion of documentation and site visit and issue an in-principal approval. The Merchant Banker can then file the prospectus with the ROC along with the opening and closing date of the issue. On approval from ROC, the company will intimate the exchange with the required documents and opening date of the issue. As per the schedule, the IPO will be opened and closed to the public for allotment. The company will then submit the documents to the exchange for allotment. Once the allotment is over, the notice of listing and trading of the shares will be issued How can the companies benefit from SME IPO listing? The SME Capital Markets have helped many companies scale up their business. The SME IPO listings have increased manifold since the introduction in 2012 and at present the BSE SME platform has over 300 companies listed on it and the NSE Emerge has over 180 companies listed on it. With relaxed listing norms and minimal cost for listing when compared to the main board, the SME platforms are ideal for companies who wish to raise capital to meet their growth requirements. Support from exchange boards, increase in the number of SME stocks on exchange and good results is encouraging more and more investors to invest in the SME segment.Disclaimer: "Investment in securities market and Mutual Funds are subject to market risks, read all the related documents carefully before investing."
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