How to invest in real estate

Posted by Mehul Kothari | Published on 14 Feb 2019
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How to invest in real estate

Everyone has financial goals. And buying a house for the family comes somewhere at the top of the list for most Indians. This is a very important milestone when it comes to investment planning. However, the scope of real estate investment is more than that. In fact, investing in real estate offers an opportunity to make good financial returns. Here’s how:

1) Rent a house (or even a room)

Don’t know anything about real estate investing? Don’t worry. You can start small if you are a beginner. Do you have a spare room or an apartment at the moment? If so, you can take in tenants and earn a steady monthly income. This is a good way to earn returns on an asset instead of letting it sit idle. So, even if you earn around Rs 5,000-6,000 per month, it can become a substantial corpus by the end of a couple of years.


2) Buy, fix, sell

One of the best things about investing in real estate is that there are loads of opportunities. Look around your city. There can be a lot of underpriced homes. For example, imagine you find an old house that is in a good area in the city.
Here is what you need to do:

Many people call this as house-flipping.


3) REITs

You can also invest in real estate through Real Estate Investment Trusts (REITs). These are companies that own commercial real estate such as apartments, hotels and retail spaces. All REITs are listed with the stock exchange and investors can directly invest in properties. Buying commercial real estate can be extremely costly and out of the reach of regular investors. Through REITs, you can participate in ownership of commercial real estate without having to actually buying commercial real estate. As a result, investors with budgets as small as Rs 2 lakh can explore the real estate sector and make profits.


4) Real estate stocks

What if you don’t want to invest directly in real estate properties? Well, there is another way. You can invest in stocks that operate in the real estate sector. There are a lot of real estate companies such as DLF, Oberoi, Unitech that are listed in the stock market. By carefully researching these stocks, you can invest and earn good returns.


Conclusion
These days, there are lots of investment opportunities for investors in the real estate sector. India is a developing country and there is huge potential for real estate. And the best part is, you don’t actually have to buy a house to invest in real estate!

 

  

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

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How to invest in mutual funds

Posted by Mehul Kothari | Published on 14 Feb 2019

A lot of investors around the globe prefer mutual fund investments for wealth creation. This is because of the immense scope and ability of these funds. These funds range over a wide spectrum of variety. Based on your requirements, you can select funds for capital preservation, steady income or high returns in the future. And if you are a novice in investments, this is perhaps the best way to get introduced to financial markets.Here is how you can invest in mutual funds:1) Be KYC compliantIt is very easy to buy mutual funds. In fact, you can purchase funds online. But in order to do it properly, you need to have all the necessary documents in order. Ensure you are KYC compliant. If not, you can fill out the KYC individual form to become compliant. Here is a list of other documents you need to provide:a) The duly-filled application formb) Identity proof (PAN card, passport, voter’s ID or Aadhaar Card are applicable)c) Proof of address (passport, driving licence, ration card, insurance copy)d) Cheque for the investment amount (SIP or lump sum)e) Third-party declaration form (in case of minors) 2) Identify your investment goalsIt is important to have clear-cut investment goals. There are many different types of mutual funds available in the market and each fund has a specific goal. For example, if you wish to avail tax benefits, it is suitable to invest in Equity Linked Saving Schemes (ELSS). If your goal is to earn steady returns, it is best to invest in debt mutual funds. 3) Assess your risk profileEvery investor has a different risk appetite. For example, equity funds invest predominantly in the stock market. These funds have the potential to offer higher returns. But they also come with higher risk when compared to debt funds. Similarly, sectoral funds invest in a specific sector only. So, if a fund has invested in the IT sector, you could be exposed to high risk if the sector crashes. Investing in these kinds of funds without knowing your risk tolerance level can result in losses. 4) Select the right fundsOnce you know your list of investment goals and your risk tolerance level, investing becomes easier. There are different kinds of mutual funds. This includes: 5) Maintain an age appropriate portfolioAs you grow older, your goals and ambitions change. Similarly, your mutual fund portfolio must change too. At the beginning, it may be better to invest more in equity funds to earn higher returns. But as you near your retirement age, it is better to shift your investments to safer funds like debt funds or balanced funds. This way, you can preserve the capital during the sunset years of your life. You don’t want to lose a major chunk of your investment money at such as stage in life. 6) Invest through SIPsOne of the best features of mutual funds is the Systematic Investment Plan (SIP). As an investor, you don’t need to bother about rising and falling markets as long as you continue to invest regularly through SIPs. All you need to do is invest a specific sum of money on a regular basis. This can be monthly, quarterly or even annually. Based on your investment budget and goals, you can decide how much you want to invest. There are many funds that allow you to start a SIP with Rs 500. Over time, you can increase the amount you invest so that you can earn higher returns. ConclusionWith a strategic investment plan, you can invest steadily in mutual funds and earn an envious warchest to meet your future goals like buying a home or creating a retirement fund. And the best part is you can do it very comfortably.     Disclaimer: Investment in securities market are subject to market risks, read all the related documents carefully before investing.

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How to make your Investment Plan

Posted by Mehul Kothari | Published on 14 Feb 2019

Imagine that you and your friends have decided to go on a road trip from one end of the country to another. One option is to just wing it. Get into the car and see what happens next. Nine out of 10 times, this ends up in a disaster (the only time it is successful is in movies). On the other hand, you could plan the trip well in advance and have a blast! Get a map, ensure there is plenty of food and water, have a spare tyre in case the car breaks down. And music, don’t forget to have good music.Similarly, investing money can be seen as a lifelong journey. And to do it successfully, you need to have a good investment plan.In this article, let’s find out how you can make an investment plan so that you can earn good returns over the years.Anatomy of an investment plan:1) Establish your financial goalsWhat are the different financial goals you wish to achieve in the coming years? Write down all of your goals on a list of paper. Sam, a 25 year old engineer has the following goals: Everyone has different investment goals. And the first step to achieve these goals is to identify them and outline them as clearly as possible. 2) Analyse the different investment optionsThe great thing about investing is that there are lots of options to choose from. A lot of investors think that it is enough if you identify a good investment option and put your money in it. That’s the wrong approach. Your investment strategy should be goal-based. This way, you can find the right avenues to invest your money. For example, to create an emergency savings fund, investments in fixed deposits or short-term debt funds is a good option. For a long-term investment goal like retirement, investment in equity funds is more suitable because it has the potential to provide high returns. 3) Risk and return: Ensure there is a balanceWhen it comes to investments, there is always a degree of risk. Whether it is a savings bank account or the stock market, you cannot avoid risk. However, the degree of risk varies from one investment option to another. It is commonly said: higher the returns, higher the risk. So, it is very important to choose an investment option that matches your risk tolerance level and also helps you achieve your goals. For example, you may not want to invest in stocks because of the high risk involved. But that doesn’t mean you cannot invest in equities at all. Through mutual funds (balanced funds, index funds), you can invest in equities and minimize your risk. 4) DiversificationEveryone knows the saying: don’t put all your eggs in one basket. But when it comes to investing, it is important to put this saying into practice. Putting all your investments in a single option is dangerous. For example, imagine you put your entire investment amount in equities. The market may be performing exceedingly well. But if the market crashes all of a sudden, you could lose your entire money. Try to split your investments into different avenues such as stocks, bonds and savings accounts. Another way to diversify is to invest in index funds. 5) Evaluate your progressRemember that road trip you plan to take with your friends. Once you reach a certain stage, you may want to whip out the map (or Google maps on your phone) and see your progress. Are you on track or did your friend take a wrong turn and you are nowhere near your destination? Similarly, you need to check your investments once in a while to ensure they are performing as per your plan. As you grow older, your goals may change. At such times, you need to incorporate your new goals into your investment plan and create a strategy to achieve these new goals. This way, you can ensure that your investments are working for you in the right way. ConclusionA plan helps you put your goals into a tangible and actionable form. By creating an investment plan, you can clearly see how much you have progressed year after year. So the first step of investing is to create a plan. And the important part is to stick to it, unless there is no other option but to change it (refer point 5).       Disclaimer: Investment in securities market are subject to market risks, read all the related documents carefully before investing.

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  • What is a Unit Linked Insurance Plan, Types & Benefits
    Posted by Rushabh H. Mehta | Published on 06 Mar 2020

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Child ULIPs Child ULIPs are especially designed unit-linked plans for the financial security of the child if the parent is not around. Under these plans, the parent is insured while the child is the beneficiary. These plans have an inbuilt premium waiver rider. If the parent dies during the policy tenure, the death benefit is paid. However, the plan does not terminate. The policy continues, and future premiums are paid by the company on behalf of the insured parent. On maturity of the policy, the fund value is again paid as the maturity benefit which provides the child with the financial corpus needed to pursue his/her dreams. Pension ULIPs These are other specific unit-linked plans which help in creating a retirement fund. Pension ULIPs are deferred annuity plans wherein you pay premiums during the policy tenure to build up a retirement corpus. In case of death, the death benefit is paid. 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Benefits of ULIP A ULIP is popular because of the following benefits it provides – It allows you to avail insurance coverage as well as investment returns in a single product The premiums paid and the benefits received under ULIPs are completely tax-free in nature helping you save tax The flexible benefits of ULIPs allow you to manage your investments as per your investment strategy The different types of ULIPs help you fulfil the various financial goals that you might have Switching and partial withdrawals do not attract any tax making ULIPs tax efficient Since the returns are market-linked, you get inflation-adjusted returns from ULIP ULIPs are attractive insurance policies that give you coverage as well as returns. Now that you understand ULIP meaning, its types and advantages, use our IndiaNivesh platform to invest in a plan as per your insurance and investment needs and enjoy all the benefits that the plan has to offer.   Disclaimer: Investment in securities market / Mutual Funds are subject to market risks, read all the related documents carefully before investing.

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  • What is CAGR & How to Calculate it?
    Posted by Rushabh H. Mehta | Published on 06 Mar 2020

    There are different types of investment avenues in the market and each of these avenues promises you a compounded rate of growth if you remain invested. Compounding of return means earning a return on the return earlier generated. So, if you invest INR 100 and earn a return of 10% in the first year, the amount would become INR 110. Thereafter, in the second year, you would earn 10% on INR 110 giving you a return of INR 11. This compounding helps grow and multiply your wealth considerably over a period of time. In the case of market-linked investments, the rate of return is not guaranteed. It varies over the investment period. To know the average rate of return on your investments, the concept of CAGR is used. Let’s understand what CAGR is and how it helps you find the growth of your market-linked investments. What is CAGR? CAGR’s full-form is Compound Annual Growth Rate. 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The CAGR formula needs three important details which are as follows – Value of the investment made initially (VI) Term of investment (T) Value of the investment at the end of the term (VE) Using these three inputs, the CAGR formula becomes – CAGR = (VE / VI) ^ (1/T) – 1 Let’s understand with an example – Mr. A invested INR 10,000 in a market-linked investment avenue. After 3 years, the value of his investments stands at INR 13,500. The CAGR for Mr.A’s investment could be calculated as below – VI – INR 10,000 T = 3 years VE = INR 13,500 CAGR = (13500/10000) ^ (1/3) – 1 = 10.52% How CAGR helps understand the mutual fund growth rate? Mutual funds are market-linked investment avenues which do not offer a guaranteed rate of return. Since the returns are subject to market fluctuations, CAGR becomes an accurate tool to measure the performance of the fund over a specified period. Investors can check the annual CAGR of mutual fund schemes and use the rate to find out which scheme offers better returns than others. The fact sheet offered by the mutual fund house contains returns generated by the fund over different time frames. These returns can prove to be confusing and so CAGR is an easier alternative to understand the performance of the fund. CAGR acts as a ready reckoner for investors to assess returns from a mutual fund scheme and also highlights the compounding of returns on mutual fund investments. Important points to know about CAGR The investment risk inherent in the scheme is not highlighted by CAGR. CAGR is merely a yardstick to measure the growth rate CAGR proves to be a good measure of growth for a short-term period, i.e. up to 6 or 7 years. If you are considering long-term investments, the growth trends over a short-term period would be averaged out. In such cases, CAGR would give an average rate even if the fund performed excessively well in a two or three year period and then the returns fell in later years. CAGR changes every year since the investment period changes CAGR for two investment funds can match one another even if the funds are different. This might happen if one fund performed well initially and the other one performed well in the last few years. As a result, the performance is averaged out and the CAGR Other modes of calculating returns from investments Besides CAGR, there are other ways to calculate the returns generated by market-linked investments. These ways are as follows – Returns since launch Under this model, the return earned by the fund ever since it was launched and till the present date is calculated. Trailing returns Under the trailing returns approach, you measure the performance of your fund daily, weekly, bi-weekly, monthly or annually. Annualised returns Annualised returns are calculated as the geometric average of the return yielded by the fund over a given period of time. CAGR v/s Absolute returns Absolute returns measure the total return yielded by an investment. The time period is not considered. CAGR, on the other hand, measures the return over a specific time period. For instance, in the previous example, INR 10,000 grew to INR 13,500 over a 3-year period. The absolute return would be 35% since it measures the total return earned on the investment. However, when CAGR is considered, the time period of investments is also taken into consideration thereby considering the time value of money. As such, CAGR comes to 10.52% which is a more realistic figure. While absolute returns show the returns generated, the time period is missing. You cannot figure out how many years it took the investment to generate this return. But CAGR shows you the annual return making it easier to make a judgement on the performance of the fund. The next time you invest in mutual funds, stocks or other market-linked investment avenues, consider their CAGR to choose the fund or investment which has better returns over its peers. So, visit IndiaNivesh and find out a mutual fund scheme of your choice and then compare the scheme’s CAGR with its peers to choose the best performing fund.   Disclaimer: Investment in securities market / Mutual Funds are subject to market risks, read all the related documents carefully before investing. 

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  • Capital Market – Meaning, Types & Functions of Capital Market
    Posted by Mehul Kothari | Published on 20 Nov 2019

    We all know how various companies and industries raise funds for their short term requirement through the money market. However, when they need funds for long term, capital market is their source. The capital market is just like the money market but with a difference that funds raised in the capital market can be used only for long term. In this article, you will learn about the concept of capital market in detail. Let us first understand what is the capital market? Understanding Capital Market Capital market in simple words means the market for long term investments. These investments have a lock-in period of more than one year. Here, the buyers and sellers transact in capital market instruments like bonds, debt instruments, debentures, shares, derivative market instruments like swaps, ETFs, futures, options, etc. Let us now understand the types of capital market. Types of Capital Market The capital market is of two types i.e. Primary Market and Secondary Market. Primary Market The primary market is also called “New Issue Market” where a company brings Initial Public Offer (IPO) to get itself listed on the stock exchange for the first time. In the primary market, the mobilisation of funds is done through right issue, private placement and prospectus. The funds collected by the company in the IPO is used for its future expansion and growth. Primary markets help the investors to put their savings into companies that are looking to expand their enterprises.  Secondary Market The secondary market is a type of capital market where the securities that are already listed on the exchange are traded. The trading done on the stock exchange and over the counter falls under the secondary market. Examples of secondary markets in India are National Stock Exchange (NSE) and Bombay Stock Exchange (BSE). After learning about the types of capital market, let us now learn about the capital market instruments through which money is raised. Ways of Raising Funds Offer through Prospectus In the primary market, the prospectus is used to raise funds. The company invites the investors and the general public through an advertisement known as the prospectus to subscribe to the shares of the company. The shares or debentures are allotted to the public on the basis of subscription. If the company receives a high subscription then allotment is done to them on pro-rata basis. The company hires merchant bankers, brokers or underwriters to sell the shares to the public.  Private Placement Some companies try to avoid the IPO route to raise funds as it is very costly. Instead, they give investment opportunity to few individuals via private placement. Here the companies can offer their shares for sale to select individuals, financial institutions, insurance companies and banks. This way they can raise funds quickly and economically. Rights Issue The structure of capital market allows the companies in need of additional funds to first approach their current investors before looking at the other sources for finance. The right issue gives the current investors the first opportunity to make additional investments in the company. The allotment of right shares is done on pro-rata basis. However, if the current shareholders of the company do not want to exercise their rights, the shares can be offered to the public. e-IPO e-IPO means Electronic Initial Public Offer. e-IPO is an agreement between the stock exchange and the company to offer its shares to the public through online mode. It is a fast and speedy process. The company here needs to appoint registrar to the issue and brokers to accept the application received from the public. The above mentioned are the ways of raising funds through the capital market. Let us now learn about the various functions of the capital market. Functions of the Capital Market Helps in the movement of capital from the people who save money to the people who are in need of it. Assists in the financing of long term projects of the companies. Encourages investors to own the range of productive assets. Minimises the transaction cost. Helps in the faster valuation of financial securities like debentures and shares. Creates liquidity in the market by facilitating the trading of securities in the secondary market. Offers cover against price or market risks through the trading of derivative instruments. Helps in efficient capital allocation by way of competitive price mechanism. Helps in liquidity creation and regulation of funds. The above mentioned are the functions of the capital market. The capital market performs its functions with the help of buyers and sellers who interact and transact. The structure of the Indian capital market is well regulated and highly organised. The capital markets may be sometimes termed risky because they do not give fixed returns annually. But when looked from a long term perspective, their performance has always been good and rewarding for the investors. If you want to learn more about the capital market or put your savings in the capital market, you can contact IndiaNivesh Ltd.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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