Mistakes to avoid when investing

Mistakes to avoid when investing

When it comes to the stock market, nobody is perfect. Anyone can make mistakes. But that doesn’t mean you make the same mistakes as the others did before you. Wouldn’t it be great if you got a cheat-sheet that helps you avoid some of the common mistakes?

Well, this is a cheat-sheet that can give you a leg-up over the others.

1) Lack of knowledge

Many investors commit mistakes in the stock market simply because they do not have the required know-how. They directly start trading or investing without any prior knowledge. It is important to be aware of some of the fundamentals in the market before putting your money in stocks. Comparing and contrasting different stocks in a sector, reading the financials of a stock and identifying patterns are some of the important aspects on which you should have a firm grasp.

2) Investing without a plan

As an investor, there may be many things you want to achieve.
a) Building a home for your family
b) Sending your children to the best schools and colleges
c) Taking your family on an exotic vacation
d) Earning a regular income
You may invest your money in order to achieve these different goals. But what if two goals clashed? You may not be able to do justice to both goals at the same time. This happens when you invest without a plan.
In order to achieve all your goals successfully, you need to create a proper financial plan. This way, you can allocate funds to meet specific goals. For example, you can invest in stocks of blue chip companies in order to earn a dividend. This gives you a regular income. You can use another portion to invest in equity mutual funds in order to buy your house in 10 years time. This way, you can achieve your goals one after the other.

3) Timing the market

Market timing is a strategy where investors buy or sell in the market by trying to predict future price movements of stocks. This can be quite risky, especially if you are new to investing. The market timing strategy uses historic price movements to identify future prices.

4) Investing on unsolicited tips

The stock market is filled with people giving tips. Even on TV, newspapers and online, you come across several self-anointed market gurus. You might read headlines such as: “Invest in these 5 stocks to double your money in 6 months.” Such headlines are sure to lure a reader to take a look. But if you act on these tips, it may be the fastest way to part with your hard-earned money. Beware of such tips. Don’t invest based on these suggestions without doing your own personal analysis. After your research, if it still sounds like a good idea, you can invest in the stock.

5) Ignoring portfolio review

Buying stocks is not the final investment step. You need to monitor your portfolio and review it on a regular basis. Many people ignore this step. If the funds in your portfolio don’t work as per your expectations you should change them. In addition, your goals may change as you grow older. For example, after you become a parent, you may have to incorporate your child’s needs into the financial plan. It is important to incorporate these goals in a timely manner.


There could be any number of mistakes an investor makes in the market. But by avoiding some of the basic ones, you can gain investment experience a lot faster. Avoid the above mistakes to ensure better performance in the stock market.


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


What is KYC?

Imagine you bought a new car on your birthday. You may be an extremely competent driver but that is not enough if you wish to take the car for a spin on the highway. For that, you need to have the right documents in place. Similarly, you may know all about mutual funds. But if you wish to invest, you need to be KYC compliant.What is KYC?KYC is an acronym for Know Your Customer. It is a process initiated by the Securities and Exchanges Board of India (SEBI) for proper identification of investors. This way, all financial institutions are aware of their clients.How can you be KYC compliant?1) Fulfil your KYC requirementsIn order to get started, you need to fill in the KYC form. This form would be provided to you by the mutual fund house. In addition, you will also be required to submit a few documents.These include:2) In-person verification Under SEBI rules, you can invest up to Rs 50,000 per year in a mutual fund with e-KYC using OTP verification process*. But if you were to invest a larger amount, you would have to undergo an in-person verification process. You can complete this process through your AMC or a distributor who is certified by the Association of Mutual Funds of India (AMFI).3) Check if information is updated Once you finish the formalities, you can check online if your data has been updated. Finding out your status is very simple. All you need to do is log into the KYC Registration Agency (KRA) website. Here, you will be asked to provide a few details such as your PAN number. If your details are updated, you get a message that you are KYC verified. After this, you can conduct transactions in mutual funds. If not, the status is shown as pending. In this case, you may have to wait until your information gets updated.ConclusionAfter the entire process is completed, you will be provided with a unique 14-digit identification number. This is known as your KIN or KYC Identification Number. So if you are not yet KYC compliant, it is best to get the process started as soon as possible. The sooner you get it completed, the faster you can start investing and accumulating wealth.       Disclaimer: Investment in securities market are subject to market risks, read all the related documents carefully before investing.*https://www.camsonline.com/Downloads/eKYC-FAQ.pdf

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Trading and Demat account

Banks offer a lot of services to their customers. But in order to enjoy all these services, you need to first open a savings account. Similarly, if you wish to invest in the stock market, you need to open a trading and demat account. You can think of your demat account as a savings account for your shares. All the shares that you buy are stored here. And when you wish to sell them, they are taken from here to be sold in the market.In this article, let’s find out the different steps in order to open a demat account and how you can trade using it.Steps to open a demat account:Step 1: Choose a Depository ParticipantDepository Participants or DPs are intermediaries between investors and the depository. Brokers, banks and other online investment platforms serve as DPs in the country. Select a valid DP in order to create your demat account. You can find the entire list of DPs on the official websites of the Central Depository Services (India) Ltd (CDSL) and National Securities Depositories Ltd (NSDL). Step 2: Submit account opening formFill out all the details in the account opening form provided to you by the DP. In addition to the account opening form, you will also be required to submit your KYC documents. This includes:a) Know Your Customer (KYC) formb) Passport size photographsc) Identity proof documentsd) Address proof documents Step 3: Assign nomineeOnce you submit all the necessary documents, you will be required to assign a nominee. This is to ensure that the responsibility of your investments would be assigned to somebody you want in case something happens to you. You also have the option of changing your nominee at a later stage if you wish. Step 4: VerificationYou may also have to appear for an in-person verification. The DP carries out this process to ensure that the details provided in your documents are correct.Buying and selling shares through demat accountOnce you open a demat account, you can start trading.The process is as follows:Select a stock you wish to purchase. Specify the price and quantity.For example: Buy stock X at Rs 50. Quantity: 100 sharesYou can inform your broker to make the transaction or you can do it yourself online. When the stock reaches the price of Rs 50, the transaction is executed. 100 shares of Stock X will be reflected in your demat account. When you wish to sell them, you can make a sale order by stating the price and quantity of shares.The DP sends you statements of your transactions on a regular basis. Go through these statements to be updated on your investments.ConclusionDemat account is easy to use and very beneficial. You can trade many securities apart from stocks. It also provides statistical analysis and performance tracking features. Above all, it is a safe way to invest.   Disclaimer: "Investment in securities market are subject to market risks, read all the related documents carefully before investing."

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Reach out to our experts at IndiaNivesh for any queries about capital gains arising from the sale of assets for correct guidance.   Disclaimer: Investment in securities market / Mutual Funds are subject to market risks, read all the related documents carefully before investing. 

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  • Dematerialisation of Shares – Meaning, Process & Benefits

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Not only were there chances of errors and mishaps on the part of the depository participant, but physical certificates were also becoming difficult to be updated. Converting such certificates into electronic format frees up space and makes it easy for depository participants to track and update their investor's stockholding. Benefits of dematerialisation for investors As an investor, you can get the following benefits from dematerialisation – You don’t have to handle the physical safekeeping of share certificates. Since your investments are converted in electronic format, you can easily store them without the risk of theft, loss or damage You can access your online demat account and manage your investments from anywhere and at anytime The charges associated with the demat account are low. Depository participants change holding charges which are minimal and you don't have to pay any stamp duty on dematerialised securities Since no paperwork is required to be done, the transaction time is considerably reduced Given these benefits, dematerialisation proves advantageous. Nowadays, the practice of holding physical securities has become almost obsolete and buying through a demat account has become the prevailing norm for investors. How to convert physical shares to demat? To convert physical shares to demat, the following steps should be followed – You should open a demat account with a depository participant. A depository participant can be a bank, financial institution or a stockbroker who is registered as a depository participant with the two licensed depositories of India You would then have to avail a Dematerialisation Request Form (DRF) from the depository participant and fill the form Submit the form along with your share certificates. The share certificates should be defaced by writing ‘Surrendered for Dematerialisation’ written across them. The depository participant would, then, forward the dematerialisation request to the company whose share certificates have been surrendered for dematerialisation. The request should also be sent to Registrar and Transfer (R & T) agents along with the company The company and the R & T agents would approve the request for dematerialisation if everything is found in order. The share certificates would also be destroyed. This approval would then be forwarded to the depository participant The depository would confirm the dematerialisation of shares and inform the depository participant of the same Once the approval and confirmation is complete, the shares would be electronically listed in the demat account of the investor Buying securities in a dematerialised form If you are looking to buy stock in a dematerialized form, here the simple steps that you can take for the same – Choose your broker for buying the securities and pay the broker the Fair Market Value of the securities that you want to buy The payment would be forwarded by the broker to the clearing corporation. This would be done on the pay-in day The clearing corporation would, then, credit the securities to the broker’s clearing account on the pay-out day The broker would then inform the depository participant to debit its clearing account and transfer the shares to the credit of your demat account The depository would also send a confirmation to your depository participant for the dematerialisation of shares in your account. The dematerialised shares would then be reflected in your demat account You would have to give ‘Receipt Instructions’ to your depository participant for availing the credit of shares in your demat account. This is needed if you hadn’t already placed a Standing Instruction for your depository participant when you opened your demat account. Similarly, for sale of dematerialised shares, the process is opposite. Trading in stocks in a dematerialised format is simple, quick and convenient. It has also become the practice of the current market. So, if you want to buy or sell securities, open a demat account and start trading in dematerialised securities. Should you have any doubts, get in touch with the team at IndiaNivesh who will look into your requirement and lead you towards a quick resolution.    Disclaimer: Investment in securities market / Mutual Funds are subject to market risks, read all the related documents carefully before investing. 

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  • High Dividend Mutual Funds

    Dividend mutual funds are a type of mutual fund that pays a regular dividend to the unitholders of the mutual fund scheme, thereby creating a regular source of income for them. The investment strategy of the fund manager is to invest in a basket of companies that have a steady flow of income and promise to pay periodic payment to the investors. Some investors prefer a regular source of passive income from their investments. Mutual fund schemes that offer a high dividend are a popular choice for such investors. The frequency of payment of dividends is decided by the fund manager and is usually fixed. Dividends can be paid daily, monthly, quarterly, six-monthly, or yearly, and the frequency of payment is mentioned beforehand. However, there is no guarantee on the rate and amount of the dividend to the investors and the payment of dividend is subject to the performance of the fund. There are 2 types of dividend mutual funds based upon the asset class that they invest in. 1. Dividend Yielding Mutual Fund (Equity) • Mutual fund schemes which invest more than 65% of their corpus in equity shares of companies • Like any other equity scheme, they have the potential for higher returns, but also carry a higher risk • Investors should invest in these schemes with an investment horizon of medium to long term 2. Dividend Yielding Mutual Fund (Debt) • Mutual fund schemes which invest more than 65% of their corpus in debt instruments of government and corporations like treasury bonds, commercial papers, etc. • These funds carry low risk and provide average returns to investors • Interest received from the various instruments is paid as a dividend to the investors• Investors should invest in these schemes with an investment horizon of short to medium term Tax treatment for dividend mutual funds Till now, dividend income received by the investor used to be recorded under the income head of “Income from other sources” and such income was tax-free in the hands of the investor. However, as per the Union Budget 2020, the DDT is now abolished for companies and mutual funds. From April’20 onwards, any dividend received above Rs 5000 will be taxed in the hands of the investor. It will be taxed as per the individual tax slabs for both equity and debt schemes. Only debt investors who fall in the lower slabs of 10% and 20% will pay lesser taxes on dividends. For all the others, the taxation would be higher going forward. Why should investors invest in high dividend mutual funds? Dividend mutual funds offer unique advantages to the investors, especially when the macroeconomic condition of the country is weak; these investments provide the reliability of income to investors. The benefits of dividend mutual funds which should be kept in mind while investing in such funds• Fund managers of dividend mutual funds invest in companies which can pay steady dividends and even if there is a slowdown in the economy, as companies do not want to send any negative signals, they avoid curtailing payment of dividends, thus making them less volatile than other funds.• Overall returns from these funds are less affected as compared to other funds as the dividends provide a hedge against market volatility.• In a low-interest rate regime, investors looking for a higher consistent income can opt for dividend mutual funds. Disadvantages of a dividend mutual fund scheme • Returns generated by dividend mutual fund schemes are lower as compared to growth schemes in case of rising markets• These funds are not suited for aggressive investors looking for higher returns from their investment• Moreover, with the abolition of Dividend Distribution Tax (DDT), investors in the higher tax-bracket will have to pay higher taxes on the dividend income. Role of dividend mutual funds in a portfolio Invest in dividend mutual funds with an investment horizon of 7 to 10 years for optimal returns. Investment in such funds should be a part of your strategic asset allocation and to lower the volatility of the overall portfolio. Aggressive investors can allocate less than 10% of their portfolio in such funds. Conservative investors, on the other hand, can allocate a higher percentage to these funds. Essential things to keep in mind while investing in dividend mutual funds • Conservative investors looking to invest in dividend funds should invest in large-cap funds, preferably of blue-chip companies that pay a higher dividend. Investing in companies with a higher proportion in mid & small-cap companies will increase the risk of the investment, thereby defeating the purpose of investment• Invest in a fund which has been in existence for some time and witnessed a few market cycles• Avoid investing in a fund with a small corpus to minimize risk as few wrong investment calls can significantly hamper returns• The expense ratio plays a vital role in determining the overall returns from a scheme. Choose funds with a lower expense ratio   CONCLUSION Investing in high dividend mutual funds is a good option if you are looking for a regular income through dividends. Consult our experts at IndiaNivesh to help you guide through the allocation of funds in these schemes as per your investment horizon and risk profile.   Disclaimer: Investment in securities market / Mutual Funds are subject to market risks, read all the related documents carefully before investing. 

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