The terms bull and bear market are quintessential in investment circles. Even though these terms are relatively simple and easy to understand, their causes are sophisticated and complex that depict market conditions.
Since the direction of the market plays a significant impact on the portfolio of every investor, it is crucial to understand the meanings of ‘bull’ and ‘bear’ in the larger context. That is knowing its meaning and implications can determine how the bull market and the bear market can affect you.
Understanding bull and bear markets
In the stock market, bull and bear are terminologies that are used to convey the progress of the market and its direction. Typically, a bear market is indicative of falling prices in the stock market, while on the other hand a bull market is a sign that the market is appreciating in value.
The bull and bear market meaning have a tremendous impact on investors. These terms also reveal how the market is shaped by investors' attitudes, ensuing trends and overall market sentiments.
A bull market means the stock market is on the rise. A sustained increase in market share prices is typically seen in a bull market. Under such a scenario, investors are upbeat and optimistic that the rising trend will continue over a long period. A sustained bull market scenario also shows the strength of a country's economy and high employment levels.
On the other hand, a bear market refers to a declining market. In this scenario, company share prices continue to dip, leading to a downward trend. In such a bear market environment, investors believe that the downward trend will perpetuate into a downward spiral. Typically, a prolonged bear market situation also points to a slowdown in the economy and rising unemployment as companies begin to lay off their workforce. It is important to note here that a bear market can be dangerous to invest in, as securities continue to lose their sheen and value.
Bull and bear market characteristics
It is crucial to be aware of the ensuing attributes of a bull and bear market. Here is a list of factors of the various bull and bear market conditions.
Supply and demand
Generally, there is a robust demand and weak supply for securities in a bull market. In such a scenario, most investors look to buy securities, but very few are willing to sell it in an uptrend. Hence, share prices continue to grow, while investors are competing to buy equities that are available in the market. On the other hand, an increasing number of people are looking to sell their equities and securities rather than make purchases. There is a significant low demand for fixed-income securities, while prices of equities rise.
Investor psychology and sentiment majorly impacts the market price in any scenario. This is because the behaviour of the market is affected and determined by investor behaviour and psychology. In the stock market, performance of share prices and investor psychology are mutually dependent. In a bull market, investors are continually hoping to reap profits; whereas in a bear market there is immense investor negativity and this sentiment shows as money moves out of equities and into fixed-income securities. Investors are cautious in a bear market and look for positive movements, while at the same time refraining from investing in equities. In short, the stock market decline negatively impacts the confidence of investors preventing them from investing in companies, thus causing an overall price decline as the outflow grows.
Correlation between the economy and the stock market
Since companies whose stocks are trading in the stock market are significant players in the country's economy, their performance can influence the economy. Typically, it is seen that a weak economy is associated with a bear market. This is because most companies are unable to show profitability as consumers are spending less. In turn, a downturn in company profitability directly affects stocks and their market values. In a bull market, the opposite takes place, as consumers have adequate money to spend and their expenditure propel and strengthens the country's economy.
Observing market changes
The principal causal factor of whether the market is bullish or bearish is not seen in the short term, but rather its performance in the long run. This means that a bull or bear market is not determined by the stock market’s spontaneous reaction to any specific event. Tiny movements could represent a short-term trend or correction in the market. It is in the extended time frame that determines whether the stock market will turn bull or bear. Sometimes, the stock market may experience an inactive period as it is looking for a direction. Here, a chain of downward and upward movements could, in reality, wipe out gains and losses leading to a flat-market trend.
What you can do in any market
The ideal thing to do in a bull run is to exploit rising prices and purchase stocks early on in the trend if you can. You can then look at selling them when these stocks reach their peak. Any losses that you experience in the bull market would be minor and temporary. You could briskly and comfortably invest in more equities with a higher likelihood of making a profit.
In a bear market, the chance of assuming losses are higher as share prices are continually losing value without an end in sight. Hence, if you are looking to invest in a bear market with the hope that the upturn will be around the corner, you may have to be prepared to take on losses before the positive turnaround takes place. Hence, if you are well-versed in the stock market, you could try short selling, or if you are trying your hand in the stock market for the first time, you may want to stick to safe investments such as fixed-income securities.
Some investors opt for defensive stocks, whose achievements are not affected by the trends in the market. Such stocks can be looked at as stable investments at a time when the economy is in a slump; these stocks are even beneficial in a bull market. Examples of these defensive stocks include utilities that are often government-owned and essentials that consumers buy irrespective of how the country's economy is functioning.
Bull and bear markets play a prominent role on investors’ emotions and investments. Hence, it can be an excellent idea to devote some time in determining how the market is performing before deciding on an investment decision. It is important to note that despite current market sentiments and trends, over the long term, the stock market has always been beneficial for its investors.
Disclaimer: Investment in securities market / Mutual Funds are subject to market risks, read all the related documents carefully before investing.
Tax Saving - Know How to save tax using Demat Account
There is a popular joke that one can teach their children about taxes by eating one-third of their ice cream. No one likes to pay more tax than they need to. As a result, everyone is on the lookout for ways to reduce or save tax outflows. If you mention the words “how to save tax" in a gathering, you are sure to get the attention of every person around you!In this article, we will share some income tax-saving tips and tricks with the help of your Demat account.What is a Demat account?A Demat or dematerialized account is used to hold shares, securities, bonds and mutual funds in an electronic format. The objective behind this account is to move away from maintaining physical copies or documents for shares or stocks and store them safely in a digital platform. It simplifies and expedites the trading process. One can access all their share certificates at the click of a button.A Demat account is principally similar to a bank passbook. Though it offers a wider range of benefits. When you make any deposits or withdrawals from your bank account, the credit and debit entries are made in your passbook. Similarly, when you buy or sell any shares, etc. it is credited to or debited from the Demat account. According to the SEBI guidelines passed in 1996, to invest in the stock market, one needs to mandatorily have a Demat account. How to save tax using a Demat account?Now you must be wondering how to save tax by using your Demat account. We will solve the mystery for you. There are three ways to save tax through a Demat account.1. Dividend Listed companies distribute a part of their earned profits amongst their shareholders in the form of a dividend. The dividend percentage is at the discretion of the company’s management. When companies pay a dividend, it is directly transferred to the shareholder’s Demat account. This arrangement can help with tax savings. In the case of a Demat account, tax is levied only for trading transactions i.e. which involve purchasing or selling shares. Dividend income does not fall under the ambit of tax calculations. Hence, this dividend income can be used by investors as an additional source of income. So, your share ownership has dual benefits – you enjoy dividend earnings from time to time and also save on tax outflows. 2. Capital Gains • Short-term capital gains (STCG): Any capital gains earned by selling off the shares within the holding period are called short-term capital gains. On the other hand, if the sale transaction is done after the completion of the holding period, the gains get classified as long-term capital gains. Long-term capital gains are not taxable until the value of Rs. One Lakh. Many investors make use of this provision to save on their tax outflows and earn higher net income (total gains minus taxes). So, you can store your shares safely in the Demat account for a longer period and benefit from the tax exemption available on long-term capital gains.• Short-term capital loss (STCL): Usually when you hear the word losses, you can only think of negative things. But there is a way that you can leverage your short-term capital losses to offset or adjust the tax payable on capital gains made in the short-term. So, if you have a Demat account, you can save the tax payable on short-term capital gains by balancing it against the losses incurred (short-term) across any asset class. Additionally, one can also carry forward short-term capital loss (to set-off the short-term capital gains) for eight years. The only pre-requisite is that the loss and gain need to be from the same category of assets.• Long-Term Capital Gains (LTCG) – Earlier, LTCG did not attract any tax obligations. However, with the recent changes, gains of this nature are taxed at 10%, if their value exceeds the limit of one lakh. Still, a Demat account holder can save taxes if their long-term capital gains are less than Rs. One Lakh. • Long-Term Capital Loss (LTCL) –Sometimes, even the fruits of patience are not sweet. Despite remaining invested for a long period, some assets or investments do not yield a positive return and we end up with long-term capital losses. However, just like STCL, one can use their long-term capital losses to offset or adjust the taxes payable due to long-term capital gains.This arrangement helps the Demat account holder to bring down some of their tax obligations. 3. Equity Linked Saving Scheme (ELSS): ELSS is best explained with the saying – “killing two birds with one arrow”. ELSS is a type of mutual fund which offers a twin set of benefits to the investors. In addition to the potential of wealth creation and appreciation, in the long run, they also offer tax savings. Investments till Rs. 1.5 Lakh in ELSS qualifies for tax deductions as per Section 80C of the IT Act. So, a Demat account holder can choose to invest in ELSS Mutual Funds and save taxes easily. Compared to other tax-saving tools available currently in the market, ELSS Mutual Funds offers more (or better) benefits. With a shorter lock-in period of three years and the potential of higher returns, they are becoming a preferred choice for many investors. Additionally, it enables novices or first-time investors to make an entry into the world of equity investing.How to open a Demat account?Opening a Demat account is an extremely simple and hassle-free process. One can select any Depository Participant (who is authorized by SEBI). The KYC paperwork requires only basic documents (PAN Card, Aadhar Card, details of residence, income proof) and a photograph of the applicant. While the investor opens the Demat account with the chosen DP, the actual shares are maintained in safe custody by either one of the national depositories i.e. NDSL or CSDL. These institutions are sponsored by government-owned bodies. Hence, one can be assured that their shares are safe in the Demat account. Choosing the right brokerage firm can make the process even more simple and quick. IndiaNivesh, a trusted name in the Indian financial market can become your investment expert in this. Indianivesh has been offering a wide range of financial solutions in the areas of broking, mutual funds, equities, IPO, insurance and wealth management for the last eleven years. Their technological expertise combined with in-depth market knowledge has helped numerous clients to grow and create wealth. Final Thoughts:A smart investor does not stop with merely earning. It is equally important to create wealth and maximize your return by finding out ways to save taxes or other outflows. If you have a Demat account, ensure that you make use of it optimally. It can be a great help not only in trading but also in saving tax outflows. Now that you know these great income tax-saving tips, you can ensure you get the best out of your hard-earned money. Especially with a partner like Indianivesh.And if you know someone who is wondering how to save tax, make sure to share this article with them. After all, sharing is caring! Disclaimer: Investment in securities market / Mutual Funds are subject to market risks, read all the related documents carefully before investing.
Wealth Management – What is Wealth Management & Services in India
Financial and physical health have a lot in common. Both are continuous journeys and not a one-time activity. For instance, it is not enough to reach one’s desired weight but rather maintain it at the same level. Similarly, when it comes to our financial wealth it is not only about earning money. Rather one needs to focus on continuously growing it. Both these journeys become easier and more fruitful when a coach is there is to guide you each step of the way. A physical trainer is to your physical health what a wealth management advisor is to your financial health. What is wealth management?Wealth management is a kind of specialised and customised investment advisory service. It is also referred to as a combination of financial and investment counseling. These services are offered to individuals with high net worth i.e. HNIs. The financial expert who offers these services is known as a wealth manager. Wealth management services in India include services related to accounting, taxation, investment, retirement planning, estate as well as legal planning.Who is considered an HNI in India?An individual who has an investible bank balance of at least Rs. 200 Lakhs (2 crores) is categorised as High Net Worth Individuals. People with an investible surplus of Rs. 25 lakhs (but below 2 crores) are tagged as Emerging HNIs. This is only an indicative figure and can vary from one service provider to another.Wealth Management services in IndiaWealth Management is one of the fastest-growing industries in our country. Numerous factors have contributed to the rapid growth of wealth management products in India. A positive long-term economic potential of the nation, growing income levels, increased consumer awareness and the current low penetration have collectively fueled this growth. A quick look at these factors• Expansion in wealth creationAn Asian Bank report mentioned that India with its 119 billionaires stands just behind the USA and China. This figure is likely to triple in less than a decade. Some of the factors that will lead towards this exponential growth are a spurt in entrepreneurship, a robust educational system, a strong outlook for the IT and ITES sector, increased investment in state-of-the-art asset classes, etc. • Increased awarenessWith the advent of technology, information about new age practices and concepts (such as wealth management products in India) is easily available and accessible. People are more open to seeking help from professional experts to manage and grow their corpus. One key factor behind this increased awareness is also the fact that the high net worth individuals are comparatively younger. • Increase in firms offering wealth management products in IndiaThere is a surge in the number of wealth management service providers in the country. In addition to individual brokers and domestic firms, many global entrants have also forayed into this arena. Though the percentage of HNIs in our country is small when compared to the figures for developed countries, strong growth forecasts coupled with a growing middle class and young population indicate the potential for high asset accumulation soon. India is pegged to become the third-largest global economy by 2030 (according to a Cognizant report). As a result, personal wealth management in India is going to become the need of the hour.As per a recent report published by Capgemini, the wealth management industry is likely to witness a double-digit growth (ranging between 10% and 15%) per year in the coming five years. Key aspects of Wealth Management services in India• Risk AnalysisThe wealth manager analyses the risk-taking capacity of the client by taking into account a host of factors. These include current as well as future financial obligations, investment goals, the stability of income, client personality, etc. Correct risk analysis plays a critical role in formulating a customised investment plan for the client which will meet his/her financial goals.• Asset AllocationAfter the risk analysis, the wealth manager strives to strike the perfect balance between risk and return for the client. The available assets of the client are distributed across the suitable asset categories in sync with their risk quotient and return aspiration. The key asset classes include stocks, debt, real estate, mutual funds, gold, etc.• Investment HorizonA good wealth manager helps in achieving the client’s short-term as well as long-term investment objectives. They offer advisory services that enable the clients to maintain enough liquidity and flexibility to meet their investment goals in the short-term. Additionally, they also work towards securing the financial future of the client and maximise the return on their investments.• Customised Investment ProductsMany wealth managers work closely with the country’s leading banks. As a result, they have access to the entire spectrum of investment products. Sometimes they might even be in a position to offer tailor-made and bespoke investment products as per the client’s requirements. • Continuous market researchWealth management is not a one-time activity that ends with suggesting the right investment avenues or products. Rather it is just the start. Wealth managers continuously scan the market, assess the performance of various products, review the client’s portfolio and try to predict future trends. They apply a host of quantitative and qualitative techniques for this purpose. Additionally, they keep on interacting with the client periodically to analyse if there are any changes in their risk profile, financial obligations, investment goals, etc. Role of a wealth managerWealth Management is principally a simple concept – protect and grow the wealth of the client. However, its execution is a highly complex task. And hence it is done by financial experts known as Wealth Managers. A wealth manager is an expert who makes use of the entire gamut of financial disciplines such as investment / financial advice, accounting and tax-related services, estate planning as well as retirement planning to grow the client’s corpus.Wealth Management Products in IndiaThe product offerings vary from one service provider to another. Though the key products include:• Alternative Asset• Equities• Bonds, debentures, fixed maturity plans• Insurance• Mutual Funds• Loans• PMS (Portfolio management services)• Real Estate Services• Digital Investments• FundraisingWealth Management service providersBroadly speaking, there are three kinds of service providers in the realm of wealth management.• Banks• Brokerage Firms• Boutique Advisory Firms• Individual brokers or sub-brokersSelecting the right advisor is critical. One needs to choose a wealth management service provider who is not only trustworthy and credible but also can offer investment or financial advice as per the client's needs. The alignment of interest is extremely important. One of the most trusted names offering wealth management products in India is IndiaNivesh. It specialises in offering customised solutions for their wealth management clients across income levels. Their client-first approach coupled with their rich experience and technological competence enables them to preserve and grow the client’s net worth. Their "Wealth Cafe" offers an exhaustive database of research ideas and reports for the client's information. More importantly, their presence across a wide range of financial solutions such as broking, institutional equities, strategic investments, insurance, and investment banking helps them gain a holistic view of the markets. This translates into profitable and sustainable investment advisory for clients looking for personal wealth management services in India.Final Words:We hope that this article has addressed a lot of questions. Such as what is wealth management, why you need it along with an overview of the offerings. And now that you know who can help you with managing and growing your corpus, make sure you make the best use of their expertise. Disclaimer: Investment in securities market / Mutual Funds are subject to market risks, read all the related documents carefully before investing.
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